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Valve Corporation: Does flat management have a half-life?

Valve Corporation: Does flat management have a half-life?

Introduction

This case study explores Valve Corporation, an entertainment software provider. It assesses the products, the flat management structure (anarcho-syndicalism in a political economic context), the benefits and costs of such a structure, and whether it has lessons for firms elsewhere in the economy.

Features and benefits

  • Analysis of Valve's product range and past successes.
  • Assessing the context of a flat management structure theoretically.
  • Assesses how flat management works in practice, with the benefits and disadvantages of an absence of hierarchy evaluated.
Highlights

Valve emerged when software engineers left Microsoft in 1996 and was incorporated in 2003. Since then it has expanded in size and presence to produce popular and acclaim-winning video game franchises. The company also revolutionized distribution of gaming content to PCs via the Steam software, likened to iTunes for video games.

Valve is unique in that it has a completely flat management structure. The aim is to have organic responses to the consumer and to bring employees as close to their potential as possible, with egalitarian authority between all employees and decision making driven by consensus (this also extends to recruitment).

The main benefit to Valve can be seen in its success; it produces content that has changed the gaming industry and also won it a loyal following among consumers and critics alike. The other benefits are more theoretical; it claims to have circumvented the problems inherent with other more traditionally run game software companies.

Your key questions answered
  • What is Valve Corporation?
  • How is Valve Corporation run?
  • What are the benefits of a flat management structure?
  • What are the disadvantages of a flat management structure?


OVERVIEW
Catalyst
Summary
A BRIEF HISTORY OF VALVE
Valve's beginnings
The games software market is lucrative
Valve's game production is high end
Steam digitized video game distribution
Steam brings ecommerce advantages to games software
Steam is well received by consumers
Steam diversifying services but retaining focus on gamer
Steam’s complementary services: Steam Music and Steam Broadcast
Expanding onto other platforms
Source powers Valve’s games
Valve’s future ambitions: wearable tech and Steam Machine
ANARCHO-SYNDICALISM: HOW VALVE IS MANAGED
Who is manning the Valve?
Cabals help Valve complete larger projects
Valve shows some traits of anarcho-syndicalism
Valve in practice for employees
Valve’s recruitment process
Valve’s performance measurement: Stack rankings and Peer review
How Valve counters malfeasance
Valve in mergers and acquisitions
WHERE FLAT MANAGEMENT BENEFITS VALVE
Employees become stakeholders, improving the value chain
Valve evokes strong loyalty in gamers
Valve compared to other gaming studios
Valve refuses to exploit its most popular franchise
Self-funding maintains the company’s vision
Valve’s theoretical benefits
Cabals and resolving disputes
THE COSTS OF VALVE’S MANAGEMENT STYE
Valve is a strong player in a niche market
Windows 8: Microsoft’s revenge?
Valve time: a redundant constraint?
Recruitment for Valve is much more complicated
Recruitment constraints are expressed more harshly
Recruitment errors can be much more costly
Diversifying talent pool is harder
Is flat management viable beyond a certain size?
Valve in theory versus Valve in practice
CONCLUSIONS
Valve goes flat out
APPENDIX
Definitions
Sources
Further Reading
Ask the analyst
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