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Ghost Org

After discovering Valve Inc. earlier this year, I wrote several posts (here and here and here) praising their flat organizational structure and unique management practices. Well, as the saying goes, “nothing ever is as it seems“.

In February, Valve laid off a group of hardware designers and one of them has spoken out against the company. Jeri Ellsworth, the former head of Valve’s hardware division, is that person:

JE Fired

In a podcast interview, Jeri said the following unflattering things about the company:

There is actually a hidden layer of powerful management structure in the company, and it felt a lot like High School. There are popular kids that have acquired power, then there’s the trouble makers, and then everyone in between. Everyone in between is ok, but the trouble makers are the ones trying to make a difference.

Now we’ve all seen the Valve handbook, which offers a very idealized view. A lot of that is true. It is a pseudo-flat structure, where in small groups at least in small groups you are all peers and make decisions together.

Their structure probably works really well with about 20 people, but breaks down terribly when you get to a company of 300 people. Communication was a problem. I don’t think it works.

They have a bonus structure in there where you can get bonuses – if you work on very prestigious projects – that are more than what you earn. So everyone is trying to work on projects that are really visible. And it’s impossible to pull those people away for something risky like augmented reality because they only want to work on the sure thing. So that was a frustration, we were starved for resources. And I probably was [abrasive] but I just couldn’t find a way to make a process to actually deliver any hardware inside that company.

If I sound bitter, it’s because I am. I am really, really bitter. They promised me the world and then stabbed me in the back.

Despite my naivete and gullibility, I originally thought that Valve was an exemplar case. With over 300 employees, they seemingly proved that flatness and egalitarianism can scale. It seemed magical. But sigh, according to Jeri, who admittedly is only one data point, it doesn’t.

In light of this sad, new information, I no longer think flatness scales. At a certain (but unknown) size, hierarchy is required for sustained economic viability in for-profit enterprises. When you arrive at the (unknown) size where you need a hierarchy, tis better to have a visible, transparent pyramid than a hidden, privileged one.

The trouble with unwritten rules is that you don’t know where to go to erase them. – Unknown

I’m glad to be part of an org with a visible hierarchy instead of an invisible one. At least I know who to suck up to (which I do well) and who not to piss off (which I don’t do well).

Hierarchy will never go away, never. – Tom Peters

Ghost Org


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