In our previous article we presented Valve as a successful horizontal organization. We sketched what these organizations are and some elements of Valve’s way of working. Now we get to the specifics and discuss about some key elements of their organization.
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Valve: a Successful Horizontal Company
What is the life of a Cabal?
We have already seen that Valve is organized into Cabals: project-centered, ephemeral, multi-disciplinary groups. In their handbook for new employees they start by saying:
Deciding what to work on can be the hardest part of your job at Valve. […] you were not hired to fill a specific job description. You were hired to constantly be looking around for the most valuable work you could be doing.
Here is a summary of the criteria for choosing a project:
- impact on company’s customers.
- impact of personal work on the project.
- a particular activity which is lacking in the company.
- the personal interest.
- the personal challenge.
It means that every employee is expected to be always seeking for the project containing where his skills would be the most useful, creating the highest value for the company.
People are actually encouraged to move their desk to be close to people they work with.
Another important thing in the way Valve deals with decisions: their is no special team to lead or govern the company. Big decisions are made organically. This approach is really important since it makes every member of the company feel responsible for what happens on a large scale and not only on an individual scale.
Well, even in a flat organization there are leaders emerging in projects. However, they do not act as managers. In fact they are more a central point for information gathering. The primary job of a project leader (apart from his operational work in the project) is to keep everything in mind. And help other members of the project to make coherent decisions.
Valve uses two approaches for annual evaluation of employees:
- Peer reviews: this system helps employees to get feedback on their work and working habits.
- Stack ranking: the purpose of this evaluation is to set the salary for each person, relative to the value generated for the company.
Each year a (changing) set of people conducts interviews with everyone in the company asking them who they worked with since last evaluation. And they ask people to provide descriptive and directive feedback relative to these specific people. Then these feedbacks are anonymized and given to the respective employees.
This system helps people to improve by getting an open feedback on their work.
tack ranking is very different from peer reviews: it only serves to estimate how much value each employee provides to the company. This is performed in order to compute the salary of everyone. This evaluation is performed among projects, and cabals are split into multiple parts. Each part evaluating another one (each individual is evaluated independently). After each group has finished its evaluations, there is a process in order to homogenize the values over the whole company.
In order to reduce the share of luck and to ensure that everyone knows what is important to the company, they use four metrics:
- Skill Level/Technical Ability: the ability to solve difficult problems.
- Productivity/Output: how much work did you do (with a focus on quality).
- Group Contribution: work oriented to the project coordination, hiring and communication.
- Product Contribution: this sums up other contribution to the products, like, for example, prioritizing resources trade-offs or playtesting (in the case of a game).
In the handbook, they do not describe in all details this evaluation process. But they also have systems in order to question a given evaluation, and in particular the stack ranking. It seems that it is working quite well. It also seems that people at Valve tend to keep their jobs and to be happy about their work.
Recruitment is important for every company. But it seems that for one like Valve it is even more. Because it is very demanding towards its employees and it needs self-accountable people. It needs persons who are able to act and adapt without someone telling them what to do.
This may be summarized in the following statement from the handbook:
Employing well is the most important thing in the universe. Nothing else comes close. It’s more important than breathing. So when you’re working on hiring everything else you could be doing is stupid and should be ignored!
Among the guidelines they use to evaluate prospective employees, they ask to assess whether you would like this person to be your boss, or whether you feel you would learn a lot from this person.
The general idea is to fight against the tendency to hire people who are less qualified than you are. Since personal power is less an issue in an horizontal company, every employee is required to hire skills that are really needed and not already present in the company. Employing someone great is not going to threaten your position in the company, it will only improve the overall quality of the production.
Risks and drawbacks
Horizontal structures face difficulties and drawbacks:
- Scalability: horizontal systems work well for small structures. For intermediate size companies like Valve (around 360 employees) it is already difficult and it needs rigorous processes in order to keep the direction. For larger companies it seems really hard to set it up correctly. It would be very interesting if anyone could testify on larger organizations that have adopted a fully horizontal structures.
- Short term vs long term: since people are encouraged to select project according to the benefit they perceive for customers, they are more drawn towards short terms realizations. For example, it may seem more important to release a game or an add-on rather than build an internal ticketing system. Valve warns its employees of this tendency and expects from them to fight it.
- Information dissemination: at Valve they have identified a problem with managing information. At a given moment, it may be difficult to know precisely what is going on in the company, eventhough this information is the key for employees to select their cabals.
- Hiring in new areas: it is difficult to hire someone in areas where you do not have skills. This is true for any company, but the internal view of hiring at Valve makes it even more difficult, since they do not want to involve external people in such a key aspect.
- Social skills: working in project, without some kind of internal gathering of information makes it important for everyone to have strong social skills: to know who is working on what, to convince people that a given project is important. These skills are not directly evaluated by stack ranking, but in fact they perspire in many activities. Such an organization is not adapted for some people that, otherwise, would be valuable to any company.
As we have seen, building a fully horizontal company is difficult. Groups do not easily escape from hierarchical solutions. In fact horizontal structures are not chaotic, they also rely on sets of rules. One of the most important guideline being, self-responsibility. Everyone in the organization needs to embrace the purpose of the whole structure. However, Valve is the living proof that it is possible to achieve great results by following this path.
This article together with the previous one are the first ones that discuss horizontal companies. We plan to write other articles on this topic, focusing either on specific examples of horizontal companies, or specific features of these systems. Feel free to express your opinion on this matter or to testify, in the comment section below.
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