It's not structureless just because it's flat. Specifically, the article mentions "accountability is what gives democracy its bite", and Valve has definite accountability in its peer review and ranking processes, which as jstelly notes has no forced/expected distribution of results.
From the same article is a very appropriate quote: "Structurelessness is often mistakenly conflated with absence of hierarchy, when in fact, effective non-hierarchical forms of organizing actually require a great deal of structure. Anyone who has participated in an effectively facilitated general assembly or spokescouncil meeting will well understand this distinction."
Valve "stack ranking" is for bonuses only. In other words, an error that puts you toward the bottom of the stack reduces your payout from a pool of money you were never promised and to which you are not entitled. You get another chance next year to excel and come out on top. Over time, the errors should smooth out.
Microsoft-style stack ranking, on the other hand, completely fucks up your career in the company, even if you were just unlucky. You don't get another chance. This can happen when a company falters (layoffs) but it shouldn't be by-design.
You get another chance next year to excel and come out on top.
A year is a long time to be passed by for additional compensation. Our technostartup environment makes a year feel even longer since the rate of change and adoption of new products is accelerating.
How do companies justify holding paltry bonus parties when teenagers are selling companies for $30 million or raising valuations at $4 billion for things that didn't exist 12 to 24 months ago?
Yearly bonuses feel like an entire lifetime passes between them. Sure, great, here's your bonus amount, but out in the real world there are still people going from zero-to-millions in the same timeframe.
Does this just go back to people are weak/scared/risk-averse and companies can exploit that sociopathically by paying someone $X while their work generates 10$X to 100$X value to the company?
I don't know anything internal about Valve, and I'm sure their system isn't working perfectly, but I'd imagine that the people generating 10-100x salary are getting bonuses that they're happy with, at least in most cases.
That would be the more rare case of an employee getting screwed (delivering massive value, underpaid). Much more common is an employee who's screwed by being given inappropriate work, few or no opportunities to advance, but then compensated accurately (this might mean getting laid off) for the value delivered (with no allowance made for the error being in that person's work allocation).
No evaluation process is perfect, but a system where being unlucky means you live on your salary for a year is better than one where being unlucky fucks up your career, possibly beyond that job if you get fired abruptly with no severance. Microsoft-style stack-ranking is the latter.
Valve's review system bears little resemblance to the stack ranking being discussed here. It has no forced or expected distribution of results, for example.
Review (and compensate based on) impact rather than "performance", the latter carrying connotations of personal assessment rather than objective contribution.
Low impact doesn't mean you're a "low performer" or bad person, just that you didn't have any major successes that year. You'd fire over low impact if someone clearly didn't care, but not if they were just unlucky/ill-mentored/mistaken in choosing what efforts to focus on.
The problem with stack-ranking is that it lets people get "killed by the dice", to use an RPG metaphor.
Valve does this in its ranking process, specifically the ranking process is about determining a composite value relative to his/her peers that each individual has on the company that allows for varied impacts to be comparable. For example in a system like this, someone who is an amazing programmer who spends more time making everyone around him smart than writing features doesn't have to rank lower than someone who quietly sits by himself writing a ton of feature code. That, plus no expectation/forcing of a certain distribution (e.g. the 10% lowest scoring people aren't necessarily shit, they could all be adequate in terms of value and deserving of a solid bonus, it's just that they're not as high as the folks above them) are what makes the process truly work and keeps confidence/trust in the system high (as well as the fact that all employees participate in the process.)
