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Puranam and Håkonsson (2015) challenge us to ponder what we as organization design theorists make of Valve’s way (see also Jeppesen, 2008). We believe that Valve, in spite of its radical vision, does not represent a challenge to fundamental organization design theory and that it is questionable to what extent it represents a new blueprint for organization design, despite it being consistent with an “egalitarian Zeitgeist” (Puranam, 2014). In fact, managerial authority may be of increasing importance rather than the opposite (Guadalupe, Li, & Wulf, 2015). Thus, Valve is, and will remain, an outlier, albeit a voguish one.

There are many ways to exercise authority. Perrow (1986), in his review of March and Simon’s Organizations (1958), offers a threefold classification of the ways authority can be exercised in organizations: (1) direct, “fully obtrusive” controls such as giving orders and direct monitoring; (2) bureaucratic controls such as defined specializations, roles, and hierarchy; and (3) “control of the cognitive premises underlying action.” Valve ostentatiously makes little use of direct authority. It downplays bureaucracy, although in fact many bureaucratic controls are in place. Instead, the legal authority vested in the owners of the company (especially the majority shareholder, Gabe Newell) is used quite extensively to set the premises of action and thus unobtrusively channel employees’ efforts and communication patterns into a highly productive configuration. The sustained high profits of the company, and its ability to attract and retain talented software developers, are testimony to the success of this organizational model. At the same time, contextual variables – in particular Valve’s identity as a video game creator and the fact of a single majority shareholder – are also critical factors contributing to its success. As a result, even within the software industry, the range of companies for which this organizational model is appropriate is quite limited.

Valve is a very interesting case study! The company shares many features with open source software projects. In Valve, as in the open source world, the focus is on creating advanced technologies and letting developers self-select projects and tasks. Self-selection seems to work particularly well in an environment where technology development itself has a coordinating function. In software development, people have a strong bond of common knowledge based on design philosophies and approaches, language and terminology, and engineering tasks. In most cases, they also share a similar educational background and/or development experience that helps them implement creative ideas in physical machines and graphic environments. Developers rarely rely on detailed instructions from higher-level managers because they already have the implicit knowledge of what needs to be done. When inconsistent views about development come to the forefront, they are best reconciled where the knowledge resides: with the experts. Moreover, it appears that Valve has uncovered how developers’ self-selection of projects and tasks can be a powerful motivator to unleash their creativity., Journal of Organization Design, 4 (2), ISSN:2245-408X

What can we learn from outliers? While statisticians rightly warn us against their non-representativeness, we believe it is also true that thinking carefully about what makes them atypical may improve our understanding of the typical case. This is the premise behind the Organization Zoo series. Valve Corporation (Valve) is an unusual firm. It is a rare example of a firm that appears to operate without any formal hierarchy in its organization. What can we learn about the viability of authority hierarchies from Valve’s way of organizing? We wrote a brief account of Valve based on public information sources and asked several renowned organizational experts to comment on this unusual firm. We asked them to write a short commentary on what the Valve example means for organizational theorists and practitioners. Thankfully, they all accepted, and we are excited to present the results of their thinking in this first “exhibit” in the Organization Zoo.

Valve is the prototype knowledge-based company because its organizational design fosters creativity, action, fast learning, and high productivity. I experienced a similar organization about 15 years before Valve, at Oticon, the Danish hearing aid manufacturer which dropped bosses, titles, departments, and most of the bureaucracy and paperwork that slows down work. As in Valve, the value-creation was spectacular: 60% growth in market value each year for a ten-year period.

Valve Corporation represents an intriguing case study of organization design and strategy. In this short commentary (cf. Puranam & Hakonsson, 2015), I discuss Valve’s use of tipping points and thresholds in strategic decision making. While Valve indeed illustrates structural features such as polyarchy and markets-in-hierarchy, what appears to be novel about Valve is their use of specific social mechanisms in making decisions. I also discuss the broader opportunity for future work to study these mechanisms — such as self-selection, thresholds and matching — in the context of entrepreneurship, strategy and innovation.

Our goal in putting the spotlight on Valve Corporation is to stimulate thinking about what (if anything) this specimen in the zoo of organizational forms teaches us. We thank our panel of distinguished commentators for kindly (and sportingly) joining us in this exercise. So is Valve simply unusual? Or is it also instructive? The commentators, to our gratification, seem to argue that it is both.

Discussions of the Valve Corporation are always enlightening. The skeptic wonders how much is rhetoric and recruiting ploy and how much is real. Is there clear evidence that this organizational design actually works – that it is efficient in this setting? While revenues per employee are quite remarkable, cause and effect are unclear. Is “boss-less-ness” the cause of high sales per employee or simply the result of high sales per employee, fueled from earlier success? The same question could be asked of Google’s unusual organizational approach. Is Google’s success the result of its extensive autonomy granted to employees, or is its past success the enabling cause of such autonomy? Such questions, of course, are empirically unanswerable here. I therefore set them aside and assume this organizational specimen is efficient – well-suited to its environment – and proceed with further commentary.

Valve is a fascinating example of a company experimenting with a new way of working – one in which there are no traditional managers, and where employees are encouraged to take direct responsibility for choosing their own projects and completing them in an efficient and effective way. Of course, Valve is not alone in pushing a “manager free” model. Zappos (owned by Amazon) is currently experimenting with a similar model they call “holacracy”, and moving further back in time there are such classic examples as W.L. Gore and Associates’ “lattice structure”, Oticon’s “spaghetti organization”, and Brazilian industrial products company, Semco. Nonetheless, Valve’s experiments are note worthy because they are ambitious, visible, and so far very successful.