Zappos and their Inner-Structure

by Seth Ansell

Holacracy is a type of management style that puts emphasis on self-management in contrast to the more common hierarchy system. This case study will compare the holacracy system to other traditional management styles, discussing the pros and cons of implementing a holacracy-like system. This case study will specifically look at Zappos’ transition into the holacracy style and review the positives the new style has given to the company, but also look at the complications and new challenges for the company due to the change of structure.

Holacracy.org, a website that advocates for the system, describes holacracy as “a complete, packaged system for self-management in organizations. Holacracy replaces the traditional management hierarchy with a new peer-to-peer “operating system” that increases transparency, accountability, and organizational agility” (Holacracy 2016). This is achieved through multiple features: distributed authority, rapid iterations, transparent rules, and roles defined around work. This are much different than traditional corporate culture where there is: delegated authority, big re-orgs, office politics, and specific job descriptions (Holacracy 2016).

Usually in a company, managers will delegate power but yet still retain the final say even if they had delegated the authority away. In a holacracy work environment, teams are self-organized around the work that they are doing and decisions are ultimately made by those groups rather than a single manager. These groups are often referred to as circles. A typical manager would oversee work and make the final decisions, but in this style of management a manager would make sure that each circle is laterally communicating with the other circles. Because employees do not have a specific job description, they can pick up or drop off work and roles easily within their own circle. This is particularly advantageous to allow employees to work where they are needed most and where they can use their talent to the fullest potential (Holacracy 2016).

Another major benefit to holacracy systems is that they do not to re-organize the way other systems may. With such a hard structure of how things must be done, traditional companies usually need to re-organize every couple of years to keep up with changing times. Due to holacracy’s looser structure, anyone can add input on everything. This keeps the organization constantly changing every month or so as the company will evolve on its own to adapt to changes (Holacracy 2016).

Holacracy organizations have transparent rules that everyone must follow; from a team member to the CEO. This gets rid of many office politics which often slow down work because no one knows who to for what. The rules in a holacracy company are clearly defined so one knows who to go to for specific needs. Due to rapid iterations rather than rare big re-organizations, rules can be changed rather quickly if a problem arises were as in a regular company it could take years or more for company policy to change (Holacracy 2016).

Zappos, an online retailer for shoes and clothes, shifted to holacracy. There are no longer managers, anyone can start a meeting. To avoid chaos, rules and policies are strictly enforced. The switch to holacracy was decided on by the company’s CEO, Mr. Hsieh, in 2013. One of the reasons Mr. Hsieh wanted to switch to holacracy was to go back to the close-knit feeling of the company when they had fewer workers, he believes it would increase productivity by improving relationships between workers (Gelles 2015).

 

leed-main
A look into Zappos’ Office. Photo Credit Zappos.com/leed

While many love the anti-hierarchy and less defined job descriptions, some do not like it. Many employees have been slow to accept the new environment, while others let their disapproval be known. The workers who enjoy it says it allows those who would not usually have input in meetings (like a secretary) and gives them an equal voice. Another issue with holacracy, with any highly democratic environment, is with more people who can voice their opinions is that meetings take much longer, with some employees complaining that they have 5 hours of meetings (Gelles 2015).

Some employees feel that the new organizational style was just unorganized chaos and brought uncertainty about the company’s future with no clear direction, which resulted in some employees leaving. Previous managers, now “link leaders”, don’t have the power to get anything done or force employees into getting work done. This left many employees unable to achieve their goals, like one who was aiming to become the VP of human resources because the job no longer exists. Also with job descriptions no longer around, it is difficult to know how much to pay everyone (Reingold 2016).

If I was Zappos’ CEO, I would apply a style of management that still had leaders and managers but allowed upward communication rather than no hierarchy at all. I would implement a modified participative style. It would allow free flow of communication between employees and the management but still retains managers to keep order and a sense of direction. I would still keep the circle style were anyone could participate in the group conservation but I would hire someone to act as a leader of each group. This leader would keep order in the circle’s meetings but also make sure everyone’s voice is heard. This leader would then relay the decisions they have made to other leaders. This allows the company to give employees a sense of direction and order while still having a democratic feel to the company. It also would give employees a goal to reach for career development. With no current leaders or managers, it gives the illusion that employees cannot progress their careers. I feel if the company were to make these changes, then Zappos would still retain the image and democracy like values they enjoy but also give more structure and direction for the company.

 

References

Gelles, D. (2015, July 17). At Zappos, Pushing Shoes and a Vision. Retrieved September 23,

2016, from http://www.nytimes.com/2015/07/19/business/at-zappos-selling-shoes-and-a-vision.html?_r=1

How It Works. (n.d.). Retrieved September 23, 2016, from http://www.holacracy.org/how-

it-works/

Reingold, J. (2016, March 4). How a Radical Shift Left Zappos Reeling. Retrieved September

23, 2016, from http://fortune.com/zappos-tony-hsieh-holacracy/

 

 

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