Employees as entrepreneurs

The Press jumped on the story and it went viral, globally. Zappos the first company to successfully sell shoes online lost more than 18% of their work force in 2015! This happened after implementing yet another dimension of operational restructuring. This particular restructure dismantles flat hierarchies even further into circles of interacting role-based pools. Control is achieved by distributing power to the individual in the teams. There are no job titles or no managers to report to. Employees act like entrepreneurs. And people left the company! Doesn’t this show that self-management is bunk? Self-delusion? And that we do need bosses to tell us what to do!

Holacracy as Policy

The Zappos folks who quit were offered generous compensations, to leave and “pursue other passions” according to a Zappos spokesperson. Observers assumed this exodus was the result of yet another drastic change to a company structure. This gutsy company had regularly exposed its personnel to beta waves of constant change – especially in their operating system. This last shift was a change from a more conventional management structure to a kind of advanced holacracy in which linear hierarchies and direct-report bosses were replaced with peer-to-peer teams that self-manage. Insiders comment that Zappos company culture, as good as it was, might not be able to cope with the amount of instability mandated by the changes.

Tony Hsieh, Zappo’s CEO, has always cared deeply about the human side of work. He wrote a book called Delivering Happiness, which asserted that employee satisfaction is the key to business success. Indeed, in recent years Zappo’s workers seemed pretty happy. They enjoyed a great company benefits, culture and for the last 10 years, gave Zappos highest ratings on the “best places to work” scale. The enterprise founded a consultancy and even began to sell Zappos peer-to-peer company culture to other businesses.  True, in 2015 sales growth had slowed. However, turning the company upside down is the last thing most managers would have done. But Hsieh was convinced that Zappos was becoming too micro-managed, bureaucratic and losing too much of its innovative spark and he decided to “rip off the band-aid”.

Can It Work For Everybody?

Holacracy is just one of many organizational tools that can help move us towards self-management and self-organization, but it would be naïve to think that by simply applying the rules of holacracy you automatically have self-management or self-organization. In Hsieh’s mind, the move to holacracy, in which teams are replaced by “circles,” and managers by “lead links,” is his an attempt to avoid the eventual fate of most large companies: death.

How much democratic team collaboration is the right mix to run a company with agility? What happens to the core business? The quarterly results? The media ripped Zappos revolutionary undertaking apart. But how one-sided is media’s representation of Zappo’s Holacracy?

What Holacracy Is Not

There are 3 main misinterpretations of Holacracy that have been repeatedly stated by the press:

1. There are no bosses

True, there are no job descriptions or people labeled “managers” in holacracy but there are clear levels of responsibility and “core roles” in holacracy, such as Lead Link, Rep Link, Facilitator and Secretary, are spelled out in exhaustive detail in the Holacracy Constitution. There are promotions, but fluid rearrangement of roles based on peer agreement. To suggest that there are no managers is false.

2. There is no hierarchy.

No hierarchy? Is also incorrect. Yes, each circle is required to be run democratically and openly. Communication and collaboration are key. However, each circle must meet the purpose as defined by its higher circle with exhaustively detailed procedures. It is a vertical hierarchy and the circles are required to look upwards for instructions as to how it is doing in response to that pre-defined purpose.

3. It is chaotic.

Anything goes? One of the comments I read is that employees at Zappos wanted to get back to their core business of selling shoes to the customer. With all the rules, complicated internal procedures and a long Holacracy constitution, it is not surprising that people feel distracted and overwhelmed by the constant need to learn new company procedures.  However, unless the company can close the “gap” between its internal processes, administration and the actually selling of shoes, this use of holacracy might proof to be hazardous to the company’s success. The focus and central organizational challenge of our times, must be to add value for customers through continuous transformational innovation. Holacracy mandates adherence to the rules which count for everyone in the company, CEO included. It requires much self-discipline.

Building in Creativity and Innovation

Can an entire company be part of transformative innovation? Zappos is trying to do just that. Other companies take another route. They in-source radical innovation to selected and protected “moon-shot” departments or units. These teams are supported by the CEO and the board. They are given the space, time and creative resources to develop disruptive innovative products that anticipate customers’ needs and delights.  These units are a little like being an autonomous start-up within the framework and context of a larger company.

Zappos has a long agile history of cultural transformation. Maybe, they can turn things around. But this will happen only if this latest evolution focuses not on improving internal efficiency and but redirects energy, attention and focus back to the customer, customer feedback and customer needs.

Re-imagining Management

Frederic LaLoux, in his book Reinventing Organisations, takes the fundamental principles of holacray a transformative step further. His book has been called the basis for a new management paradigm. LaLoux re-thinks fundamentals of management practices. He presents an operational treatise with personal, holistic elements. It is a seminal book based on in-depth on-site research, historical precedents and the evolution of working mankind. He envisions new productive ways of working together where our talents are nurtured and our potential are honored. For further reading, check out The Future of Management is Teal.

Holacracy is a radically different way of dealing with organization and administration of the workplace. It is democratic, which means it can be hefty and there can be lots of discussion.  However, there is a clear set of rules, and processes for how a team breaks up its work and defines roles with clear responsibilities.

How does this sound for you? Is this a model organization of the future that you’d like to work towards and for?

Confucius was right when he said “Choose a job you love and you’ll never have to work a day in your life.”