This weekend I got a little obsessed about Valve and watching Gabe Newell talk about stuff. The company structure is simply amazing. For this blog I’m going to assume you know about it but in summary they have a completely flat hierarchy. Gabe felt that hierarchy works really well for the military of any industry focused on getting as many people as possible to perform the same task as efficiently as possible (such as in factories). However he thinks it is terrible for creative industries and so they have implemented their corporate structure. It has strange consequences because no one is able to tell anyone else what to do so everyone focuses 100% of time on the projects of their choosing. They deal with hiring, salaries and bonuses through this kind of way. There are no departments as everyone has direct contact with the customers and so everyone can do art or sales or marketing or development or managment, etc.

Even new Valve employees have trouble getting their head around this. So here are some links:

• At the bottom of this page you can download and read their new employee handbook. Its a colourful, full of pictures and answers most of the immediate questions you may have about it. http://kotaku.com/5903955/read-valves-employee-company-handbook-its-amazing
  
• A blog by their in-house economist explaining how their company structure fits into the history of economics. http://blogs.valvesoftware.com/economics/why-valve-or-what-do-we-need-corporations-for-and-how-does-valves-management-structure-fit-into-todays-corporate-world/
• This is a conversation Gabe had with what looks like a bunch of business people recently: http://www.youtube.com/watch?v=t8QEOBgLBQU
• A friend of mine described “working for valve must be like working for at willy wonka’s chocolate factory, except instead of a tiny slave, you’re like, a valued person”. He doesn’t work for valve but does write for his own website: http://gamebanter.co.uk/ Just thought I’d add this.

Now getting that out of the way I’ve been thinking a lot about if Common Nonsense the company I work for could act more like Valve? Its an on-going thing but I thought I’d post yet another Facebook conversation.

Isn’t it amazing!!!! I’ve been spending the evening chatting to one of my programmers seeing if we could make our company like that… I don’t think we can within a consultancy business model. I think you need to sell products and you need to be privately owned

The problem with the consultancy model is the way information flows. I (or my boss) meet with my clients and consult with them and then my developers build the things I come up with my clients. This means my developers can’t easily know exactly why they are doing what they are doing and to some degree have to just do what they are told. Ultimately we can’t just do what is best for our clients, we have to do what we’re told. So we as a company are under their structure and therefore of the theoretical inefficiencies that come with our client’s being managed internally hierarchically (according to valve’s economist in the above link)

In order for the information to fully flow either I’d have to essentially repeat every meeting I have with the clients, to all the developers or every developer would have speak to the client directly. Agile Software Development methodologies such as Scrum do a lot to get around this (which we do use) but they are no way near as cool as what Valve are doing.

This is particularly clear when looking at the way Valve focus heavily on quantitative testing of everything they do. As Gabe says, anyone can explain retrospectively why something didn’t work and so they put a lot of pressure of people coming up with quantitative tests before you do something. 

What this means is that every single individual in the company can do what is the best ultimately for their customers. This is because They have access to all the data they need to understand all the information they need to make the right decisions. This data may exist in someone’s head but they can sit next to them.

Now it might be possibly if our clients were ok with it to do something like this. But Gabe talks a lot about how its quite hard to adapt to valve’s way of working and so we’d have to have that struggle with every one of our clients and essentially force them to think differently about the way they make desicions!

The advantage of a consultancy model is that cash flow is really not a problem. I get paid for every hour I work and so we haven’t needed any start-up money. Now if we switched to a product business model we’d probably not make any money for quite a while. Gabe had made millions with Mike Harrington so he could self-fund the company. I don’t have millions and so would probably have to seek investment so that we were owned by someone who didn’t directly work for the company. It would be possible to pull this off but much more difficult.

(oh yeah the final thing! Is the pricing structure of consultancy. We’re not paid to provide value, we’re paid to work hours. At valve they encourage you to rest and chill out (and so does my boss) and what that means is that creative people may only work for a couple of hours in a day but it works if those 2 hours provide tremendous value. However, although we aim to provide that kind of value to our clients because we’re not doing it for the money. Our pricing structure discourages this and encourages us to just work hours because thats what we get paid to do. Even worse, if I sit around and come up with an amazing idea with lots of value, it might get lost on our clients because if they haven’t paid more for it they may not value it and so they may not use it.

I’ve spoken to people in the software world who complain about this and try and switch to a value based pricing structure rather then time based but so far I haven’t seen anyone suceed)

So there you go! Maybe if Common Nonsense were to move away from pure consultancy it could work? Maybe there is a way to get close to Valve with a consultancy model? Maybe Agile is kind of close?