Don’t look now, but Valve just humiliated your “corporate culture”.

The game company Valve has gotten a lot of press recently for, among other things, its unusual corporate culture in which employees are free to move to whatever project they choose. There’s no “transfer process” to go through when an employee decides to move to another team. They just move. This is symbolized by placing wheels under each desk. People are free to move as they are capable. Employees are trusted with their time and energy. And it works.

Surely this can’t work for larger companies, can it? Actually, I’d argue that Valve has found the only solution that actually works. When companies trust their employees to self-organize and allocate their time as they will, the way to make sure that unpleasant but important work gets done is to provide an incentive: a leadership position or a promotion or a bonus to the person who rolls up her sleeves and solves this problem. That’s “expensive”, but it actually works. (Unpleasant and unimportant projects don’t get done, as they shouldn’t.) The more traditional, managerial alternative is to “assign” someone to that project and make it hard for her to transfer until some amount of time has been “served” on the shitty project. There’s a problem. First, the quality of the work done when someone tells a newcomer, “Complete this or I’ll fire you” is just not nearly as good as the work you get when you tell someone competent, “This project will be unpleasant but it will lock in your next promotion.” Second, it tends to produce mediocrity. The best people have better options than to pay 18 months of dues before having the option (not a guarantee, but the right to apply) to transfer┬áto something better, so the ones who remain and suffer tend to be less talented. Good people are always going to move around in search of the best learning opportunity (that’s how they got to be good) so it’s counterproductive to force them into external transfer with a policy that makes it a lot harder to get onto a decent project than to get hired.

Valve actually Solved It with the elegance of a one-line mathematical proof. They’ve won the cultural battle. The wheels under the desk are a beautiful symbol, as well: an awesome fuck-you to every company that thinks providing a Foosball table constitutes a “corporate culture” worth giving a shit about. They’ve also, by demonstration of an alternative, shown a generation of technology workers how terrible their more typical, micromanaged jobs are. What good is an array of cheap perks (8:30 pm pizza!) if people aren’t trusted to choose what to work on and direct their own careers?

I think, however, that Valve’s under-desk wheels have solved an even deeper problem. What causes corporations to decay? A lot of things, but hiring and firing come to mind. Hiring the wrong people is toxic, but there are very few objectively bad employees. Mostly, it comes down to project/person fit. Why not maximize the chance of a successful fit by letting the employee drive? Next, firing. It always does damage. Even when there is no question that it’s the right decision to fire someone, it has undesirable cultural side effects. Taking a short-term, first-order perspective, most companies could, in theory, become more productive if they fired the bottom 30 percent of their workforce. In practice, virtually no company would do this. It would be cultural suicide, and the actual effect on productivity would be catastrophic. So very companies execute 30 percent layoffs lightly. Nonetheless, good people do get fired, and it’s not a rare occasion, and it’s incredibly damaging. What drives this? Enter the Welch Effect, named for Jack Welch, inventor of stack-ranking, which answers the question of, “Who is most likely to get fired when a company has to cut people?” The answer: junior people on macroscopically underperforming teams. Why is this suboptimal? Because the junior members of this team are the ones least responsible for its underperformance.

Companies generally allocate bonuses and raises by having the CEO or board divide a pool of money among departments for the VPs to further subdivide, and so on, with leaf-level employees at the end of this propagation chain. The same process is usually used for layoffs, which means that an employee’s chance of getting nicked is a function of his team’s macroscopic performance, rather than her individual capability. Junior employees, who rarely make the kinds of major decisions that would result in macroscopic team underperformance, still tend to be the first ones to go. They don’t have the connections within the company or open transfer opportunities that would protect them. It’s not firing “from the top” or the middle or the bottom. It’s firing mostly new people randomly, which destroys the culture rapidly. Once people see a colleague unfairly fired, they tend to distrust that there’s any fairness in the company at all.

Wheels under the desk, in addiction to creating a corporate culture actually worth caring about, eliminate the Welch Effect. This inspires people to genuinely work hard and energetically, and makes bad hires and firings rare and transfer battles nonexistent.

Moreover, the Valve way of doing things is the only way, for white-collar work at least, that actually makes sense. Where did companies get the idea that, before anyone is allowed to spend time on it, a project needs to be “allocated” “head count” by a bunch of people who don’t even understand the work being done? I don’t know where that idea comes from, but its time is clearly long past over.