Organizational Structure and Architecture Valve Corporation - Essay Example

Analysing Valve Corporation Table of Contents Introduction 3 2. Analysis 3 2 Organisational structure and architecture 3 2.2. Leadership and power 6 3. Conclusions 8 References Appendices 1. Introduction: According to Gilbert’s (2012) report, Valve Corporation, formerly known as Valve Software, one of the best known video game development companies, based in Washington, was founded by Gabe Newell and Mike Harrington in 1996 according to the company’s website. The success of Valve Corporation was rooted in the way they functioned as a team. These co-founders hired the best talent from the market even if they had to pay a very high price. A big-games publisher that uses cutting-edge technology, as described by its competitor, is operated with about only 300 employees, as published in New York Times (Wingfield, 2012). This company, with its unconventional methods of management and operations, is worthy of investigating to gain new and proven insights into the world of contemporary management. For this purpose, a report on two of the most critical management aspects, such as, organisational structure and architecture, and leadership and power at Valve Corporation will be explored as we believe that these two aspects create the foundation required for effective management and business outcomes. Valve Corporation’s management approach and its credibility was intensified every time it bagged an award or a created a milestone that its customers recognized, valued and appreciated. In order to understand Valve’s success from two critical perspectives, such as organisational structure and architecture, and leadership and power, theory and literature will be explored before concluding with key findings. 2. Analysis: 2.1. Organisational structure and architecture at Valve Corporation: Devanna et al., (1984) have clarified that strategic management requires human resources management and organisational structure to be congruent with organisational strategy (cited in Armstrong, 2003). An advanced definition of organisational structure offered by Bartol and Martin (1994; cited in Senior & Fleming, 2010, p.78) is, “the formal pattern of interactions and coordination designed by management to link the tasks of individuals and groups in achieving organisational goals.” The ‘management’ aspect in this definition implies systems, control, authority, communication, and all other elements involved in performing tasks and achieving desired objectives. In short, the concept of organisational structure and architecture’ means the way different organisational or management aspects are arranged that facilitate achievement of effective and desired outcomes. One of the earliest models of strategic HRM, which integrates organisational structure in strategic management theory is the one proposed by Devanna et al., (1984), named as “the matching model,” (see appendix 2.1). This model emphasizes the relationships between employees, organisational structure, strategy and external environmental factors, while strategy includes all internal factors such as organisation’s mission, vision, and HRM policies. This model can provide a strong foundation to strategic HRM while emphasizing the importance of organisational structure (Raiden, Dainty & Neale, 2009). Equally significant is the aspect of organisational architecture, which refers to the decision-making authority and capabilities shaped by various factors such as its structure, culture, management style, incentive systems, information availability and processing, resource capabilities and their utilization etc (Burton, Obel & DeSanctis, 2011). It is basically the same organisational elements, but arranged or configured in a manner that enhances or weakens achievement of organisational goals through factors such as speed, flexibility, integration, and innovation (Moseley, 2009). Organisational configuration that is simple, flexible and encourages learning and promotes effectiveness requires a flat organisational structure with minimum authority and maximum empowerment. To apply this understanding and theory of organisational structure in strategic HRM to Valve Corporation, it is important to understand Valve’s way of operating. News reports and company’s website suggest that Valve is a flat organisation with absolutely no hierarchical levels. In his article, Wingfield (2012) highlights that Valve is truly ‘boss-less’ organisation; it also does not have any formal job titles unlike many other companies in the entertainment industry. In fact, at Valve, no individual employee is responsible or accountable for any other individual; every employee is on his own and does not have to report to any other member for any work-related tasks or deliverables. This flat structure is exercised to the extent that the co-founder, Newell, is only technically the CEO, which many of its employees are not even aware of. In fact, literature lists some of the most innovative organisations, such as Google, Hewlett-Packard, IDEO and Valve Corporation as having flat organisational structure with multidisciplinary collaboration (Fulton, 2013; p.114). Valve Corporation encourages free-form teaming, which allows the employees to team up with any one freely. Valve does not attach any formal titles to its employees, but employees are recognized based on the work or product they are dealing with at a particular time. Their ‘team leads’ are usually the employees that emerge as leaders while working on a particular project or product. Valve also believes that lack of job role and clarity can cause much confusion and deviated focus; to address this, they encourage their group members to discuss among themselves to attain job clarities and what each member would like to do to contribute towards development of a successful product. The so-formed self job description also changes with requirement. In their Handbook for New Employee (2012), Valve Corp refers to itself as the ‘Flatland,’ which does not mean that its completely devoid of any form of organisational structure, but means that its organisational structure is highly flexible and encourages sharing responsibilities and understanding. Valve encourages constantly changing group structures in order to avoid complacency and to restore focus towards Valve’s customers. While theory suggests that information dissemination is quicker and simpler in flat organisations, Valve Corporation’s culture does not foster such dissemination but encourages its employees to earn information through interaction and participation. Moreover, Valve does not have any formal systems to disseminate information and to impart training or coaching to its employees, but encourages employees to figure out themselves what they are good at and to learn from peers to the possible extent apart from putting their efforts and passion to test. 2.2. Leadership and power: Leadership is the quintessential aspect of any management and refers to the ability of an individual to inspire performance, commitment, cohesion, togetherness and integrity in a group of people that have come together to achieve a common objective with knowledge, empathy, listening and communicating and a vision. Literature identifies numerous types of leadership based on the way these actions and attributes are performed and exhibited, respectively, by the individual. Leaders, by virtue of position or by character/nature, possess the potential to influence others towards achieving a particular goal/objective; this potential may be referred to as ‘power’ (Northouse, 2012). Yukl (2007) has extensively explained about leadership power and its impact on various aspects such as outcomes, followers, organisation, society etc. Yukl (2007) asserts that power is an essential requirement to exercise leadership but should be moderated according to the need. Moreover, the effectiveness of power also depends upon the way it is exercised by the leader. French and Raven (1959; cited in Yukl, 2007) identified five types of power exercised by leaders/managers: reward, coercive, legitimate, expert and referent power. A brief explanation of these types is shown in appendix 2.2. At Valve Corporation, power is exercised, not by any specific leader/manager, but by every employee in some form or other. Based on understanding developed from its Handbook, it can be said that employees use reward power, referent power and expert power to achieve desired objectives. However, challenges in initial stages such as difficulties in attaining focus, team building and relationships, trust and interdependence cannot be avoided. However, more recent news about Valve Corporation tells that it has been firing its employees as a part of cleansing process, as reported by Sottek (2013). This indicates its use of coercive and legitimate power also, much against its own claims in its Employee Handbook. Theory suggests that every action and social relationship involves the usage of power in some form or other. Thus, in the context of leadership, power is used to attain desired influence. Usage of power has an impact on organisational effectiveness and job performance to large extent (Michelson, 2001). The same can be seen in Valve Corporation that formally does not define any leadership roles or authority. At Valve Corporation, employees are allowed to take on leadership roles such as to provide guidance, mentoring, coaching etc to other group members; such emergent leaders neither hold any formal authority nor are accountable to any member. According to its Handbook for New Employees (2012), all employees are independent to perform their job and can choose the project or task they wish to accomplish. Secondly, their hiring strategy targets the best talent in the market with highest price, and people that are highly competitive, passionate and knowledgeable are hired. These practices themselves bestow power to employees at this gaming company. Both, the knowledge that each employee comes with and his/her passion are qualities that create leadership. Although no particular individual can be formally named as the leader at Valve Corporation, its organisational policies and practices focus on creating transformational leaders that work towards creating a change that is valuable to its customers and itself. In fact, all four elements of transformational leadership as described by Bass, B and Bass, R (2009), individualized consideration, intellectual stimulation, inspirational motivation, and idealized influence can be seen in Valve’s approach to management. Firstly, practices such as empowerment, peer review, encouraging risk-taking, transparency, communication, trust and respect, and flat organisational structure provide immense individual consideration that boosts the employees’ self esteem and intrinsic motivation. Secondly, Valve’s functioning greatly depends on intellectual stimulation through practices such as peer reviews and feedback, encouraging risk taking, information collecting, and trying new methods of working. Thirdly, employees that are driven and motivated by the organisation’s vision to constantly create value to its customers and to be allowed to work according to their passion without any boundaries are the biggest inspirational motivation experienced by employees here. Lastly, such autonomy, empowerment, inspiration, and ethical orientation form the sources of idealized influence and pride. Such approach to leadership, which Valve exercises through its management practices, has had positive influence on its performance, which is congruent with some empirical studies (Ismail, Abidin & Tudin, 2009). 3. Conclusions: In summation, it could be said that Valve Corporation’s contemporary management approach that fits with its innovation-dependent strategy and products has been a great success and a way-marker for future companies with similar objectives. Its approaches to the exercise of leadership and power that motivates its employees and provides a path to their passion are supported by congruent practices in hiring, leading and controlling, and managing performance; their organisational structure adds further strength to these practices by creating an open, friendly, transparent and trustworthy atmosphere that is free from any sort of control and fear. Both these approaches create an ideal world for its employees to perform and innovate thereby continuously create value to its stakeholders, which ultimately is Valve’s vision. Nevertheless, this flat and highly empowered management style at Valve Corporation does have its challenges, which employees need to figure out continuously and handle in a manner that creates an ideal state for the organisation’s performance. References Armstrong, M. 2003. A handbook of human resource management practice. 9th ed. London: Kogan Page. (Ch2; 21-35). Bass, BM and Bass, R. 2009. 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Appendices Appendix 1 Source: Bratton, 2012; p.48. Appendix 2. French and Raven’s power taxonomy. Source: Yukl, 2007, p.166. Read More