In 2013, Zappos went through a major restructuring, ditching the traditional hierarchy, opting instead to flatten the organisation with holacracy. This change was likely inspired by the Downtown Project, where CEO Tony Hsieh worked to revitalize downtown Las Vegas and turn it into a local hub of business, innovation, and creativity.
Holacracy works by removing traditional power structures, distributing clear roles throughout the organisation that allow for autonomous execution. The idea is to eliminate the roadblocks to innovation and evolution that seemingly cause organisational stagnation rather than growth and forward movement.
In a statement about the move to holacracy, Hsieh pointed to research about how cities grow versus how companies grow and his desire to make Zappos work more like a city:
“In a city, people and businesses are self-organising. We’re trying to do the same thing by switching from a normal hierarchical structure to a system called Holacracy, which enables employees to act more like entrepreneurs and self-direct their work instead of reporting to a manager who tells them what to do.”
More recently, there has been some curiosity regarding how the experiment is working for Zappos, with some noting the increased employee turnover during 2015. According to the New York Times, holacracy has led to confusion, resentment and questions about “how to hire, fire and pay people in a company with no job titles.”
Holacracy consultant Brian Robertson defended the experiment saying, “Zappos’ focus on core values and culture has done a remarkably good job of getting around the limits of a conventional corporate structure. Leaders that already understand the limits of conventional structures are the ones that are attracted to holacracy.”
Zappos echoed this sentiment in a statement answering the recent media curiosity about the company health, noting that ultimately, the employee turnover is what it is, and those who stay are those “aligned, committed, and excited to push forward the purpose and vision of Zappos.” In other words, the commitment to company culture is more important than organisational structure. And while the change might be uncomfortable, the restructuring was intended to preserve the culture for which Zappos was revered, but many thought was getting lost as the company grew.
The reality is that for some people, being part of an organisation without hierarchy simply doesn’t work. Some people want job descriptions, titles, and someone else to look-to for making hard decisions. However, Mara Luna, organising director for Shareable, a non-profit news, action and connection hub for the sharing transformation, says holacracy is a way to create a different kind of organisation, without command-and-control management structures.
“The traditional way is to use top-down management to control the work and the workers. This can lead to burnout for the boss who has too much responsibility, and frustration for talented workers that are passively receiving orders, not fully contributing their gifts, and feeling demoralised by a lack of transparency and decision-making power.”
In the end, culture must determine the structure of an organisation, not the other way around. If the goal is to have a culture wherein team members are free to pursue the purpose of the organisation passionately, as autonomous decision makers, holacracy might be a worthy experiment. However, if the goal is to use holacracy to fix a broken culture, you may want to first establish the desired culture, and see if it works within the organisational structure already in place.
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