Zappos Tries On Holacracy for Size
A number of years ago, in a courageous and somewhat risky move, Tony Hsieh, CEO and founder of Zappos, eliminated all managerial positions at the Las Vegas–based e-commerce shoe company. The strategy is called holacracy—better known as management by committee. Holacracy eliminates traditional manager roles and job titles with the intention of creating a faster, more efficient, and more innovative company. Hsieh is trying to fully integrate a self-managed organization that has estimated sales of $3 billion and 1,500 employees. The “work hard, play hard” attitude that embodies the Zappos culture will remain intact. What’s different is that all employees will have equal say, and employees will be evaluated and rewarded by peers rather than a traditional boss.
To date, Zappos, a wholly owned subsidiary of Amazon, is one of the largest companies known to be implementing holacracy. Teams choose their own goals in a decentralized structure. Hsieh is confident that the more control he relinquishes and redistributes, the better off and more productive the company will be.
Previously a manager at Zappos had a variety of responsibilities, including managing people, overseeing and approving decisions, budgeting, developing employees, and working directly with team members to meet goals and improve project results. Hsieh is interested to see what contributions will materialize from those who are no longer responsible for managing others. Former managers will be given insight and training through a process called “Reinventing Yourself,” whereby they explore new roles that match their passions, skills, and interests.
Hsieh acknowledges that for some the transition to self-management has been difficult. About 18% of the Zappos workforce has left since holacracy was implemented. Experts agree that it can take up to a decade to see its full, positive impact. Whether or not holacracy succeeds at Zappos remains to be seen. Yet, Hsieh’s decision to eliminate the negativity and lack of productivity sometimes associated with the power of a traditional organizational hierarchy may be a risk worth taking.
Questions for Critical Thinking
1. Suppose you had been a manager at Zappos before holacracy had been implemented. Would you stay on with the company in a different nonmanagerial role? Why or why not?
2. Research the current status of Hsieh’s decision to eliminate all managers and to implement holacracy. What have been the benefits? Drawbacks?
