"If you stop on the way back from your massage to play darts or work out in the Valve gym or whatever, it's not a sign that this place is going to come crumbling down like some 1999-era dot-com start-up. If we ever institute caviar-catered lunches, though, then maybe something's wrong. Definitely panic if there's caviar."

Those few sentences, culled from page 19 of Valve Software's "Handbook for New Employees," are perfectly emblematic of the rest of the uniquely Valve book. The above illustration is pulled from early on in the handbook, where the company's much discussed "flat" hierarchy is detailed. A Valve rep confirmed the book's legitimacy to Joystiq after it leaked this weekend on Flamehaus.

Seen above everyone else, of course, is company co-founder and president Gabe Newell. But even Newell isn't beyond being overridden. "We do have a founder/president, but even he isn't your manager," the book states.

"We want innovators, and that means maintaining an environment where they'll flourish," it reads. "That's why Valve is flat. It's our shorthand way of saying that we don't have any management, and nobody 'reports to' anybody else." Bizarre? Yes. Successful? Apparently! A timeline depicting Valve's birth in 1996 shows the company's steady growth into the powerhouse it is today across a variety of projects, all the while espousing Valve's adherence to lack of structure.

293 employees are governed by this formula a formula that Valve recognizes as potentially unstable at such a scale, but that it claims is still working. "Concepts discussed in this book sound like they might work well at a tiny start-up, but not at a hundreds-of-people-plus- billions-in-revenue company. The big question is: Does all this stuff scale? Well, so far, yes. And we believe that if we're careful, it will work better and better the larger we get."

So, how does anything get done with a "flat" management structure? That's a good question, and one that's answered more by Valve's history of success than by actual example. The closest the handbook gets to answering it is with explanations of "team leads" and "cabals." The latter has been written about exhaustively in the past but the concept of leads within Valve seems antithetical to the ethos of the company. That is, until you read the description of said leads:

"Someone will emerge as the 'lead' for a project. This person's role is not a traditional managerial one. Most often, they're primarily a clearinghouse of information. They're keeping the whole project in their head at once so that people can use them as a resource to check decisions against. The leads serve the team, while acting as centers for the teams."

Following paragraphs explain that, yes, group structures tend to emerge from Valve's ... lack of structure, but that structure is just as easily dissolved when projects complete so that those employees can focus attention where it's needed most.

But the handbook isn't just about what Valve's doing right or how its baffling lack of structure is a massive success. It's also about what Valve could be doing better. At the top of that list? "Helping new people find their way. We wrote this book to help, but ... a book can only go so far." The irony! More interesting, however, is a serious limitation Valve faces due to its openness. "We miss out on hiring talented people who prefer to work within a more traditional structure. Again, this comes with the territory and isn't something we should change, but it's worth recognizing as a self-imposed limitation."

Regardless of that "self-imposed limitation," Valve seems to be doing more than alright thus far.
Source

An interesting read.