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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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+13 Rank Up Rank Down
Mar 25, 2013
People that are too oppressed will break rules out of spite. People are at their best when they're free. Granted there are always going to be bad apples, but nothing builds resentment faster that clamping down on an entire culture for the sake of keeping a minority in check. Governments could learn a thing or two from Valve.
 
 
+7 Rank Up Rank Down
Mar 25, 2013
One more thing to add: I agree with @usmdj that incompetent or average people need jobs too. A company like Valve, which is a very simple company, may cherry pick the global workforce, backed by plenty of venture capital.

That's not the real world. The real world still exists mostly of local hires, with average pay and average competency. The whole "let's only hire super star entrepreneurs" model does not scale. Average people need jobs to pay for bills and to buy products produced by those superstars. If that model breaks down, everything breaks down.

It really comes down to this: most people are average and many really hate to work, it is a means to an end.
 
 
+27 Rank Up Rank Down
Mar 25, 2013
Management, or the lack thereof, is hard to scale. I work for a company of 100.000 employees, doing business in almost every country there is, this leads to an organization of enormous complexity, not comparable to Valve's single purpose online digital business. It is inevitable that such complexity leads to multiple layers of management.

The biggest problem usually lies in middle management. This is where the politics are at, where managers reside that kick down and kiss up. Many managers end up there as their final destination as they are not competent enough to move up any further. Yet they have reached a high pay position and will defend their little kingdom no matter the actual company interest. Of course I am stereotyping here.

But even at the lowest level of management there are problems. My manager manages a team of 10. Yet the work life of one single team member is so complex (multiple projects, 3rd party involvements, international business) that frankly the manager has no idea what the team is doing. Even if you want to micro manage, nowadays it is just plain impossible. So low level managers reside to administrative tasks and dealing with escalations.

I question the value of many management positions every day, but I don't know for sure if management-free is a solution for complicated organizations either. What I am convinced of however, is that particularly low level to middle management is strongly overrated: these people aren't doing the actual work, yet receive the highest pay, their added value is debatable, and there are almost no explicit qualifications for the job, meaning it attracts a lot of incompetent yet verbal people.
 
 
Mar 25, 2013
@miwaku

[That sounds too much like Marxism: "From each according to his ability, to each according to his need."]

Does it? The point I was trying to make was that the dystopia usmdj imagines where large numbers of people are unemployed because they're incompetent need not happen. That the folks who get weeded out because they're incompetent at their current jobs are competent at something and should find that something. The alternative is to consider such folks genuinely incompetent and keep overpaying them at jobs they're incompetent for. Sounds more like Marxism to me than what I was saying.
 
 
0 Rank Up Rank Down
Mar 25, 2013
@whtllnew "Everyone except the truly disabled has the potential to be competent at something. The problem is matching their training direction and opportunity to their talents and whether or not they will be happy with the compensation they can receive at what they should be doing."

That sounds too much like Marxism: "From each according to his ability, to each according to his need."

It assumes that each person has a perfect job out there and they need to find it, or at least have someone help them to find it. While it's a nice efficient way to think, it doesn't apply to many people. There are tons of people out there who are good at their jobs, but they hate the work they do. There are others who love their jobs, but suck at them. I work in a job because I care about the result, and while I'm the most knowledgeable about the product, I have little interest in being a mover or shaker to get it through the bureaucratic processes required. I'm more of an idea guy, and I like it that way.
 
 
Mar 25, 2013
@usmdj

[The problem is that the incompetent need jobs as well since there are insufficient competent people to support them all.]

Everyone except the truly disabled has the potential to be competent at something. The problem is matching their training direction and opportunity to their talents and whether or not they will be happy with the compensation they can receive at what they should be doing.
 
 
Mar 25, 2013
I think it's less of an issue of hiring mistakes and more the nature of different businesses. Most businesses need managers in the same way slaves needed dudes with whips.
 
 
-2 Rank Up Rank Down
Mar 25, 2013
@priceymark Regarding communism not working is like saying democracy doesn't work because the middle east has has through "democracy" elected a dictatorship. Valves success means that there are multiple ways to run a company no matter the complexity. Anyone that believes in the free market should be happy about that because that's what it's all about is finding the best solution through evolution.
 
 
+18 Rank Up Rank Down
Mar 25, 2013
The problem is that the incompetent need jobs as well since there are insufficient competent people to support them all.
 
 
Mar 25, 2013
Management is needed where complexity exists. In the example of your startup, the number of people involved and the decisions being made are straight forward enough that community decisions work.

Plus everyone's compensation in the startup group is probably directly tied to the incremental success of the company. I.e. 10% more profit goes directly into everyone's pockets instead of a salary structure where you make the same amount as long as the company survives.

I can't imagine no management at a company with 400. Sounds like communism to me, which hasn't worked out so well. There's no way that many people all have equal skin in the game and human nature is to perform at a level that matches your personal benefit.
 
 
-4 Rank Up Rank Down
Mar 25, 2013
I have also seen this to be true. The way it seems to work is person a (Manager) is worthless so hires someone to carry their slack. However they are only attracted to hiring like minded in-duh-viduals beacause they're "team players." After hiring 10 or so of these kinds of employees the Manager actually hires one or two that can do the work that the manager was supposed to have done. The one or two employees complete the task the manager was originally hired for and get to keep their job. Since the manager was so successful in managing all their employees and conpleting the task the were originally hired for then the manager is promoted. Now they gets to start the whole process all over again but with hiring managers.
 
 
Mar 25, 2013
"Management exists to minimize the problems created by its own hiring mistakes."

...and the problems begin not with the loser employees who are hired in and need to be managed... but with the loser managers who are hired in and never dealt with.
 
 
Mar 25, 2013
[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.]

[Management exists to minimize the problems created by its own hiring mistakes.]

I can imagine this working for small teams of folks. I can imagine being able to keep your companies teams small enough for this to work. But sooner or later your company is going to get big enough that you're going to need someone to organize those teams, and I have a hard time beleiving you're not going to need someone for that. Just how big is your startup at present? Maybe the reason you havent needed management til now is its not big enough (in terms of peoplepower) yet.

I also have a hard time beleiving that hiring mistakes are as avoidable as you think.
 
 
 
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