Zappos pays up to support Holacracy vision
Through a special arrangement, presented here for discussion is a summary of a current article from the Retail TouchPoints website.
Zappos has recently been making making waves with its new "Holacracy" model. As noted by Zappos Insights — the culture division within the Zappos Family of Companies — a Holacracy is a "comprehensive practice for structuring, governing and running an organization" that "instills rapid evolution in the core processes of an organization."
Zappos made this shift in an effort to maintain its pace of innovation and collaboration, even as the company continues to grow. Rather than having a top-down approach to decision-making, authority is distributed throughout. So that means there are no traditional bosses or even job titles.
"Unlike conventional top-down or progressive bottom-up approaches, it integrates the benefits of both without relying on parental heroic leaders," noted a description from Holacracy.org. "Everyone becomes a leader of their roles and a follower of others’, processing tensions with real authority and real responsibility, through dynamic governance and transparent operations."
However, it doesn’t seem like the entire Zappos team is on board.
Source: Holacracy
The company recently offered its entire staff three months’ severance by April 30 to leave if they weren’t comfortable with the new self-management organizational structure. The offer came from a memo to staff members from Tony Hsieh, CEO, who indicated that the company was taking too long to transition to the Holacracy that has been slowly rolling out since the close of 2013.
As a result, approximately 14 percent of the company’s entire employee base decided to throw in the towel, according to The Wall Street Journal.
Despite rumblings of disagreement, I have to say that I commend Mr. Hsieh for going "all in" on this concept, and his business overall.
We’re living in time when less than one third (31.5 percent) of U.S. workers are engaged in their jobs, according to research from Gallup. Recognizing the company’s culture and business practices aren’t for everyone, Zappos’ leadership is taking the appropriate measures to remove employees that may be an issue further down the line. At the same time, Mr. Hsieh wants to ensure that he has the most loyal and dedicated employees.
It’s still early days for the Zappos Holacracy, but I’m excited to see how employees adapt, and most importantly, how it will impact the company’s overall innovation and growth.
- Zappos Pays Up To Support Holacracy Vision – Retail TouchPoints
- Holacracy – How it Works – Holacracy
- A Memo From Tony Hsieh – Zappos Insights
- Zappos Insights
- Why Zappos Offers New Hires $2,000 to Quit – Bloomberg
- At Zappos, Some Employees Find Offer to Leave Too Good to Refuse – The Wall Street Journal (sub. required)
- Majority of U.S. Employees Not Engaged Despite Gains in 2014 – Gallup
Discussion Questions
What do you think of flatter, more democratic management approaches such as Holacracy? Does such a corporate organizational system make sense for Zappos and its customer service driven model?
Poll
BrainTrust
Kudos for the courage to try something different to engage employees.
However, the challenge with “democracy” is that it can be slow and unwieldy at times. Can the democratic approach of a “Holacracy” be nimble enough to meet the unrelenting demands of consumers?
Is it just me, or is there something missing in the Holocracy organizational chart? The chart seems all about doing work, tactics and resolving tensions. Where does the employee fit into the scheme of things? And in the case of Zappos, where would the consumer fit in the Holacracy?
The trajectory that Tony Hsieh is pursuing will take Zappos to a state of “self-organization and self-management.” Holacracy is a tool along that journey. Breaking away from traditional structures is extremely difficult to realize. Ongoing course corrections in the continuous improvement model take the existing paradigm as appropriate but can be tweaked on the edges to increase efficiencies. No truly transformational value can be achieved by these adjustments, they only serve to validate existing structures and processes while shutting out new ideas. We get stuck in existing silos and ways of doing things — continuity trumps change regardless of the massive social and technological changes we see around us.
I view Zappos as a living operational laboratory and a window into what the future of work may look like in the post-industrial, post-information age. The notion of “business circles” and the elimination of functional silos can immediately focus employees on the customer and what really matters. This completely changes the notion of power and relationships among workers which can be both liberating and frightening. I applaud Zappos’ efforts and by “ripping off the Band-Aid,” Zappos is making a bold commitment to self-organization and creating their own future through learning-by-doing.
Holocracy fits the mold of Holocrazy for a shop the size of Zappos. This makes more sense for manufacturing operations where teamwork takes on a whole new light (see Gilbarco, part of Danaher, and learn how they have grown so fast with their use of a different management technique).
Seems to me that someone — Tony? — read too many management idea books and spun this model into place.
I estimate the results will get worse before they get better.
As organizational psychologists we talked about organizational models like this in graduate school back in the ’70s. Zappos attached a new name to it which is always a good idea to make it look fresh and new.
Basically it gets down to aligning and integrating all of the organization’s energy and focusing it on the highest possibilities. Learn to do that and your organization will be unassailable.
Here’s some brutal reality …
First, it is no surprise that 14 percent of employees opted out of this model. I’m surprised it was that low. We were all taught to think inside the box and if you didn’t or couldn’t do that you likely dropped out of school and hopefully you are a multimillionaire today. Zappos comes along and bravely reveals that “THERE IS NO BOX!” Someone just made that up in the effort to control people. Churches do it, schools do it, employers do it and governments do it. Notice it’s “do” not “did.” The result is that some people can’t handle freedom and responsibility and have zero confidence in their own creative thinking.
Now to the board. I’ve worked with a lot of boards over the last four decades, most filled with very bright and successful people. Too many overweight balding white men, but I digress. Something happens when people join “boards.” The very name refers back to a hard rigid substance. The “boardroom” is where they keep the huge immovable table that requires rigidity from all who enter. (Next board meeting sit in someone else’s seat and see the furor you generate.) And so all of the sudden the courage, risk-taking and innovation board members show in their own organizations disappears in someone else’s boardroom. That has never ceased to amaze me.
The idea of having people free to interact, make decisions, take risks and so on is more than most boardrooms can bear. The truth is if you are on a board that constantly energizes you, expands your thinking, tests your courage and where you can’t wait until the next board meeting, you are one lucky person. Me, I’d pay to be on Zappos’ board!
It just came to me that “the action is where the action is at.” And it ain’t where the top people are any more. So holarchic structuring begins to make sense in this modern world, for many, but not all, business entities.
Nevertheless, I still had to check out the definition: “Holacracy is a social technology or system of organizational governance in which authority and decision-making are distributed throughout a holarchy of self-organizing teams rather than being vested at the top of a hierarchy. (From Wikipedia.)
And from How It Works: “Holacracy is a new way of running an organization that removes power from a management hierarchy and distributes it across clear roles, which can then be executed autonomously, without a micromanaging boss. The work is actually more structured than in a conventional company, just differently so.”
The last sentence is reassuring, so it will be interesting to see how this idea works for Zappos. If it works, others will follow.
The new Zappos structure looks like a recipe for career stagnation. Not just at Zappos but when they try to move on to other companies. No traditional job titles means no getting through the resume filter when you apply for the next job.
There are a lot of people who do not want to be leaders. The responsibility scares them. While almost everyone wants to be respected and feel wanted/needed.
The trick would be a hybrid approach, or to take from Holacracy the ideas that will work for your organization and implement them in parts of the business that would see an improvement.
The 14 percent may not seem like a significant number but if that 14 percent is their most ambitious and committed employees, this is a huge problem.
Hierarchy, while not the most efficient, plays an important role in motivating employees. The reward of “moving up” is very powerful.
We’ve all worked in organizations where there’s at least one class of managers who do nothing but report on what other people are doing. Oh, and critique the work they’re doing.
I’ll guess that the Zappos staff who walked did so because they had figured out that they were going to have to deliver real work product and realized they weren’t up to the task. In this hyper-competitive atmosphere, it’s important for retailers to empower their people — and allow the laggards to work for their competitors.
First, congratulations to Tony Hsieh for pushing the envelope (again) on corporate culture. I don’t know if Holacracy will work, but what a concept. The key is the right people. The ones that are already at Zappos, and the ones that will replace the people who left. Zappos hires to the culture and they know the type of person they need to hire. Looking forward to seeing how this plays out.
Holacracy seems to be creating some tension within the organization and motivating employees to take the $2,000 and run. And Tony Hsieh has acknowledged that the system is not catching on fast enough within the organization. I think the concept has some potential but will have to be tweaked in order to be sustainable.
I’m having trouble getting past “relying on parental heroic leaders” and “processing tensions with real authority and real responsibility” and “dynamic governance and transparent operations.”
Zappos is one of the true retail success stories of the 21st century. Customers love shopping with Zappos. As a long-time satisfied customer myself it is unclear to me that there is anything about Zappos that is sufficiently broken to warrant undertaking this type of psychological and financial experiment that will involve both its employees and its customers.
I am all for “pushing responsibility down the org chart to where it does the most good” (an essential in a customer service driven model). I am in favor of empowering people to be responsible for their work, output, role, etc. All good things. I believe in providing employees with tools and resources to accomplish great things.
What scares me a little bit about the chart shown is the “baked in” reliance on meetings upon meetings. While I have no direct experience with this model as an employee—like Ian Percy—I spent plenty of graduate school nights arguing about org models, management techniques, motivations, performance evaluation, etc. (in my case—very often with Buffalo Chicken Wings and a pitcher of beer in front me) and come to the same conclusions that he reaches. The “box” is often airtight and impenetrable for many.
If Holocracy can work, it will work at Zappo’s. The culture there lends itself to more trial and error exercises than many of today’s typical management styles. I have studied this and am convinced it will take a special culture like Zappo’s to make it work.
The prospects for success at Zappos are high, though the company may have to suffer the turnover stated in the article to get to a good result. Zappos had a stated culture that emphasized customer service and people there now have bought into that culture. Any sort of shift, especially one as significant as the Holacracy will be sure to shake things up.
The interesting side story to me is that a Holacracy structure may appeal to Millennials as an “easy way out” of the traditional business structure, but stepping into a world with less framework actually puts more responsibility on the individual. That could be a scary high price for some to pay, which is why they are leaving.
At the end of the process, I do believe that enough people exist that will find this environment satisfying and attractive and that Zappos will be able to pull it off.
As we continue to find ways to generate profit in this relentless world economic depression commonly refereed to as a struggling recovery, I see no end to the spin for what is happening on the retail floor. Supervisors, assistant managers and store management job descriptions are a far more hands on experience than they were 10 years ago. Instead of referring to the situation as being under staffed we now call for the entire team to play ball without a side line. So we call this devolution “Holacracy” and sell it as a means to allow individual talent to supersede proven business practice in favor of getting the work done. These efforts take a lot of tolerance and may allow a narrow view to settle in. This in turn will get you killed when complacency and oversight follow to save time as a rule.
I think Holacracy is fine in smaller organizations, like David Gray’s, where you have very low turnover and a moderate amount of customer interaction.
Zappos has a huge call center with high turnover and low pay. This means a steady stream of new employees with little more than a high school diploma. All will have to be indoctrinated, so the continuous process of training people to operate under Holacracy is going to be a drain on the company. The “failure rate” of new hires is probably going to be higher than it is now.
A commenter over on Reddit said it best: most people want to show up for work, be told what to do, get their paycheck and go home. They do not “bring their selves” to work with them and they don’t take their work home either. (Tony Hsieh has stated Zappos wants people to “be their true selves at work”). Trying to make entrepreneurs out of the call center people is going to be a tough row to hoe.
And I should point out a majority of the 14% who quit were middle and upper management who were losing their job titles. You don’t work at a company for ten years, climbing the ladder, only to have it taken away from you with no plan for how you’ll be compensated in the future. Well, there’s *sort of* a plan: you have to earn “badges” and the more badges you have, the higher your pay grade. In other words, compensation based on gamification.
So imagine you’ve been at Zappos for ten years: you are offered severance of ten months of full pay and medical care, WITH THE OPTION to return to the company (something not being widely printed in other news outlets). If you stay you lose your job title and likely see your compensation decreased. Why wouldn’t you take the buyout, spend six months traveling Europe or Asia, and spend the last four months looking for new work?