I discussed this issue with Mike and asked if Atlassian had a similar view on the efficacy of the flat company structure that Valve, GitHub, et al espouse. He said that no, this was not the case at Atlassian because he felt that this kind of flat structure contributed to a poorer culture in the long run.Events like the Github fiasco should not be mentioned in the open allocation debate, because it's not like they're rare in a closed-allocation company. They're just as common, if not moreso. It just doesn't surprise us, when that shit goes down at a closed-allocation company, because open-allocation companies are held to a higher standard-- because open allocation companies are better.
Open allocation isn't a panacea. The Github event established that, if it wasn't already obvious. Open allocation isn't perfect. It is, however, superior to closed allocation is almost every way (at least, in software). Closed allocation only works better under severe time constraints.
"Flat organization" is somewhat different and usually (like "unlimited vacation") undesirable. Just as "unlimited vacation" means the policy is undefined, "flat organization" usually means the hierarchy is undefined-- which is dangerous, because "unofficial managers" are more likely to compete with those below them than official, titled ones.
In reality and perhaps paradoxically, true open allocation requires that people with credibility and leadership skill keep the company open and fair, which means that it requires (lightweight) management. It's not the Traditional Dickhead Management (i.e. you subordinate to this assigned person, whose goals may conflict with the company's and yours, or you are fucked) that you see in 90+ percent of companies, but it's not "flat" either. "Flat" is like "anarchy"; not stable. Open allocation, however, is the absolute right way to go.