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The Management-free Organization

The Management-free Organization

    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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