The Real Implications of Zappos' Shift to Holacracy

Guest Contributorby Lizz Pellet | Posted | Industry Buzz

The Real Implications of Zappos\' Shift to Holacracy

In March, Zappos CEO, Tony Hsieh shared a companywide memo with employees stating that the company would more aggressively pursue Holacracy, a movement of self-organization. Employees were offered severance to quit, giving them until April 30 to opt in or out. Hsieh’s approach to “the offer” is a longstanding Zappos practice that gives employees the “freedom of choice” to align with major changes in the company - and this is a major change.

It appears that 14%, or roughly 210 of the near 1,500 employees, may transition out of the organization.   Given their current culture and talent management model, Zappos can afford to let 14% of the talent pool leave because they know they will have 210 new “Zapponians” lined up at the front door waiting to enter.

Note here, I don’t say 210 candidates answering a job posting; even those are passé at Zappos. They are so well known for their culture and employment brand that the resumes are always coming in. This allows them to keep a constant talent pipeline (a sourcer’s dream, mind you) with eager candidates just waiting in the wings for a job opening. These Zapponians are young and keen to work for a company with dominant name recognition and a stated level of autonomy. Those kinds of things mean a lot when you are just starting out and usually translate to an easier time of transitioning into a position with another company or upward mobility within the company.

While it’s good to shake things up a bit and try different approaches to leadership and self-management, this shift to Holacracy may not see significant ROI for quite some time.

The impact of Zappos’ shift to Holacracy

Here are some of observations on this recent all-in move:

1. Traditional companies are not into Holacracy - true enough. But we have never considered Zappos all that traditional, so it may be a good fit.

2. The title of ‘manager’ in a traditional company structure indicates a level of maturity, attained leadership skills and added responsibility. If employees are not going to be afforded the opportunity to have a manager title at Zappos, how can they expect to transition into a manager role somewhere else? Employers like to see some demonstrated experience (and title) before hiring a leader into the organization.

3. Not everyone is as evolved or emotionally intelligent as Tony Hsieh. Seriously, who understands leaving a Fortune 100 company because they didn’t do a good job of cultivating a positive company culture to start your own business, only to sell it off to Microsoft at age 24 for $265 million?! Think about it. There are only a handful of companies today that are used as examples of having an evolved company culture that has positioned them to be a high performing organization. You can count them on one hand.

4. Holacracy as Tony has stated is a self-managed process. The average individual, while saying they would like to self-manage, usually needs direction in order to be highly productive. Humans are lazy creatures and they will do what they can to get by. Zappos began testing an “open market” system in their call center and it is reported that employees took advantage of this freedom to the detriment of customer service.

5. Holacracy is touted as the “new” way of management and will become the norm, somewhere out in the future. If that’s true, I still see it laden with corporate “buzz word bingo”, so jargon aside, I would like to see it in laymen’s terms.

Here is more from the memo…. “Teal” organizations attempt to minimize service provider groups and lean more towards creating self-organizing and self-managing business-centric groups instead. As of 4/30/15, in order to eliminate the legacy management hierarchy, there will be effectively be no more people managers. In addition, we will begin the process of breaking down our legacy silo’ed structure/circles of merchandising, finance, tech, marketing, and other functions and create self-organizing and self-managing business-centric circles instead by starting to fund this new model with the appropriate resources needed to flourish.

If orange is the new black, Holacracy’s “teal” must be the new blue? The jury is still out on this approach, but, if there’s one dedicated CEO who can pull it off, it will be Tony Hsieh. 

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Intentionally Creating Your Organizational Culture

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