I love discovering people and companies that buck the current “kool and hip” trends followed religiously by the herd (mooo!). One of these motherbuckers is Evernote Inc. I’m not an Evernote user, but the app is phenomenally successful and has an enthusiastic following.
In “One Reason Everyone Has Outsourced Their Brains To Evernote | Fast Company”, Evernote CEO Phil Libin says:
We do everything native. That was actually the big decision. Right from the beginning we said, “No common denominator crap.” No HTML5. Just all native on every platform.
You would think that it makes no business sense to maintain a separate, resource-sucking team for each supported platform, but think again:
Yes, it’s really expensive. Yes, it takes a ton of developers. But it works for Evernote: As Libin says, they’ve got independent teams for every platform. They compete to make the best version, steal from each other, and leapfrog one another. Since each platform is different–BlackBerry, for instance, has that keyboard thing–the versions are tailored to them. And each fits. – FastCompany
Damn it, I hired you to get results! (… and I don’t care what means you use, so don’t give me any details) – Unknown CEO, President, SVP, VP, Director, or Manager
Some of the people who run our institutions don’t care much about “means“. Although they’ll never publicly admit it, they only care that results are achieved by whatever “means” possible. That is, until the “means” comes back to hit them where it counts – in the wallet. Even then, after the wallet has been lightened with a slap on the wrist, it’s back to business as usual. Wall St.? Investment banks? Bad ass corpocracies?
The title of this post sounds like the stodgy name of some inhumane, BS, corpo process under which “supervisors” evaluate their children, I mean, induhvidual contributors. But wait! It’s the Valve way.
You don’t know who Valve is? Valve is a company that creates massive, multi-player, online games. According to “economist-in-residence“, Yanis Varoufakis, Valve rakes in $1B in revenue even though they have a measly 300 employees. Also, according to Yanis (and their employee handbook), they are totally flat chested. There’s not a single boob, oops, I mean “boss“, in the entire community. D’oh!
The employee handbook spells out the details of the “Stacked Ranking“ process, but in summary, peers rate each other once a year according to these four, equally-weighted metrics:
Skill Level/Technical Ability
Notice that there’s no long list of patriarchical, corpo-BS ditties like these in the four simple Valve metrics:
- Takes initiative and is a self-starter
- Knows how to acquire resources when needed
- Manages time well
- Knows how to prioritize tasks
- Yada, yada, yada
As you might guess, the stack rankings are used for salary adjustment:
…stack ranking is done in order to gain insight into who’s providing the most value at the company and to thereby adjust each person’s compensation to be commensurate with his or her actual value. Valve pays people very well compared to industry norms. Our profitability per employee is higher than that of Google or Amazon or Microsoft, and we believe strongly that the right thing to do in that case is to put a maximum amount of money back into each employee’s pocket. Valve does not win if you’re paid less than the value you create. Over time, compensation gets adjusted to fit an employee’s internal peer-driven valuation. - The Valve Employee Handbook
Whenever I serendipitously discover jewels in the rough like Valve, SAS Institute, HCL Technologies, Semco, Zappos.com, etc, I always ask myself why they’re rare exceptions to the herd of standard, cookie-cutter corpricracies that dominate the business world. The best answer I can conjure up is this Ackoff-ism:
The only thing harder than starting something new is stopping something old. – Russ Ackoff
But it’s prolly something more pragmatic than that. Since corpo profits seem to keep rising, there is no burning need to change anything, let alone blow up the org and re-design it from scratch to be both socially and financially successful. That would be like asking the king to willingly give up the keys to his kingdom.
I recently listened to a fascinating podcast interview of Valve Inc‘s “economist-in-residence“, Yanis Varoufakis. According to Yanis, the company is still organizationally flat after 17 years of existence.
The thought early on at Valve was that the maximum limit to flatness would be around 50-60 people. Above that, in order to keep the wheels from falling off, some form of hierarchy would be required for concerted coordination. However, currently at 300+ employees, Valve has managed to blow through that artificial barrier and remain flat. Mind you, this is not a company solely made up of like-thinking engineers. There are also artists, animators, writers, and accountants running around like a herd of cats inefficiently doing the shit that brings in $1B in revenue each year.
According to Yanis, in order to maintain their egalitarian culture, Valve can’t afford to grow too quickly. That’s because they have to deprogram people who are hired in from hierarchical borgs as former bosses who expect others to work for them, and as former workers who expect to be “directed” by a boss. If Valve didn’t do this, their culture would get eaten alive by the pervasive and mighty command-and-control mindset. The spontaneity, creativity, and togetherness that power their revenue machine would be lost forever.
Nevertheless, Valve is pragmatic with respect to hierarchy:
“Valve is not averse to all organizational structure—it crops up in many forms all the time, temporarily. But problems show up when hierarchy or codified divisions of labor either haven’t been created by the group’s members or when those structures persist for long periods of time. We believe those structures inevitably begin to serve their own needs rather than those of Valve’s customers. The hierarchy will begin to reinforce its own structure by hiring people who fit its shape, adding people to fill subordinate support roles. Its members are also incented to engage in rent-seeking behaviors that take advantage of the power structure rather than focusing on simply delivering value to customers.” – The Valve employee handbook
Whether Valve knows it or not, their success is due to their respect of some of Gall’s system laws:
- Systems develop goals of their own as soon as they come into existence – and intra-system goals come first.
- Loose systems last longer and work better. Efficient systems are dangerous to themselves and others.
Complexity is generally understood to refer to such things as the size of a society, the number and distinctiveness of its parts, the variety of specialized social roles that it incorporates, the number of distinct social personalities present, and the variety of mechanisms for organizing these into a coherent, functioning whole. – Joseph Tainter.
Joseph then defines “collapse” as:
A society has collapsed when it displays a rapid, significant loss of an established level of sociopolitical complexity. Collapse then is not a fall to some primordial chaos, but a return to the normal human condition of lower complexity. – Joseph Tainter
Mr. Tainter then surveys the landscape of historic, archaeological, and anthropological literature explaining the collapse of societies like the western Roman empire, the Mayans, the Hittites, the Mycenaeans, etc. He groups the theories of collapse into 11 “tainted” themes:
Joseph then skillfully makes a case that all these specialized themes can be subsumed under his simple and universal theory of collapse:
His theory goes something like this. As a society grows, it necessarily becomes more complex. Exceedingly more and more investment in complexity (infrastructure, basic services, defense, food production control, public tributes to the elite to maintain their legitimacy in the minds of the non-elites) is then required to hold the society together. However, as the graphic below shows, at some point in time, the marginal return on the investments in complexity reaches a tipping point at which the society becomes vulnerable to collapse from one or more of the subsumed themes.
To illustrate further, BD00 presents the dorky growth-to-collapse scenario below:
As shown, societal growth begets a larger and more internally diverse production subsystem. That same growth requires investment in more and varied control (Ashby’s law of requisite variety) over production so that “the center can hold” and the society can “retain its identity as a whole“. In this runaway positive feedback system, the growing army of controller layers siphons off more and more of the production outputs for itself – starving the production subsystem in the process.
To prevent the production subsystem from dispersing (or revolting) and keep the whole system growing, more and more investment is poured into production control (compliance and efficiency) in an attempt to increase output and keep both the production and control subsystems viable. However, as the control subsystem growth outpaces production subsystem growth and a caste system emerges, the control subsystem requires a larger and larger share of the production subsystem outputs for itself – which further weakens and constrains and alienates the production subsystem. Hence, the “declining marginal return on investment in complexity” machine is kicked into overdrive and the vulnerability to collapse appears on the horizon. D’oh!
In your growing “society“, is the controller subsystem growing faster than the production subsystem? Are more specialized controller/administration layers being added faster than producers? Is the caste system becoming more stratified and prejudiced? Are more and more processes/rules/policies being imposed on the production subsystem for increased compliance and efficiency? Is the army of growing controllers siphoning off more and more of the production system outputs for themselves? If so, then maybe your society is vulnerable to sudden collapse. But then again, it may not. Tainter’s thesis is simply a bland and drama-less, economically based theory. It might be tainted itself.
Say it taint so, shoeless Joe! – unknown kid
Processes designed to execute the business of an enterprise should be tight and theory-based. Processes designed to develop the products of an enterprise should be loose and empirical.
In the best performing companies, this ridiculously simplistic BD00 generalization is true? In the worst companies, the opposite is true?
In golf, when you shank a shot off the tee, sometimes you’re allowed a “Mulligan“. A Mulligan is a “do over” where everyone cheatingly agrees that your first shot never took place and you get to tee off again with no stroke penalty. As you might surmise, I love freakin’ Mulligans; especially when the agreement allows TWO Mulligans per 18 hole round. Whoo Hoo!
Like the bailed-out principals that ignited the world’s financial meltdown, it looks like the army and its contractor cohorts are getting a Mulligan with the cancelled, 15-year, multi-billion dollar JTRS (Joint Tactical Radio System) program. Everyone involved in the original shank shot gets to wipe the slate clean; the program gets a shiny new name (JTN = Joint Tactical Networks program) to shake off the prior stank; and the players can start gorging on taxpayer money again.
But of course, this next go around will be different – the approach will be “entrepreneurial” despite the fact that all the participants are huge command & control hiermalarkies.
In search of economies of scale, centrally planned and controlled economies in nations and corporations tend to create monopolistic providers of goods and services. For example, in corporations, accounting, personnel, and R&D departments are usually deliberately organized as subsidized monopolies. They are subsidized in the sense that the users of their products or services do not pay for them directly; the supplying units are supported financially by funds that are allocated to them from above. The pool from which these funds are drawn is filled by a “tax” allocated from above to the units served. Monopolistic units that are subsidized are generally insensitive and unresponsive to the users of their services, but they are sensitive and responsive to the desires of the higher-level units that subsidize them. These higher level units are even more removed from the units served than the serving units. As a result, they are often unaware of, or unresponsive to, the needs and desires of the internal users of monopolistically provided goods and services. – Russell Ackoff (Ackoff’s Best: His Classic Writings on Management)
OK, time to practice my “bent” UML modeling skills and test your understanding with the class and sequence diagram pair below. The class diagram provides a structural view of a fictional Ackoffian system. The sequence diagram steps through an amalgam of behaviors in a world where monopolies rule. Any questions, comments, critiques, accolades, WTFs?