Seattle-based game company Valve was the topic of much discussion on BoingBoing yesterday.

The 16-year old company has no corporate hierarchy whatsoever, and yet - according to its employee manual - their profitability per employee is "higher than that of Google or Amazon or Microsoft".

The company's team page proclaims at the top "We've been boss-free since 1996", and then proceeds to list every single employee (a bit over 100) in alphabetical order. About the founder, Gabe Newell, the manual says, "Of all the people at this company who aren't your boss, Gabe is the MOST not your boss, if you get what we're saying."



How does this madness work? Leaving alone the claim of incredible profitability, how do they manage to get anything done at all? Is this not a recipe for corporate disaster?

Maybe. But what the employee manual [PDF] describes is actually an incredibly well-designed corporate machine for maximizing productivity, allowing good ideas to flourish, and minimizing corporate waste. Valve's basic approach to "managing without managers" is:

hire only incredibly self-motivated people

give them full autonomy to decide what project to work on

teach them to spot valuable projects, and to understand what value they can add to those projects

allow team structure to happen organically - teams self-select, leaders are chosen by their peers

encourage people to acknowledge and learn from mistakes quickly to move forward

make everyone responsible together for the success or failure of projects



and finally (and most critically):

determine the value and compensation of each employee by peer review

When you organize an company like that, several things happen:



- You leave no room for unproductive people to hide. Nobody can pass the buck on to the next person, as that person is going to be determining their salary at the next review. Everyone maximizes their own productivity.



- You allow the best ideas in the organization to bubble to the top. When people are free to suggest ideas and other people are free to join them (or not to join them) in executing those ideas, people rally around the more promising ideas while leaving the unpromising ones to die a quiet death.



- You allow the natural leaders to lead. For any project there are team members who will be the natural leaders. In a more structured environment, those natural leaders are often not the ones appointed to lead the project. When team structure happens organically, leaders emerge organically as well.



- You reward people for finding the position in the company where they can make the biggest difference. If everyone is free to go and do what they want, and everyone's salary is determined by peer review, everyone naturally seeks the place where they can make the biggest difference to their teammates, to maximize their income. The net effect is a system where employees want to make the biggest difference they can, always.



The results of this sort of structure can apparently be impressive - as Valve shows us.



So the big question of course is: does this only work for companies that make video games, or can it work for everyone?



Well there are two things here to note:



1. Valve is unlike many other companies in a couple of ways. Most notably, it is entirely self-owned with no outside investment, and it owns all of its own IP.



2. Valve didn't design and impose this structure on itself from the top - it evolved organically toward it from the beginning (see a good blog post about this here).



So the short, easy answer to the above question may be no, this only works for Valve. But the bigger answer is that all companies should be exploring how they can introduce these kinds of ideas into their own corporate structure in ways that makes sense to them. The more you create the right incentives and opportunities for employees to add value as best they can, and the more you create openings for the best ideas to bubble up naturally, the better, leaner, and more competitive your company will become. And the happier your employees will likely be, too.