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Recently I heard that Valve, a highly successful video game company, has four hundred employees and no management structure. According to all reports, they make that model work.

I spent a lot of time trying to imagine working for a company with no management. How do they resolve conflicts, set priorities, measure performance, fire laggards, and all the rest? I couldn't picture it working. Keep in mind that I earn my living by shouting that management is mostly worthless, yet even I couldn't accept the idea that management is 100% unnecessary. I was skeptical.

My best guess was that the founders of Valve do plenty of managing, but perhaps it sounds cooler to say they don't. Or perhaps the founders are bad managers and it just feels more comfortable to say they don't even try. In any case, I was ready to pass judgment: The management-free company is bullshit.

But before I passed judgment, an inconvenient realization entered my brain: I've been working on a start-up for over a year and we have no management whatsoever. I'll tell you more about the start-up in coming days. For now, the interesting part is that I never once - in the course of an entire year - noticed that we have no management until after I heard the story about Valve.

In our case, we have a group of people who have different skills and that seems to be enough. Our decision-making so far seems to follow a rational model that goes like this:

1.      We discuss the question (by email or Skype).
2.      Everyone gives an opinion or adds information.
3.      The smartest choice becomes obvious to all.
4.      The end.

That decision-making model might not work in your company if some of your coworkers are worthless. There's always the one person in every meeting who keeps changing the topic, or doesn't understand the issue, or insists he knows more than he does, or is bluffing to cover his ass, or is jockeying for a promotion, and so on. To put it in clearer terms: Management exists to minimize the problems created by its own hiring mistakes.

Valve says the secret of their management-free environment is hiring good people. That sounds right to me. We don't have any weak contributors in our start-up so we have never felt a need for management.

One of the interesting aspects of better global communications, better access to information, and better mobility is that collectively it reduces the risk of making hiring mistakes. When employers were limited to hiring people who lived nearby, and the only information at their disposal was lie-filled resumes, every growing company would necessarily absorb a lot of losers. But now that entrepreneurs can hire the best people from anywhere in the world, we have for the first time in human history the ability to create teams so capable they require no management structure. That's new.

I think the manager-free model only works for a business that has high margins and depends more on creating hits than cutting costs. The videogame business fits that model, as do many Internet businesses. And in both cases entrepreneurs can hire from anywhere in the world.

So here's my summary: Management only exists to compensate for its own poor hiring decisions. The Internet makes it easier to locate and then work with capable partners. Therefore, the need for management will shrink - at least for some types of businesses - because entrepreneurs have the tools to make fewer hiring mistakes in the first place.

Management won't entirely go away, but as technology makes it easier to form competent teams without at least one disruptive or worthless worker in the group, the need for management will continue to decline.

 
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+1 Rank Up Rank Down
Mar 28, 2013
After having worked at a start-up game company, I can tell you the reason Valve has such a limited management structure is because everyone wants to be there and make awesome games. They're highly motivated and enjoy being there. It doesn't work for some game companies that fire hoards of highly talented people because management didn't get off their ass and keep the pipeline going. In this particular business, the culture of the employees to create is inane and therefore, you'd think, pretty easy to keep the troops moving with little direction.
 
 
Mar 28, 2013
In my company the org chart looks like this: Me -> You.

I don't hire anyone I can't fire.

I believe the roll of management is to provide all means for the workers to do their job. If you've got a lot of intelligent, motivated people, they find the weakness within their area of expertise and take it on. I give very little direction and praise the good stuff. Mostly because I hired them to do !$%* I don't want to do. So far, it's worked for me.
 
 
Mar 27, 2013
A company which recruits highly intelligent, highly motivated, and autodidactic people probably has very little need for management. A simple corollary of that is the number of companies which can do this is probably quite limited: because those types of people are rare, probably at best the top 1-3%. But a large fraction of computer programmers meet these criteria and Valve can do this because the nature of the talent pool they need for their operations allows them to select for the personality traits needed. But other environments and settings where such people exist also occur to me. Certainly a majority of physicians are intelligent, motivated, and autodidactic.

A management-free company probably also needs to be small in size or compartmentalized into separate and distinct divisions of labor. Large size introduces competing interests and this leads to politics and a greater need for management to resolve disputes and allocate resources. The reason so many people are cynical of management is the same reason so many people are cynical of politicians: they deal with the same problems. And the "deciders" aren't always good at making decisions - and sometimes they are self-interested and corrupt. I believe this kind of friction says something very deep about human nature and puts limits on how efficiently groups can function with increased scale. It is one of the reasons management theories often sound like a theories of human behavior. The problem is that, as anyone who has studied human behavior can tell you, there is no grand unified theory of human psychology. Different theories seem to apply to different individuals. And it is probably true that different individuals succeed in different environments and different management structures.

But because individuals are diverse, there is a subset of people who can work in a management-free environment and succeed. But the pool of individuals for whom this can work is probably not large. If there were large numbers of such people, there would be more companies like Valve and management-free companies would be the norm.
 
 
Mar 26, 2013
I don't think there is ever an organization with 'no management'. What you can have is an organization that lacks people who's primary task is management.

In an organization like valve, everyone does some management, or is at least self-managed, so there is no need for anyone to spend all their time managing.

Other organizations may just be simple enough to minimize the need for much management. If everyone always knows what to do, management is limited to infrequent interuptions to this task.

The mix of this is a company that requires very little management, and the little that is required can be handled by a handful of people who usually do other things like actual work. I think most small companies fall in this category. The boss (usually the owner) is the only 'manager', but only spends 5-10% of his time managing.
 
 
+2 Rank Up Rank Down
Mar 26, 2013
This is an interesting interview about Valve:

http://www.econtalk.org/archives/2013/02/varoufakis_on_v.html
 
 
Mar 26, 2013
Possibly what you have instead of management is a 'guru' (you) and a handful of people you feel strong affinity for (very competent worshipers). Then again, I'm a believer in anarchism. The problem is hiring the good people. At my last few jobs, the drive to hire perfect people is paramount. The blue badgers (full time employees) spent between 20-50% of their time interviewing potential hires. And since everyone hired had to get 100% buy-in from the group, few people ever were hired, so the interviewing process goes on indefinitely. Green badgers (contractors) never have to do any of that stuff, we just get to blissfully program with full uninterrupted focus all day. Of course there are downsides to being a contractor, like, well, being treated like a subhuman. Blue badgers are a step up: subhumans with medical benefits and a comforting illusion of job security.

 
 
0 Rank Up Rank Down
Mar 26, 2013
This ain't Marxism. Look up: Anarcho-syndicalism
 
 
+11 Rank Up Rank Down
Mar 26, 2013
Hmmm. If you have NO management, how do you determine when to hire someone new? Who interviews? And who decides whether they join? What salary or benefits they start at? Is it REALLY the case that any new hire will be a group decision at all times and for all stages?

And if one person honestly thinks that they know the best thing to do, and ignores the consensus, what happens? Never mind how you tell the difference between the idiot and the genius who has seen the solution nobody else can grasp, what do you do with two teams pulling in different directions without someone to say "this is the way it will be"?

I quite agree that the vast majority of "management" is a waste, but I can't see any way you can eliminate it completely other than for extremely small groups.
 
 
+6 Rank Up Rank Down
Mar 26, 2013
"Management exists to minimize the problems created by its own hiring mistakes."

Scott, even if you hire perfect people for all the right positions, you shouldn't expect to have zero conflicts.
Sometimes its not clear what the best solution to a problem is, and you can have a group of people who have different views on whats best.
The conflict between those people is what needs to be managed.

I agree that the management-free company is !$%*!$%*! According to the linked article, even Valve has some degree of management in the form of what they called "group contributors".
And its also telling that they have some issues with unchecked people making bad decisions. They assume that everybody knows relatively well whats best. If everybody actually knew whats best, then sure - you probably don't need management, just sufficiently competent people.

Once the goals and tasks (and size) of a company becomes complex enough and its no longer clear whats best, you're going to need people with different ways of thinking, put them together in the same room, and then you'll need to a manager to work through the conflict to extract the best solution.
 
 
+2 Rank Up Rank Down
Mar 26, 2013
Sorry about the scrambled characters. I forgot the "special blog software" thing on this blog.
 
 
+2 Rank Up Rank Down
Mar 26, 2013
Valve's handbook for new employees is awesome. You should really read it. It makes you want to work there. I'll give you an example:

[ But how do I decide which things to work on?
(...) It’s useful to answer questions like these:
• Of all the projects currently under way, what’s the
most valuable thing I can be working on?
• Which project will have the highest direct impact
on our customers? How much will the work I ship
benefit them?
• Is Valve not doing something that it should be doing?
• What’s interesting? What’s rewarding? What leverages
my individual strengths the most?]

Ofcourse they're the first to acknowledge that their organisation does not fit for all companies. They're not stupid, or why would they be so successfull.
 
 
Mar 25, 2013
[ No one at your startup ever has to make a hard decision with imperfect information? ]

I think it is even murkier than that. There are plenty of decisions for which there IS no best answer, just varying tradeoffs that even people with similar goals could strongly disagree on. For anyone familiar with the history of software development, I can prove that point in three words: "vi versus Emacs".

[ Valve says the secret of their management-free environment is hiring good people. ]

To me, this is a meaningless tautology. Does anyone think the secret to their success is making bad hires? Everyone WANTS to make good hires. The question is, has Valve hit upon an interview process that has a demonstrably higher rate of success than the typical ones? Because that would probably be worth more than all of their software combined.
 
 
Mar 25, 2013
If you don't have management, how do you start the inevitable round of 'Investors in Paper' or Mission statements or ISO9000 or status reports. Do you mean to say that management has another function?
 
 
+11 Rank Up Rank Down
Mar 25, 2013
My question is about point 3, "the smartest choice becomes obvious to all". I think there's only a small subset of decisions where that's ever true. No one at your startup ever has to make a hard decision with imperfect information?

When you start to choose between advocates, picking winners and losers, the whole human mechanism of politics comes into play. And therefore management (and I'm not a manager, try to avoid them as much as possible).

You could go meta and say that that's a hiring decision, hiring extraordinary humans who don't get involved in their work to that extent, and I'd say great, you're either hiring extraterrestrials or Wally's who just don't care.

You tell me which is more likely.
 
 
Mar 25, 2013
Very thought-provoking.

I think one aspect of why your startup doesn't need managers is because you all have the same goal. That goal is to make the company successful so you'll then either have a profit-generating company or one that you can sell. So your teammates are truly that. Everyone wants the same thing.

Compare that with the typical business. There are as many motives for working as there are people in the organization. The owners want to capitalize on their business for money and for legacy. The workers want to earn a fair wage, and perhaps get in the position someday to start their own business, perhaps in competition to their current employer. Managers want to rise through the ranks until they become C-level executives (or start their own business as well).

So management in the typical company becomes the cat-herders, trying to get a bunch of people who have different personal goals all pulling in roughly the same direction. It could just as easily be said that managers' jobs are to try to motivate their people to perform, as it is to say that they just try to make up for hiring mistakes.

In his book "Hiring for Attitude," author Mark Murphy posits that 46% of new hires fail within 18 months of joining a company, and almost 90% do so because of what he calls "attitudinal deficits." If you look at Scott's company, I'd wager that the attitudes there are positive because of a drive to reach a shared goal.

I'm sure Scott will recall when Hewlett-Packard was young, and how their 'flat management style' was the talk of all the business schools. Their divisional structure led to a number of small, entrepeneurial-like organizations within the larger one. Decisions are able to be made more quickly; since the division's goals are narrowed, it's easier to focus. But it still takes management to make decisions, such as evaluating performance within a division and looking to rationalize products and entire divisions if they are unable to provide return to the corporation.

When HP was relatively small, it worked great. They're no longer small. It's not working so great any more.

So what do I conclude? That I'm going to go back and reread that standout tome of business enlightment, "The Dilbert Principle." You can't go wrong with that book as your guide.

 
 
Mar 25, 2013
Yeah, I've heard about valve not needing management awhile ago. Hiring good people is great, problem is there's only a finite amount of good people and an infinite amount of work to do. If your company is either very good or very lucky, you'll wind up with enough talent in the right places to go managementless (perhaps with a little peer pressure management for the occasional Wally that pops up). For the rest of the companies, management is needed.

Hopefully managers will never infect the educational system and make it impossible for good talent to develop or find its way to the right job.
 
 
Mar 25, 2013
you should check out the Valve New Employee handbook.... it gives a lot of insight into how they do things

http://newcdn.flamehaus.com/Valve_Handbook_LowRes.pdf
 
 
Mar 25, 2013
It's not so much having good people as it is having a good team. You can have two people that are individual very talented but don't work together well - and that requires management.
 
 
+18 Rank Up Rank Down
Mar 25, 2013
This discussion (and that article) lacks a definition of management. Clearly Valve has team leads. Clearly they have a CEO. a CEO leading team leads is a management structure, and for a certain/type size organization, a good one. You sound like you're the team lead of your organization Scott. If the epiphany here is that the "middle management" (between the Team Leads and CEO" is shrinking with better communication, then welcome to 2002. :-)

/j
 
 
+1 Rank Up Rank Down
Mar 25, 2013
First, I applaud your limited scope, recognizing that this could only work in quite limited situations - specifically, I'd suggest, for very small groups and simple projects in which it makes sense for everyone to weigh-in on every decision. Also, I'd question how far one can get before not everyone finds the same choice to be "obviously" correct.

And then there's the question of compensation. When it's a start-up and everyone is working for little or nothing in the hopes of a big payout (or there's lots of VC money being thrown around) that may not be much of an issue, but otherwise, I think it would.
 
 
 
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