1101IBA – Management Concepts

Literature Review and Report

Valve Case Study

By

Muhammad Rabani b. Shamsul Khairil s2834180 Semester 2, 2012

1 583 words

Table of Content

1. Introduction 3 2. Problem Identification 3 3. Analysis 4 3.1 Vertical Organisation Structure 4 3.2 Horizontal Organisation Structure 5 4. Recommendations 6 5. Conclusion 7 6. Reference List 8

1. Introduction

Organisation can be seen as networks of system perform by a collective effort of people in order to achieve to a common purpose. (Schermerhorn et al. 2011, p.11). An organization can be structured in many different ways, depending on their objectives. The structure of an organization will determine the modes in which it operates and performs (Damraks 2009 p.1). Valve has a unique flat organisation structure where it operates. The purpose of this report is to discuss how selective adaptation of a vertical organisation structure can increase the efficiency, performance and growth at Valve. Firstly, this report will identify and examine Valve’s organisation structure problems within two main scopes of organisational structure, the horizontal organisation structure and the vertical organisation structure. Secondly, this report will analyse the academic literature regarding the two main scopes of organisation structure mentioned above as to deal with Valve’s problems. Thirdly, recommendations for Valve’s will be given based on the analysis of the research. Main argument of this report is Valve must adopt some elements of vertical organisation structure while maintaining it organic structure to maximise performance and growth.

2. Problem Identification

Organisation structure is a fundamental element within an organisation. Organisation structure is a set of relationship that enables its members to perform task far beyond the reach of individual accomplishment. People are assigned to specific positions within an organisational structure to increase the specificity of tasks and the reliability with which they are performed (Alvarez & Robin 2001, p 2002). There are two distinct types of organisation structure – vertical organisation structure and horizontal organisation structure (Ikeda, S., Ito, T., & Sakamoto, M. 2010, p478).

Valve is a successful and one of the top video game software development company in the gaming industry. With around 300 employees and a success story, Valve uniqueness lies in the company organisation structure. Valve organisation structure is said to be a flat and organic organisation structure, not what one expect from a big corporation company. With the growth rate and size of the company present state, the ability and durability of Valve to continue to deliver their product given their current company structure are questionable.

3. Analysis

Valve’ organisation structure problems in this report will be put into focus within a wider context of vertical organisation structure and horizontal organisation structure. As profitable and sustainable growth requires an organisation design that emphasising in productivity, effectiveness and efficiency (Raisch 2008, p 483).

3.1 Vertical Organisation structure.

Vertical organisation structure companies have a chain of management, usually with a CEO at the top making decisions and then delegating authority to lower-level managers (Andersen 2006 p238-239). Basically, vertical organisation structure has a central decision maker within the organisation or department. This enables organisation a better at designation of tasks to employees or departments within the company, have well-defined responsibilities for employees, and are generally easier to manage. This enables problems to be solved quickly and projects or tasks are done according to plan. Because of this distribution of power and centralisation in decision making, vertical organisation structure provides the organisation the ability to grow efficiently as well increase productivity (Mihm et al. 2010, p 831). As company grows large, management are required to solve problems that are complex because of multiple relevant technologies, globalizing markets, multiple interacting business processes, and collaboration with external partners, vertical organisation structure helps in solving these challenges.

A major problem for vertical organisation structure is that because of the pyramid shapes of the structure, it lacks the transparency of information because each layer muddles information more and more and tends to create boundaries between departments or branches in an organization. For example, person down one branch must go up the chain of command on his branch and then down the chain of command on the other branch in order to interact with someone down the chain of command on a different branch (Damraks 2009, p7-8). This may lead to poor inter group interaction which can result in poor output of task or projects. Another problem arise regarding vertical organisation structure is the quality of the solution, because of poor flow of information, the quality of the solution is questionable.

3.2 Horizontal Organisation structure.

Horizontal organisation structure refers to an organizational structure with few or no levels of intervening management between staff and managers. The idea is that well-trained workers will be more productive when they are more directly involved in the decision making process, rather than closely supervised by many layers of management. The horizontal organization structure promotes employee involvement through a decentralized decision-making process. By elevating the level of responsibility of baseline employees and eliminating layers of middle management, it create a free flow of information environment where by comments and feedback reach all employees more quickly and also involvement of decision making are also been emphasis thus strengthening the quality of a solution (‘A Flat Pyramid: A Symbolic Processing Of Organizational Str’ 1989, p5). Researchers said in an environment that is uncertain and rapidly changing, the horizontal structure provide flexibility in decision making and increase the functional specialization of employees thus promote efficiency and performance(Ikeda S., Ito T., & Sakamoto M. 2010, p478).

The horizontal organisation structure, however, is said to lose it creditability as the company grow in size. As such horizontal organisation lack the ability to provide productivity and effectiveness in a large operating company (‘A Flat Pyramid: A Symbolic Processing Of Organizational Str’, 1989 p5). The decentralized structure could lead to a "loose ship," as the team and project leaders have high levels of responsibility for achieving results but little real authority over their team members. A resulting lack of control can lead to finger-pointing when things go awry, which can hinder productivity. The lack of authority also contribute in the motivation of the employee as employees are unsure about their roles and responsibilities within the company, and project leaders can be frustrated by their lack of authority which result bad performance. Having a clear identity in the minds of employees creates value to the organisation. In an organization with the capability of shared mind-set, employees become more autonomous, self-directed, and self-motivated. They know what the company is trying to accomplish and how each individual contributes its goals (Ulrich 1997, p43).

4. Recommendations

It is recommended that Valve should gradually adopt some vertical structure while retaining the streamlined horizontal structure to enhance a sustainable growth at the same time being competitive in the industry.

An adaptation of a centralise structure will create a better coordination for Valve, this will enable Valve to expend or to move operation to other place rather than based in a spot which limit the capability of Valve to be stay competitive as expanding operation can help in a better talent search and improving customer satisfaction (Ikeda S., Ito T., & Sakamoto M. 2010, p478).
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Furthermore, a vertical organisation structure will help in the decision making process. In the industry of information technology where it is rapidly changing, a form of authority that overlooked the internal environment of the organisation as well the external environment of the organisation will provide a significant importance in decision making in order to accomplish the company goals.

However, the industry is highly demanding for innovation so it is also recommended, Valve retain the horizontal and organic structure as the current state of structure promote innovation and centralization and hierarchy structure have been found to hinder the forces of innovation and flexibility required for exploring new capabilities (Raisch 2008, p2).

5. Conclusion

Organisations such as Valve that brand themselves of being unique and innovation must have a balance design of organisation structure that emphasis in exploitation of existing capabilities as well the exploration of new possibilities. As the case of Valve, when an organisation grow and becomes increasingly globalise, it will need to centralised and formalisation organisation structure. Consequently, Valve will need deal with globalizing markets and multiple interacting business processes. For this reason, Valve must move to a mix organisation structure of vertical and horizontal structure.

6. Reference List

‘A Flat Pyramid: A Symbolic Processing Of Organizational Str’. 1989. International Studies of Management & Organization, 19(4), pp. 5-5. Andersen J.A. 2006, ‘Does Organization Structure Matter? On The Relationship Between The Structure, Functioning And Effectiveness’, International Journal of Innovation & Technology Management, p237-264.

Anderson C., 2010, ‘The functions and dysfunctions of hierarchy’, Research ing Organizational Behavior Volume 30, Pages 55–89.

Alvarez R and Robin, L. 2001.Organizational Structure. Encyclopedia of Sociology
Vol. 3. 2nd ed. New York: Macmillan Reference USA,. p2002-2017.

Damraks, T. 2009. ‘Organizational structures in dynamic mechanism design’. The University of Chicago). ProQuest Dissertations and Theses, viewed 08 September 2012, http://search.proquest.com.libraryproxy.griffith.edu.au/docview/305060424?accountid=14543. (305060424).

Ikeda, S., Ito, T., & Sakamoto, M. 2010 ‘Discovering the efficient organization structure: horizontal versus vertical’, Artif Life Robotics. p478- 481.

Mihm J., Loch C., Wilkinson D. and Huberman B 2010, ‘Hierarchical Structure and Search in Complex Organizations’, Management Science vol. 56 no. 5, p 831-848.

Raisch S., 2008, ‘Balanced Structures: Designing Organizations for Profitable Growth’ Long Range Planning Volume 41, Issue 5, p483–508.

Ulrich D, 1997, ‘What is organization’, Leader to Leader Volume 1997, Issue 5, p 40–46, Summer 1997