Wednesday, April 9, 2014

Zappos Says Goodbye to Bosses


Andy Cole
Strategy Development
Blog Post, Week 4
4/9/14

Zappos Says Goodbye to Bosses


            Announced early this year, online realtor Zappos.com will be transitioning from a traditional organizational development model to a “holacracy.”  Rather than a typical corporate hierarchy, including managers, (internal) job titles, etc., Zappos will be implementing this holacratic model of “overlapping, self-governing ‘circles’,” giving “employees more of a voice in the way the company is run.”  This shift, according to company executives, is a reaction to the potential of Zappos becoming too rigid and bureaucratic as it grows.

            Zappos has seen two notable instances of growth in recent times.  First, expanding its product offers from shoes and apparel to home goods and cosmetics, and in 2009 when Amazon acquired Zappos for $1.2 billion.  While an acquisition by Amazon is a substantial alliance, they are not involved in the break out of sales for Zappos.  As such, to keep itself lean—Zappos is currently a 1,500-person operation—Zappos feels that corporate bureaucracy was getting in the way of adaptability to potential challenges in the market place and even for internal performance.

            Rather than looking at the individuals and their respective roles, holacracy views on the work that needs to be accomplished as an organizational focal point.  This is the core concept behind the practice of stripping away job titles and managerial roles.  In lieu thereof, employees are tasked with different roles that make them “part of multiple circles that each perform certain functions.”  Managers are replaced by “lead links.”  These employees have the power to assign or shuffle other non-lead employees to different projects.  Roles are assigned by the groups, within the groups, as separate circles.  However there are “broader circles” in place, which can tell sub-groups for what they may be accountable.

            However, there is still a governing structure well within the holacracy system.  Poor performance, for example, is qualified by a combination of not filling an employee’s time adequately with enough roles, or when a group of employees tasked with monitoring company culture decide that employee does not fit—luckily Zappos knows a thing or two about “if the shoe fits…” (or not).

            While there are elements of uncertainty associated with this decoupling of management and its longstanding role in corporations, including an uncontrolled rash of politics,  Zappos’ decision to implement a holacratic model seems innovative and a potential for success.  It seems to stress company culture and universal culpability in the work place.  Further, as pointed out by Stanford’s Bob Sutton, within “any group of five human beings or five apes or five dogs, and I want to see the one where a status difference does not emerge. It's who we are as creatures.”

Questions/Comments to Consider:
Reading this article reminded me of the Southwest Airlines case: young companies with dynamic internal practices, including ringing cowbells.  It just got me thinking how much of Zappos’ holacratic shift is image related versus seeing an actual need to implement such a system?  How long will such an innovation like this last and will it bring Zappos to a better place or create a game of catch-up to undo troublesome practices? 



Sources:
McGregor, Jena. "Zappos Says Goodbye to Bosses." The Washington Post.com. The Washington Post, 3
Jan. 2014. Web. 7 Apr. 2014. <http://www.washingtonpost.com/blogs/on-
leadership/wp/2014/01/03/zappos-gets-rid-of-all-managers/>.

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