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This original post was inspired by concepts from chapter twelve of Under New Management. A company with no managers or job descriptions. It sounds like a recipe for chaos, but Valve Software has used this fluid structure to become immensely successful, relying on the strength of its people and their own sense of accountability to maximize productivity and create growth.

Desks on Wheels: How Valve Software’s Manager-less Structure Creates Productivity

To most business professionals, the idea of firing your managers doesn’t sound counterintuitive, it sounds insane. However some of the most successful companies do in fact run manager-less, while others have found ways to push some of the management function down to the level of those who are being managed. In either case, more and more leaders are discovering that employees are most productive and engaged when they control their own destiny.

Employees at Valve Software don’t have to take orders from ‘the boss.’

That’s because, at the Bellevue, Washington–based company, there are no bosses to give orders.

Valve is a company with no managers. They don’t believe in managers, or job descriptions. When new people join the company, they rotate around on various projects, talk to lots of people, and then decide which project (or projects) to jump into full-time.

“My observation is that it takes new hires about six months before they fully accept that no one is going to tell them what to do, that no manager is going to give them a review, that there is no such thing as a promotion or a job title or even a fixed role,” wrote Valve employee Michael Abrash on the company’s blog. “That it is their responsibility, and theirs alone, to allocate the most valuable resource in the company — their time — by figuring out what it is that they can do that is most valuable for the company, and then to go do it.”

Valve isn’t just a small handful of programmers working in a garage either. The company was founded in 1996 by Mike Harrington and Gabe Newell. Both were former Microsoft employees who decided to partner together. The company grew organically and quickly based on the success of its critically acclaimed game series Half-Life, a six-game series that made a significant impact on the industry and won more than fifty game-of-the-year awards.

That success was followed up by other successful franchises and the release of Steam, an online distribution portal for video games that accounts for an estimated 70 percent of all video home sales worldwide. The company has grown dramatically from the original partnership to more than 400 people.

Ordinarily, that type of growth would require a fairly rigid hierarchy to manage everyone and keep them working in the right direction. But Harrington and Newell don’t see it that way. “We thought about what the company needed to be good at,” Newell said. “We realized that here, our job was to create things that hadn’t existed before. Managers are good at institutionalizing procedures, but in our line of work, that’s not always good.”

So Harrington and Newell chose to ignore the traditional structure and to build something that would allow innovative and talented people to thrive. According to Valve’s employee handbook:

<>When you’re an entertainment company that’s spent the last decade going out of its way to recruit the most intelligent, innovative, talented people on Earth, telling them to sit at a desk and do what they’re told obliterates 99 percent of their value. We want innovators, and that means maintaining an environment where they’ll flourish.<>

In fact, what Valve employees work on changes so much each day that every employee’s desk is equipped with wheels and organized such that only two cords need to be unplugged before it can be rolled to wherever it’s needed in the shop. “The mobility within the corporation is a great asset, and everybody recognizes that,” said Yanis Varoufakis, an economist from the University of Athens who used to work as Valve’s economist-in-residence.

There are lots of people, however, to tell them what they could do. Since Valve has no managers, all projects are started by an individual employee or a group pitching an idea and then recruiting a team. If enough people join the group, the project starts. Sometimes an individual employee is referred to as the ‘leader’ for a project, but everyone knows that this simply means that this person is keeping track of all of the information and organizing what’s being done — not giving orders.

There are also lots of people to tell employees how they’re doing. Valve may not have managers, but it does have a performance management system in place. Just like the work itself, the system works on a peer basis. A designated set of employees interview everyone in the company and ask who they’ve worked with since the last peer review session. They ask about their experiences working with each person. That feedback is collected and anonymized, and then every employee is given a report on their peers’ experiences working with them.

A similar, but separate, system is also used to determine compensation. Each project group is asked to rank the members of the group based on four factors: skill level, productivity, group contribution, and product contribution. Once all that information is collected, Valve applies a series of calculations that place each employee in a compensation bracket.

Valve also empowers all of its employees to make hiring decisions, which it describes as “the most important thing in the universe.” Valve attributes the success of its organizational design to hiring the smartest, most innovative, and most talented people it can find. Making sure that it continues to hire only high-caliber people is vital to keeping the system working. The company’s handbook reminds employees, “Any time you interview a potential hire, you need to ask yourself not only if they’re talented or collaborative but also if they’re capable of literally running this company, because they will be.”

The leaders of companies like Valve have discovered something that researchers have known for decades: when individuals feel free to determine what they’re working on or how they work, they’re more motivated, more loyal and more productive. While Valve’s almost free-form structure may not be ideal for every company, the lessons learned here about improved productivity and engagement are of use to all.

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David Burkus is the author of the forthcoming Under New Management. He is host of the Radio Free Leader podcast and associate professor of management at Oral Roberts University. Please visit his website at www.davidburkus.com.