A couple of weeks ago I received a message that turned out to be a serendipitous opportunity.

A few back and forths, a few last-minute edits…

Side-quest complete. New skin unlocked:
→ “Strategy Breakdowns: as featured in Business Insider”.

Today we’re breaking down another culture memo that lives in my ‘leaked tech documents’ hall of fame.

Enjoy,

— Tom

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Why Valve has no managers

Chess Move

The what: A TLDR explanation of the strategy

At Valve there is only one direct report. The customer.

The company behind Steam (the largest online game store) and some of the biggest cult classic games (Dota 2, Half-Life, Counter Strike) has no employee hierarchy. No management. And nobody reports to anyone. Anyone but the customer that is.

Valve’s founder, Gabe Newell, was very intentional in what he wanted to achieve:

• Doing what’s best for the customer

• Empowering employees to flourish

His belief was that you can’t expect to get the best results for the customer when there’s 7 layers of bureaucracy between customer and builder.

And you can’t expect exceptional people to do their best work when they’re being told what to do and how to it.

So Valve removed all the red tape between employees and giving the customer what they want, and documented their entire philosophy in the now-legendary “Handbook for New Employees”.

Through doing this, Valve have built one of the most profitable companies per employee in the US, greater than Microsoft, Apple, and Facebook.

Breakdown

The how: The strategic playbook boiled down to 3x key takeaways

1.  Forcing function to hire A+ players

At Valve, hiring is the single most important task that any employee can work on.

With such a unique organisational structure there is a lot of potential upside, but also downside.

Which way it goes depends on who they hire.

Why? Because every employee has the autonomy to make decisions that only senior management running other companies would be able to make. Including who they hire next.

Read that again.

This structure isn’t for everyone. It’s a lot of pressure and responsibility. Not everyone wants that and Valve understands this. They know that only a specific type of person will thrive in this environment.

Valve looks exclusively for 'T-shaped' people:

• Good at most things. A jack of all trades. (the top)

• One of the very best at a specific thing. (the stem)

Everything at Valve is downstream of hiring A+ people. It’s the bar they measure success on.

2. Ownership at the core

Everything at Valve is up to you:

• What projects you join

• What projects you start

• What your role is

• When you move project

• Who you work with

• Who you hire

• What skills you develop

• How well you perform

It is all up to you. Valve trusts that any decision you make is in the best interests of its customers. In whatever way you see as fulfilling that.

This is a lot of responsibility to give to everyone. But it’s very intentional.

Valve believe that collective ability increases as responsibility is spread, because ownership gets people bought into the company and the projects they work on, ultimately improving the final product.

The impact of this buy-in becomes clearer when you view Valve as a "Marketplace of Ideas". With projects being “sold”, employees as “buyers”, and the currency as time. In an open and free environment like this, where people choose what they work on, the most exciting projects naturally elevate to the top and get the most momentum.

A self-selecting algorithm for determining what Valve should be working on.

Side note: The key enabler for a culture like this to thrive is being extremely forgiving on mistakes (provided they are done with the best intention for the customer). This is because you can’t expect ambitious projects to succeed without risk.

3. Stewards of the customer

While the internal org chart may be flat, there is one head point: the customer.

'Customer-centricity' is nothing unique. Where Valve stands out is in its execution.

At Valve there is nothing that stops anyone from speaking to a customer, figuring out what they want, and building it for them.

Not only is there nothing stopping it, everything discussed above encourages and ensures it happens.

Valve employees are expected to be stewards of the customer. With every choice to be made in line with what’s best for them.

It’s this bias for action, not management, that has helped Valve refine and deliver on what their customers want.

Rabbit Hole

The where: 3x high-signal resources to learn more

Valve Handbook for New Employees ↗

[38 minute read]

Peel back the culture and reasoning of one the most profitable (per employee) companies in America. Including how your pay depends on how your peers view your work.

And unlike most onboarding docs, it’s actually a world-class read (all the images in this breakdown came from Valve’s handbook).

Valve devs speak about Valve’s work structure ↗

[10 minute watch]

How Valve views its own culture is one thing.

Here’s the inside scoop on how employees see it, and how (if*) the culture handbook works in practice.

Culture Docs: Facebook, Netflix and Valve ↗

[4 minute read]

Valve isn’t the only one with an infamous culture doc.

Ex-Facebook employee breaks down Valve’s handbook, alongside with Facebook’s pointy “Little Red Booklet” and Netflix’s excellence-driven slide deck.

That’s all for today’s breakdown.

BRB - going to go whip up a Strategy Breakdowns culture memo.

Written by Sheldon Bishop and Tom Alder.

P.S. Today’s soundtrack whilst writing this piece.

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