Case study: The ‘no manager’ company: how does it work?

Imagine a company where there are no managers, no‐one has a private office,
there is no clear organisation structure, and employees choose who they work with,
what projects they work on and what hours they work. Perhaps this sounds like an ideal
workplace for you, or maybe it sounds like chaos.

It may be a surprise to know that this is the organisational approach of one of the
world’s largest com puter games design and social entertainment platform companies.
The company is Valve and is famous for games series such as Half‐Life, Left 4 Dead,
Counterstrike, Portal and Team Fortress. They are also responsible for Steam, which is
the world’s largest online gaming platform with over 35 million active users. The game
engine Source is also part of the Valve Corporation’s stable of products and services.

So with no managers to plan, lead, control and organise, how does the company
achieve its enviable record of growth and innovation? The short answer is that they
hire the right people and work together to develop a corporate culture that rewards
performance and innovation. In reality, however, the answer is more complex.

The kind of person that Valve looks to employ is someone with a broad range of
skills, including the ability to work effectively in teams, coupled with expertise in a
more narrow field. These could be called ‘T–shaped’ people, with the horizontal line of
the ‘T’ representing generalist breadth in terms of teamwork and customer orientation
and the vertical line representing narrow skill depth in areas such as programming or
digital art. Most importantly, however, the person must have a passion for what they
do, so that motivation comes largely from within rather than from external sources.
Valve hires staff from around the world, and because they have such a large fan base of
active gamers who interact in online forums, attend conventions and create
modifications for games, they have no shortage of suitable applicants knocking on their
electronic door every day.

To build the right organisational culture, the company issues each new employee
with The Valve Handbook for New Employees. The handbook reads a little like a ‘game
guide’ and is structured around frequently asked questions and explains how the
company performance reward system works, the history of the company, how they can
move their desk on wheels, how to prepare for the annual company vacation and how
they can participate in choosing the next group of new employees.

The company does have a structure, which is based around multidisciplinary

project teams called cabals. The teams exist to ship products to consumers and the
‘lead’ person for each team emerges rather than being appointed by an external
authority. Temporary structures that set expectations on deadlines, roles and tasks do
emerge, but these exist only as long as is needed. Some former employees have
criticised this as being a little like high school, with hints of bullying, and a clear line of
the ‘in‐group’ separating the ‘out‐group’.

While there may be some healthy scepticism that the flat organisational structure
of Valve is really as flat as claimed, the reality is that the company is a leader in
innovative games design and games delivery. The company is growing with over 330
employees, however, there are sometimes struggles to agree on who the next new
employee should be. In attempting to emphasise company culture over structure Valve
may be having some success, but the company’s continued growth may eventually limit
this approach. Problems are emerging as customers complain that their favourite game

is not receiving enough development focus but it remains to be proven whether

this is related to the employees’ freedom to choose the projects they work on. The
development of the company, however, remains a challenge to traditional ways of
thinking about company structure and may be an indication of the direction of
companies of the future.

Question:

Do you think that having no designated managers in an organisation is a good or bad

idea? Justify your perspective
 First and foremost, we would like to have a small introduction about Valve Co.
and their business structure:

Valve Corporation (Value) is an entertainment and gaming software and

technology provider company, consisting of a number of 201 employees in total.
Initially, Valve used a hierarchical structure more typical of other development firms,
driven by the nature of physical game releases through publishers that required tasks to
be completed by deadlines. However, as Valve became its own publisher via Steam, it
found the hierarchal structure was hindering progress.

After completing Half-Life 2, Valve transitioned to a looser flat structure; outside

of executive management, Valve does not have bosses and uses an open allocation
system. This approach allows employees to work on whatever interests them, but
requires them to take ownership of their product and mistakes they may make.Their
business structure does not have many layers of management, this means that Valve is
operating on a “Flat-Structure” Organization (or Flat Hierarchy, Horizontal
Organization) scheme. What are the components of this type of business structure?
How is it different from the traditional hierarchy structure? These diagrams here will
visualize the compoents of “flat structure” and the differences to the “tall structure” :

Components of flat structure…

 …in comparision to traditional tall structure.

What we can inferred from the two diagrams, is that the traditional hierarchy
structure has various layers and management, while the flat structure only has at most
two to three layers of employees, all led by the CEO of the business. So what are the
advantages and disadvantages of the flat organizational structure?

Disavantages
1. Bad decisions can be made under the guise of expertise.

Because the flat organizational structure is essentially a “bottom-up” type of

hierarchy, there is tremendous reliance on the expertise of the front-line staff. If
someone does not have the level of expertise that their job requirements demand of
them, the C-Suite could make decisions based on false expertise. That can lead a
business down the wrong path very quickly.

2. It can lead to a lot of wasted time and money.

Employees in this type of structure do benefit from being able to approach the C-
Suite with their ideas. There is also a lot of time spent talking with others to ensure
that an idea isn’t being duplicated before it is presented. Although access is a benefit,
because there are not continuous lines of communication between varying departments
or teams, a lot of time can be wasted when trying to be innovative.
3. This structure can limit productivity.

The flat organizational structure assumes that each worker is going to give their
best effort every day. It lacks close supervision in many instances, which means
workers can get away with not working at all on some days. That is especially true for
workers who might be in a satellite office. Although there are monitoring programs
that can track productivity or worker presence, that isn’t always the same as having a
manager be responsible for team productivity.

4. There is a lack of work-life balance.

Many people who work within a flat organizational structure find themselves
always connected to their work. A certain “responsibility” comes when the C-Suite
sends out an email asking for a job to be completed or feedback to be offered. That
makes it difficult for some workers to turn away from their professional duties when
enjoying personal time, which affects their work-life balance.

5. It can encourage power struggles.

Because there is a lack of management definition in most flat organizational

structures, a power vacuum is created when the C-Suite is not present. In an SMB, the
C-Suite might involve just one person. If that person leaves, the employees bicker
amongst themselves about who should be in charge when a replacement is not named.
That bickering leads to confusion, leading to resentment, which leads to a lack of
productivity.

6. It can hinder employee retention.

Highly skilled workers also like having opportunities to advance upward through
the chain of command. Because middle management positions are naturally limited in
this business structure, there are fewer advancement options. An employee who needs
something fresh or new to do may find few options available to them, which encourages
them to seek out a new job instead of staying put.
7. Biases become more prevalent.

There is no manager also means that without data and metrics to rely on to gauge
performance, so it may lead to inequality between employees.

8. Failure to set standards makes the process unfair.

Without the managers, there are no standards for performance in employees’

roles, they won’t know what’s expected of them, and may simply not understand what
justifies poor vs excellent performance.

9. Difficulty in financial statement

10. Loss of confidentiality

With the mentioned drawbacks of this type of organizational structure, we can see
that it is not a flawless structure. That being said, there has to be various advantages
of this type of structures, because there are world-class businesses that use this flat
structure, such as Google in the technological industry, or Nike in sportwear retailer.
How come that depsite having many drawbacks, this flat structure is used by some
largest businesses? First, we will present the advantages of this structure:

Advantages
1. Flat Structure Lowers Operational Costs

In a flat structure, decision making occurs at the staff level; it doesn’t proceed
from executives down to the rank-and-file. Employees in a flat organizational structure
are given significant authority with little to no supervision. This means you don’t have
the expense of hiring mid-level and low-level managers. You can use that money for
other important aspects of your business such as marketing and advertising. Flat
structures typically eliminate all managers except executive-level managers, so you can
run a leaner operation and get more out of your staff, which increases productivity
relative to the number of people you employ.

2. Flat Structure Improves Communication

One of the disadvantages of a tall organizational structure is the slow rate of

communication due to the number of management layers between executives and staff
employees. In a flat structure, executives and staff members communicate directly with
one another without having to go through intermediaries. This not only speeds up
communication, but it also makes the communication clear and understandable
because clarity suffers when more people are involved in the communication process.

3. Flat Structure Reduces Micromanaging

When a company has multiple managers, there is a tendency for those managers
to micromanage every detail of the daily tasks that staff members must complete.
Micromanaging can hinder creativity because employees feel as if they can’t make any
moves without being criticized. Micromanaging also stifles efficiency. The lack of trust
that managers show for their subordinates often slows the work process when they
must approve everything before employees can keep working on a project.

4. Flat Structure Improves Employee Motivation and Satisfaction

Employees in a flat-structured organization have the authority to implement their

ideas and their way of doing things as long as they produce the desired results. This
empowerment not only increases productivity, but it also boosts staff motivation.
When workers feel as if they are trusted, they are motivated to do their best and to use
all their skills and talent in service to their company. Motivated employees are happier
employees, which improves job satisfaction, and most importantly, elevates staff
member buy-in.

5. Less bureaucracy and easier decision making

6. It Requires Less Dominance and Supervision

Many believe that a company’s head must be able to monitor and manage
anything and everything that is happening inside his or her organization, including the
employees. Some studies, however, show otherwise. This is because the less time
managers have to helicopter and micromanage their employees, the more productive
employees can get in day as these can give them a higher sense of responsibility.

Like we have mentioned earlier, Google, Nike, and Valve are the “giants” of their
own industries, and that their businesses organized horizontally means that they have
succesfully utilised the advantages and minimised the obstacles. This leads to the
conclusion that the flat structure worked extraodinary well for them.

But then why do some other businesses failed when they applied the same
structure? Or why do other business used other structures and still became successful?
Answering these questions is not an easy task. To explain the downfall of a
company by just pointing the finger at their organizational structure is not
professional and some may call it “unresponsible”. There are many factors that lead to
the failure and downfall of businesses, and to acknowledge of what causes them, we
need to perform another big analysis, and since that is out of this subject, we will only
answer this: Each business/company has their unique circumstances and problems,
therefore, they need to work out what works best for them and use it to its full potential
to grow the business; there are no standard way for companies to follow, and it is
up to the board of management to firgure out their own way. Flat or tall structure, they
themselves do not singularily responsible for the success or failure of a company.

Answering the Case Study problem and Recommendations

We believe that up to this point of this document, we have thoroughly analysed
and explained different aspects of the Flat Organizational structure. Based on that, we
will give our answer as follow:

While having designated managers is a good thing, however, it does not work for
every business. Some of them performs better with less managers and layers of
employees because they all have different situations and compatilities. Companies
should work out which structure types are the best for them and apply the said
structure.

We recommend that they should consider making minor adaptations adjustments

to their preffered structures to increase their suitability. What is more, companies need
to minimize the drawbacks and ultilize the advantages of their in-use organizational
structures to achieve the best results.

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