INNOVATINI

 In April 2014, this post was updated to reflect the then-current employee counts for these bossless companies. LGT

My last post covered Valve Software and the more general topic of “bossless work environments”.  Tac Anderson kindly pointed out to me that I didn’t mention the well-known case of the Morning Star Company.

This started me thinking: Were Valve, Semco and Morning Star outliers? What was the  “Googleable” count of companies who are known to be “bossless”?

So I set out to do a first-order count based on the loose Google query “bossless company”. Sorting through results, I counted only those where I could verify through their websites and/or trusted news sources that had some degree of “bossless” culture.  By this somewhat hybrid  Googlish- public relations definition, I found the following.

The Answer: There are Some 18 Well Publicized Bossless Companies

The table below shows, in alphabetic order, the company names, headquarters location, number of employees, industry and/or vertical market and reference describing a  “bossless workplace”. Now as much as I don’t like messing with small numbers for statistics, still, I note that  there are some surprises.

 Update 4/4/2014: Based on reader comments in 2014 as well as significant hyper-growth in some of the companies discussed (eg. Github,Shopify and Stripe) estimates of the number of employees per company have been updated where noted.

[ultimatetables 1 /]

Beyond the United States

While many 12 out of  18 are in the U.S., particularly West Coast tech spots (eg. Austin, Los Angeles, San Francisco, Seattle), 6 out of 18 were based  internationally, including Australia, Brazil,Canada,France, Singapore and Spain.

These are Not Just Small Companies

Of these, six were less than 100-person companies. Some 12 out of 18 companies were less than 1000-employee companies. One third of the companies had organizations over  1000 employees, with the largest being the Basque province’s Mondragno with 85,000 worker-members. (Update: One year after the date of this post, Github, Shopify and Stripe have undergone tremendous growth – supporting the view that bossless org structures are not  incompatible with growth.)

Not Just High Tech

While the majority (11/18) are in tech-related areas, over one-third were not, representing  industries as diverse as s automotive, aviation manufacturing, tomato processing to  a natural foods supermarket chain.

Not Just Young Startups

Some of these organizations have a long history. Mondragon has been around since 1956. France’s Favi is over 50 years old and has operated without a personnel department for over 30 years. GE Aviation’s self-managed teams began over 20 years ago.

Caveats

So some of you are thinking, “Oh no, dweep blonde. You are off by orders of magnitude.”

After all, some might argue I should count all open software companies, those where there is the thinnest of dividing lines between producers and consumers, where the software can be modified and redistributed by recipients. Wikipedia today counts over 50 free open software companies alone. Are those not self-managed collectives?

Some might argue that hackathons should be considered. One list of hackathons compiled in the first quarter of 2012, counted 160 hackathons taking place worldwide. If we extrapolate that, it’s likely some 640 hackathons, groups of self-organizing code teams, take place each year.

Still others might argue to include the spontaneously organizing crowd challenges where teams of “Solvers” cooperate to address business, social and technical challenges for a large prize reward. As an example, Innocentive has enlisted over 285,000 Solvers across 200+ countries, addressing over 1600 challenges.

Whatever definition of “organization” you are willing to accept and the period of time over which they operate (one day as in a “hackathon” to decades for corporations such as Favi, Mondragon or Semco ), it’s clear that bossless workplaces are much more prevalent than one might first suspect.

Did I miss any obvious candidates? Who would you include? Or exclude?

On December 30, 1853 a dinner party was held in London that took place inside a life sized model of an Iguanodon created by Benjamin Waterhoue Hawkins and Sir Richard Owens. Today, if many corporate executives and managers were aware of the sea change afoot, they might realize that they too were sitting similarly, encapsulated inside the skeleton of a long extinct dinosaur.

There’s a very physical differentiator between Valve and most companies: Employee workstations are on wheels, with movable network connectivity. This means that when an employee wants to join another project, they simply unplug their workstation and connect into the local group. This is not unlike the Brazilian manufacturer Semco, which also offers a very unstructured work environment and which encourages swapping chairs with other employees.

Self-Governance by Peer Review

Hiring is central: It’s the all essential hydrogen element of fueling the Valve star system’s nuclear fusion.

This ethos carries over to employee performance assessments where retention and reward are assessed by a group-view of how the contributor did or did not contribute to company performance. Valve’s is a meritocracy held together by a tight, but far from constraining social fabric. Indeed, there is the potential for as much as a 5X performance bonus over salary available to all employees, not just a select elite.

We’ve seen foreshadowing of similar forms of enlightened autonomous employee culture earlier from both Whole Foods and Netflix. (Note the latter’s employee handbook published online in 2009 inspired 3.9 million downloads.)

The Emerging Knowledge Worker Manifesto

Many corporate managers, reviewing the above, are surely astonished. And more astonished still to learn that Valve company’s Founder, Gabe Newell, candidly describes the company as operating under the principles of anarcho-syndicalism. Yes- the same anarcho-syndicalism mentioned in this Monty Python skit below. And as with Monty Python’s “annoying peasant” who regards centralized, hierarchical structure as repressing , Valve’ s culture regards the C&C structure as repressing innovation of knowledge workers.

Urging them that their talents may be wasted sitting at the dinner party inside the Iguanodon, the battle cry to knowledge workers is quite clearly expressed in Varoufakis’ closing paragraph on Valve culture.

The current system of corporate governance is bunk. Capitalist corporations are on the way to certain extinction. Replete with hierarchies that are excedingly wasteful of human talent and energies, intertwined with toxic finance, co-dependent with political structures that are losing democratic legitimacy fast, a form of post-capitalist, decentralised corporation will, sooner or later, emerge.

The eradication of distribution and marginal costs, the capacity of producers to have direct access to billions of customers instantaneously, the advances of open source communities and mentalities, all these fascinating developments are bound to turn the autocratic Soviet-like megaliths of today into curiosities that students of political economy, business studies etc will marvel at in the future, just like school children marvel at dinosaur skeletons at the Natural History museum.

If you have experienced the waste of human talent and energies inside traditional corporations compared to the free-wheeling innovation in start-ups, you can’t help but takes some glee in Varoufakis’ bold pronouncement.

Time to Short Command and Control?

We cannot be cavalier in dismissing the status quo. After all, this is the very system that brought about a 50x increase in productivity to the U.S. economy. In fact, the commenters on Varoufakis’ post on Valve culture, as much as they were enchanted, brought up some cogent objections. Let’s look at and respond to several …

The Valve Workplace Model isn’t Scalable

Valve has managed to grow to 300 employees today and claims it can handle hiring some 30-40 new ones per month. Can it grow further? Look at Brazil’s Semco as an possible predictor: Also operating a fairly work-time unstructured, peer review-dominant workplace, Semco today has some 3000 employees.

There’s a bigger question here: Is scalability as relevant in today’s networked economy, where consumers are also producers? The importance of scalability comes from a traditional corporate perspective, where the distinct barriers between producers and customers exist. If one considers that a good deal of Valves’ producers are creator-customers (eg. the independents and employees of small and large software houses creating the 1400+ games and tools for Steam), the effective workforce is probably more 800.

The Model Doesn’t Support Fast-Paced Decision-Making

For Valve as for many other companies in the current digital networked economy, the end-consumers include a large number of producers, so-called “co-creators”. Even between platform releases, the product is under evolution from these consumer-customers: One indie developer may create a special hat with magical powers that confers advantages to a game player’s avatar and makes that available for sale, adding to the game complexity and providing a new potential transaction. Another developer may devise a virtual hammer useful in certain game situations, again making the digital tool available for a price. In effect, co-creator consumers create more time for the company to produce the next platform.

This is true for all companies which open their platform to partners and customers for sharing and transacting. Consider the app world of Apple iOS and Google Android: Between platform releases, consumers can enrich and deepen their interaction with the current platform through the new features created by app developers. Recognizing this factor of a co-creator digital economy, underscores the earlier point that the “virtual workforce” in such platform companies is larger than the nominal employee size, making for greater productivity, off-setting the fixed costs of development while also scaling.

As I’ve posted earlier, Eric Von Hippel of MIT and colleagues have shown that in the U.S., U.K. and Japan alone, product modifications by some 18.5 million consumer-innovators generate $31.2 Bn a year. This decreasing dividing line between producers and consumers signals one roaring game-changer for conventional corporate structures.

The Valve Model Only Applies to Knowledge Workers

It can be said that such rarified work environments as Valve’s only apply to knowledge workers, such as Ph.D. researchers, software developers and designers; it can’t possibly apply to the average worker. But there’s a growing viewpoint that the “average worker” with the “average job” is becoming a relic of the past too. I see this as an extension of a view described in David Bollier’s Power Curve Society: The Future of Innovation, Opportunity and Social Equity in the Emerging Networked Economy ( a highly recommended read) which examines in depth the decreasing relevance of “average” and bell curve distributions in our working society.

While Power Curve Society vexes as to what exact shape our organizations need to take to meet the increasing pressures of fast-paced technology innovation, a quote from Joi Ito, Director of the MIT Media Lab and a contributor to the Roundtable described in the book, suggests we are not far-off from a Valve-like future.

The most interesting and rewarding jobs of the future are likely to require entrepreneurial talents, practice-based skills and a healthy sense of anti-authoritarianism.

The Valve Workplace Model Only Applies to Near Monopolies

This last point is raised by Varoufakas himself. Opponents argue that this form of bossless workplace is a luxury that can only take place where there is no scarcity, for instance, there can be no struggle to meet revenue targets or fierce need to meet a new product deadline due to competitors nipping at your heels.

This is perhaps the more cogent of the objections. Valve is valued, by Forbes estimates, at $2- $4 billion, owning some 50%-70% of the $4 billion online PC games distribution. So too, Netflix can be said to a near-monopoly in video distribution. Topping the pile, there’s no argument that Google has a near-monopoly position.

Interestingly, each of these companies grew by virtue of networked effects, where the value of their product or service increased with the number of users. The more users used these products, the more the value of their products grew in the perception of other users.

There are two reasons we expect to the growth of such tech monopolies to reshape the workplaces of the future: 1. More companies overall are migrating to the networked economy where they will be able to harness high growth network effects. 2. As stated earlier, increasing competitive pressure associated with greater intelligence derived from Big Data analyses, will tend to favor knowledge worker-based companies (or at least those with a strategic group of knowledge workers). Tim Wu’s Wall Street Journal piece, In the Grip of the New Monopolists does a great job of describing this ongoing trend.

Why It’s Time to Go Short on Command and Control

The objections and risks associated with a Valve-like future work environment, when evaluated against the trend toward a networked economy, open platforms and the emergence of co-creators consumers, leads to the exact opposite conclusion: There’s greater risk not to support a decentralized bossless knowledge-worker environment.

Yet the majority will tenaciously hang onto the dinosaur skeleton of command and control. Open reception to revolutionary change is about as likely as someone having convinced them to short sub-prime mortgages in 2006. And we know there weren’t many that foresaw that.

Bone-hanger-oners, beware. The libertarian view of Varoufakis’ inciting pronouncement pales against another (not mutually exclusive) version of the future workplaces, one more synergistic with a digital economy. Consider that the anarcho-syndicalist culture of a Valve isn’t quite complete: In its pure form, the owners of an anarcho-syndicalist organization transfer the capital, the ownership, to the workers. Yup – there’s still a more open structure that might cause even a Valve to “Shut TF up and run”: Guilds.

This greater threat is described by Bill Coleman, Partner in the venture capital firm Alsop Louie Partners, in “Power Curve Society”,

The productivity revolution being ushered in by the Internet and digital technologies will reprise the Industrial Revolution in a new guise. In the coming century, capital costs and barriers to entry will be fundamentally disrupted, and human self-actualization on an individual basis, will drive participation in an open, global chain of commerce. In this “pull world”, where everyone has the opportunity to participate, people will work through “guilds”” in every specialty – music, writing, film and even law, medicine and financial services. I also believe in a revolution of monetization, in which guilds (not unions) will lead innovation and demand compensation commensurate with their contributions. Meanwhile, the concept of a vertical enterprise will morph as it becomes more adaptive and fluid.”

Credit/Source for The Iguanodon Dinner Party engraving