Valve economist breaks down hiring, firing and in-between

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Valve tends to keep as hush-hush as possible on a number of things, not least of which are matters of personnel. So EconTalk's chat with the company's economist, Yanis Varoufakis, in which he explains in elucidating detail how the company hires, fires, and pays its employees, is particularly enlightening. It's Valve's "flat hierarchy" approach which makes these processes interesting, and more than a little unconventional, as Varoufakis demonstrates when discussing the studio's hiring policy.

"The way it works is very simple," Varoufakis told EconTalk. "Let's say you and I have a chat in the corridor, or in some conference room, or wherever, and the result of this chat is that we converge to the view that we need an additional software engineer, or animator, or artist, or hardware person, or several of them. What we can do is we can send an email to the rest of our colleagues at Valve, invite them to join us in forming a search committee that actually looks for these people without seeking anyone's permission in the hierarchy, simply because there is no hierarchy."

This results in a free-for-all interview process, first by Skype, then "if they pass that test" in person, with anyone who wants to participate able to. After that, a consensus is eventually reached, and the hire is made.

Firings at Valve came under scrutiny recently after the company laid off an undisclosed number of employees, including hardware engineer Jeri Ellsworth. Varoufakis noted "in many occasions" it's a failure to adjust to the company's lack of hierarchy that leads to an employee's dismissal, with a similar consensus reaching the final decision. This Online MBA video and article from earlier this year neatly summarizes Valve's consensus-driven but case-by-case approach to firing.

The rewards for remaining employed by Valve, however, can be lucrative, as company bonuses don't have an upper limit. "Bonuses can end up being five, six, ten times the level of the basic wage," Varoufakis said.

Varoufakis goes to into greater detail on these processes and a lot of what's in between in the EconTalk podcast.
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