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Valve’s Employee Handbook is making the rounds on the web for good reason. Valve is an impressive company, generating $300M in net sales and $1B of gross sales annually with several hundred employees. Valve builds games. Valve distributes these games through a client called Steam that updates games and sells games made by others, for which they take a revenue share.

I’ve been discussing the conclusions from this handbook and how to apply it with several portfolio companies. The handbook extols some strong perspectives on culture. A summary of the values:

  • Flat organizational structure. No one reports to anyone.
  • Peer evaluation and reviews; public stack ranking of employee contribution as a way to evaluate performance and pay.
  • Self organization for projects. The most important/most valuable projects are staffed quickly.
  • Focus on hiring T shaped people: experts in one field but generalists in a broad number of others.
  • Prioritizing experimentation and engendering an open culture for discussion of the merits of different approaches.
  • Culture that encourages education/skills building.

Overall, these values make a lot of sense for companies in a creative/early stage of development or in a creative field with persistent creative problems, when lots of experimentation is important/essential for growth and success. Companies still developing their products and their core processes whether customer support, sales, marketing, and new product features can benefit from implementing some of these values.

Every culture has tradeoffs. To Valve’s credit, they openly share the challenges of their culture. They describe their challenges as:

  • Employee on-boarding and mentoring may not be effective because of the flat organization.
  • Disseminating information across the company is difficult because there is no hierarchy.
  • Making long term predictions and plans is hard because self organization and experimentation.

I came up with a few questions about the culture.

  • A byproduct of information dissemination and long term predictions challenges means that communication with client facing teams through sales and marketing, particularly with large enterprise customers, may suffer. This may not be a problem for Valve since most of their games are sold direct to consumer and Valve can govern their own timelines. But enterprise sales companies should think about how to reconcile the differences in needs between the two groups.
  • Staffing projects that aren’t sexy but essential for the business may be a challenge. There are very few people who are excited about refactoring someone else’s code as a full time job but sometimes it needs to be done.

I’ve embedded the document here. I think it’s wonderful for large successful companies like Valve and Netflix to share their guiding principles. Culture is one of the most important ingredients in the recipe for a successful company and one of the most important things to think through when building the company.

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3 thoughts on “Lessons from Valve’s Employee Handbook

  1. Fascinating read for someone who has worked at more common hierarchical companies. I wonder if all/some/none of the unique characteristics would work at a company with a single fundamental product.

  2. I think that for early stage projects in large companies it might work. As companies get bigger, they create hierarchy for information distribution purposes but this kills the creative efforts. The most creative groups, like Google X, seem to have one executive sponsor who shields the group from the organizational demands, and lets the group run free. So I think it could work. Do you agree, Jack?

    I’ve never worked for one of these companies, but a more and more startups I work with are building these kinds of org structures.

  3. That really was fascinating Tom, thanks for posting it! Brilliantly written handbook. I would love to work at an organization like that. By the way, how are you, and congrats on the imminent new family member!

    Interesting that you have seen other startups build similar organizational structures. I wonder if there is any petty wrangling/personality clashing during the review processes. Also, there is no mention of the firing process…I wonder how that works. The entire office lets the bad employee know they’re ineffective and ushers them out?

    Anyhow, hope you’re well!
    -Deane

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