Zappos – Is It Not the Perfect World?

Zappos – Is It Not the Perfect World?

In an article in The Wall Street Journal, 14 percent of Zappos’ employees have resigned after the company implemented a new management structure called Holacracy. This is an interesting statistic.

Everyone knows Zappos pays new hires to leave. They only want people to stay and provide service to their customers if they really believe in their culture. Zappos has an outstanding service reputation so it must be working.

What is Holacracy? According to, the concept is a distributed authority system – a set of “rules of the game” that bake empowerment into the core of the organization. Unlike conventional top-down or progressive bottom-up approaches, it integrates the benefits of both without relying on parental heroic leaders. 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.

When the change to Holacracy was announced, Tony Hsieh promised employees at least three-month severance if they decided that the newly implemented structure was not right for them. The offer was open to all employees including senior management. Zappos did not disclose the percentages of staff leaving by position or title in the article.

The Wall Street article reported that the “transition to self-management has been difficult.”  Mr. Hsieh is impatient with his staff and wrote a memo to that effect, stating that, “it’s taking too long to implement the new management structure.”

I think Holacracy is an interesting and workable business model, not only an unusual one.  The idea of “no bosses” creates opportunities for employees as well as responsibilities.  Obviously it is an environment where everyone has to work well with each other.

When there is a change in a business structure, especially a major shift like the one at Zappos, perhaps the problem is that there wasn’t enough lead time for the employees to embrace the new paradigm or concrete information about Holacracy rules.  Whatever the reason, bottom line is that change can be difficult and it’s important in any organization that employees and staff are successfully brought into the loop to encourage each other.

Zappos is projecting a big increase in profits for 2015 of $97 million this year, a 77.9 percent jump from $54.5 million in profits in 2014. Their customers love them. So, as I said before, they must be doing something or everything right. And as we all know, Zappos’ employees make it work.

Holacracy is a new concept to me.  Of course, I always like to learn.  I welcome feedback and want to further the conversation.

What’s your opinion?

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