Radically Redefining Organizational Structure: Holacracy at Zappos

by Susanna Savage

Holacracy is a unique style of management that came into being at Ternary Software. In 2007, Ternary’s founder, Brian Robertson refined and condensed his most successful management practices and coined the term Holacracy. Robertson later developed the Holacracy Constitution, which lays out the core principles of the system, in 2010. Since then, Holacracy has been successfully used by a number of organizations (Groth, 2014). However, when Holacracy was implemented at Zappos, an online shoe and clothing company, many employees became less satisfied with their jobs and others were openly resistant to the change. It is now clear that at Zappos, the holacratic system was not a success and the company has moved on to a new system called “Teal” (Reingold, 2016). The following is an analysis of the strengths and weakness of holacracy, specifically in the context of Zappos.

Holacracy differs from traditional management styles in a number of ways. Rather then having job descriptions with titles that describe the work a specific person is to do, Holacracy instead has “roles.” Roles are used to describe the work being done, rather than the people doing it and they are updated regularly to fit the needs of the company. Staff members may have multiple roles at any given time (Holacracy, 2016). Authority is evenly distributed among roles and teams, replacing the top-to-bottom hierarchy found in traditional management styles. Rules are decided on and posted for everyone to see, and the same rules apply to every member of the staff, no matter their roles, status, or pay grade (Holacracy, 2016).This is a drastic shift from traditional styles, where certain actions are permissible for some but not for others and the rules are often bent by higher management.

Holacracy’s structure consists of layers of circles made up of team members. Circles are basically teams, organized to work on specific tasks. Any given employee can decide what circles he or she wants to be a part of. Whether he or she is granted membership depends in whether the teams leaders want him or her to be in the circle and whether there is available space. Although there is freedom within the system for employees to choose what circles to work in, they must find a spot to fill in enough circles at any given time to keep their job (Reingold, 2016).

Tony Hsieh is the man who has run Zappos for the last sixteen years and he has worked hard to maintain a culture of laid back, self expressive creativity within the organization (Gelles, 2015). Zappos corporate charter even expresses the company’s vision to, “create fun and a little weirdness” (Gelles, 2015). Hsieh decided to begin implementing holacracy at Zappos in 2013. This change was brought about by Hsieh’s wish to create a workplace that truly fosters creativity and freedom for the employees (Gelles, 2015).

culture-6
An example of creative space within Zappos. Photo Credit: https://www.zapposinsights.com/files/accounts/zappos/assets/files/approved/Culture%206.jpg

In theory, the holacratic system is valuable for creating equality and open communication in the work place. Employees who would have no power or say in a traditional system are able to voice their opinions and manage themselves. This should allow for creativity, more efficient flow of ideas, and greater individual autonomy. However, in reality, the results of the system vary from one work place to another. It is important to consider the lack of stability that holacracy creates. While individual expression, choice, and autonomy all foster creativity and are valuable pursuits of the holacratic system, the human need for stability is also incredibly important not only to job satisfaction but to the creative process as well. 

The culture of Zappos is one that expresses relaxed creativity. While on the surface, holacracy would seem to endorse those same ideals, in reality this is not the case. The rigid structure that is a necessity of holacracy to avoid complete anarchy is not only confusing but stifling, specifically for Zappos, where employees are used to a very laid back atmosphere. This, coupled with the speed at which the company adopted the holacratic style, created culture shock. Additionally, the lack of structure and stability of holacracy made it incompatible with Zappos (Reingold, 2016). Employees felt stress and pressure from self managing. The fact that the roles that they pick for themselves are short-term, means that there is absolutely no stability. This causes employees to become preoccupied, out of necessity, with navigating the system, detracting from their piece of mind and job satisfaction as well as their ability to focus on the actual job that they are there to do (Gelles, 2015).

While the relaxed culture of Zappos suggests that inclusive management would be best, it is also clear that some structure is necessary for its employees to work creatively. A more traditional participative or democratic management style would work well at Zappos. Employees would have input on decisions and be able to voice their opinions, concerns and suggestions, while the ultimate responsibility for decisions would not rest on their shoulders. Additionally, because this type of system is much less complex than the holacracy, employees will be able to focus more time on their work.

 

References

Gelles, D. (2015, July 17). At Zappos, pushing shoes and a vision. The New York Times. Retrieved from http://www.nytimes.com/2015/07/19/business/at-zappos-selling-shoes-and-a-vision.html?_r=1

Groth, A. (2014, January 16). The story of the man who’s flattening the world of corporate hierarchies. Quartz. Retrieved from http://qz.com/167145/the-story-of-holacracys-founder-began-when-he-started-coding-at-age-6/

Holacracy. (2016). How it works. Retrieved from http://www.holacracy.org/how-it-works/

Reingold, J. (2016, March 4). A move to “self-management” has shaken online shoe retailer. Can it regain its mojo? Fortune. Retrieved from http://fortune.com/zappos-tony-hsieh-holacracy/

 

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