Last month, Zappos CEO Tony Hsieh made what he would likely call a calculated error [4]: he forced his 1,500 employees to choose between a seemingly unpopular ultimatum and free money. Hundreds chose the money.
Hsieh is in the process of implementing a “holacratic” corporate culture at Zappos. As a reminder, here’s what that means:
Holacracy is, in Hsieh’s words, “a system that removes traditional managerial hierarchies allowing employees to self-organize to complete work in a way that increases productivity, fosters innovation and empowers anyone in the company with the ability to make decisions that push the company forward.” So essentially, it’s a boss-less structure aimed at driving productivity and innovation by allowing employees to take ownership of their respective goals and responsibilities.
That sounds good in theory, but for whatever reason — perhaps employees want structure and guidance, perhaps they perceived the new system as antithetical to career advancement, or maybe all of the managers just quit — 210 people chose “the offer” over Holocracy.
“The offer” is Zappos lingo for a pay-to-quit scheme wherein the company offers to compensate employees who choose to leave, the idea being to retain only those who are truly dedicated to Zappos. Typically, only around 1-3% accept — this time around, the number was 14%.
New details are now emerging both about the employee exodus and about how effective the “bossless” system has been in terms of achieving the outcomes envisioned by Hsieh.
WSJ has the story [5]:
Brironni Alex was so good at answering telephone calls and emails from customers at Zappos.com Inc. that the company promoted her to customer-service manager.
But when the online retailer adopted a management philosophy called Holacracy, she lost her job title and
responsibility for performance reviews. Since the end of April, Zappos has zero managers to oversee employees, who are supposed to decide largely for themselves how to get their work done...
Employees say the new system has been confusing and time-consuming, especially at first, sometimes requiring five extra hours of meetings a week as workers unshackled from their former bosses organize themselves into “circles” and learn the vocabulary of Holacracy.
Created by a former software executive, the philosophy is spelled out in a 30-page “Constitution” where doing a job is called “energizing a role,” workplace concerns are “tensions” and updates are made at “tactical meetings”...
Boss-free companies are the extreme version of a recent push to flatten out management hierarchies that can create bottlenecks and slow productivity. W.L. Gore & Associates Inc., the maker of Gore-Tex fabric, says it has more than 10,000 employees and annual sales of more than $3 billion but no traditional organizational charts or chain of command...
Tweaks to how employees work at the company’s headquarters in the former Las Vegas city hall are common. Employees from every part of Zappos frequently mention its second core value: “Embrace and Drive Change.”
Zappos began testing Holacracy with a small group of employees in 2013. Mr. Hsieh then declared at a company wide meeting that Zappos would get rid of bosses and put employees in charge.
The management philosophy replaces work teams with circles. Employees start or join a circle based on the type of work they want to do, and each circle has a “lead link” who is similar to a project manager with limited authority.
Day-to-day routines were thrown into doubt, too. In many companies, managers announce new projects and direct employees to meet specified deadlines. The bosses usually track performance, make crucial decisions and swoop in if problems erupt.
Holacracy-driven employees establish their own priorities and raise problems with the rest of their “circle.” Meetings end with an opportunity for employees to say whatever is on their minds. Ms. Jimenez says she has heard employees say: “We got a lot done” and “I can’t wait to eat my leftover pizza for lunch.”
Note the rather amusing bolded passage above wherein employees attest that this space-age, zen-like management philosophy which Hsieh swears will "increase productivity" has in fact been "confusing", "time-consuming", and on bad weeks, creates five hours worth of extra meetings because no one can understand what anyone else is saying.
In a further testament to just how efficient this new system isn't, Hsieh says implementation will take half a decade...
Mr. Hsieh says it could take Zappos two to five years to finish the transition.
...while those who stuck around think things have gone from 'we've got a McDonald's playplace in the office' eccentric to 'we may have inadvertently joined a cult' weird:
“Create Fun and a Little Weirdness” is one of 10 “core values” [at Zappos] and a conference room features a Chuck E. Cheese’s-style pit filled with small plastic balls...
Marques Smith, 31, who drives the company’s courtesy shuttles, found Holacracy hard to understand and “weird 100%."
Here's a handy Holacracy graphic to which you can refer should any of the above sound as convoluted to you as it apparently did to 14% of Zappos' workforce:
[6]
* * *
In the end, Hsieh isn't discouraged by the employee exodus because after all, not everyone quit:
“Another way to look at it is that 86% of employees chose to ... stay with the company.”
Right.
Kind of like how another way to look at a 20% decline in Greek bank deposits since December is that 80% of depositors didn't stuff their money in the mattress.
