When Tony Hsieh (pronounced Shay) says something, we should listen.
Hsieh, the brilliant CEO of online apparel retailer Zappos.com Inc., has made a habit of defying convention and winning. What has made Zappos the opposite of the anti-consumer airline industry is his empowerment of front-line workers, encouraging them to solve problems as they see fit to soothe a customer’s complaint. It’s part of the reason why customers are so willing to pay a premium price for Zappos’ footwear—and now handbags, men and women’s casual clothing, eyewear and much more.
But Hsieh’s latest move is arguably his most audacious—and potentially likeliest to backfire. In a 4,700-word memo emailed March 24 to the company’s roughly 1,500 employees, Hsieh revealed plans to flatten Zappos’ managerial hierarchy.
In place of managers, Hsieh introduced a philosophy called Holacracy, a system founded by a Pennsylvania company called Ternary Software. The approach replaces traditional structure with circles, in which each person plays a role in the model.
The vernacular is extensive, but in short, each person is a partner and his or her duty is defined as a role. (To appreciate the entirety of Holacracy, go to holacracy.org/constitution).
Here’s a snippet of what Hsieh shared:
“We’ve been operating partially under Holacracy and partially under the legacy management hierarchy in parallel for over a year now. Having one foot in one world while having the other foot in the other world has slowed down our transformation toward self-management and self-organization.
“While we’ve made decent progress on understanding the workings of the system of Holacracy and capturing work/accountabilities … we haven’t made fast enough progress toward self-management, self-organization and more efficient structures to run our business.
“After many conversations and a lot of feedback about where we are today vs. our desired state of self-organization, self-management, increased autonomy and increased efficiency, we are going to take a ‘rip the Band-Aid’ approach …”
For Hsieh, there’s no compromise. He offered an ultimatum: Embrace self-management by April 30, or take a three-month severance package and leave. By May, approximately 14% of the company’s workforce had taken the offer.
In an article in Business Insider, Holacracy creator Brian Robertson explained the logic behind such a radical structure, and cited efforts to grow Ternary, his software company.
“[The traditional structure] wasn’t agile. It wasn’t adaptable,” he told the publication. “It was crushing the ability in people to actually contribute and use their gifts.”
The Holacracy management style, he said, was inspired by the nimble software-development movement of the late ’90s, which allowed engineers to develop ideas without the direction of a manager.
But critics say there are chinks in the armor. For one, who bears ultimate responsibility for a team’s failure? How do best employees/partners get recognized for excellence? What’s the balance between team and individual talent?
I have reservations about whether Hsieh’s model can be replicated on a broader basis or whether it will revolutionize workplace structure. It is, for better or worse, amping up a distaste for the increasingly antiquated top-down corporate approach. For all the collaboration it fosters and empowerment of workers to think—and act—creatively, there is an alarming lack of systems for vetting bad ideas embraced by a given team.
There is another challenge that should concern not only Hsieh but also all of us. And that is the college graduate.
In their thoughtful book, “Aspiring Adults Adrift,” academics Richard Arum and Josipa Roksa point out that four-year colleges require about half the studying they did a generation ago, and seem more intent on investing in costly student centers, gyms and social enrichment programs. Academic rigors are secondary.
As cited by New York Times columnist David Brooks, when these college graduates leave campus, “most of those [college] social connections and structures are ripped away. Suddenly, fresh alumni are cast out into a world almost without support organizations and compelled to hustle for themselves.”
Kids today are getting their driver’s license later and staying home longer, and the 20-something population is the most unemployed and underemployed segment in the labor force.
Whether this generation serves as a vital link in Hsieh’s circle or an irreparable breach remains to be answered. What seems to be lacking in both Hsieh’s model and today’s college experience is a sense of mentorship, the value of mature leaders and respect for the wisdom accrued through life’s experiences.
I’m not endorsing a return to the top-down model, but a world stripped of all authority, where hierarchy is a dirty word, promises a world void of accountability and a circle certain to be broken.
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