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Empowering employees at Zappos

CEO Tony Hsieh has done away with management hierarchy at the online retailer, replacing it with a "holacracy."

By Bob Thomas and Yaarit Silverstone

INTRODUCTION

HAVING FUN

In 1999, Hsieh, then general manager of investment firm Venture Frogs, agreed to provide Zappos with $1.1 million in venture capital. By 2000, Hsieh had come to view the one-year-old company as the most “fun” and promising in his firm’s portfolio; he soon became CEO.

Hsieh set two goals for the fledgling organization: To reach $1 billion in sales and to be named one of Fortune’s “Best Companies to Work For”—by 2010. The key, he believed, was to consistently deliver an outstanding customer service experience. Indeed, even after becoming CEO, Hsieh was not particularly interested in footwear; shoes were primarily a vehicle for delivering outstanding customer service—the business Hsieh really wanted to be in.

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BEWARE BUREAUCRACY

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Zappos sees holacracy as an operating system (see figure, above). “[Holacracy itself] is not a technology in the traditional sense. [W]e use it to organize around the work we need to do,” notes Alexis Gonzales-Black, who works on the implementation team. Holacracy is a social technology that distributes decision-making by using self-organized teams, called circles, to complete tasks. According to Gonzales-Black, “It’s up to [the teams] to figure out how to break the work down into roles and accountabilities to energize that purpose.”

The teams operate through two types of meetings: Governance and tactical. Bunch explains: “Governance meetings just capture all of the work, authorities and accountabilities. But in tactical meetings, it’s about getting work done.”

Employees known as “lead links” replace managers. They are chosen based on their performance and their interest in increasing their level of responsibility and accountability. Employees are empowered to make decisions around tasks for which they are accountable.

“It’s not leaderless,” Bunch is quick to point out. “There are certainly people who hold a bigger scope of purpose for the organization than others. What it does is distribute leadership into each role. Everybody is expected to lead and be an entrepreneur in their own roles.” He goes on to add that “anybody, throughout the company, whether that be Tony or anybody else, can give you ideas, thoughts and data points on decisions they think you should be making in your role. But ultimately it’s up to you to make that decision”.3

GLASS HOUSE

To support holacracy, Zappos employs Glass Frog, software that serves as a meeting archive and coach, storing and tracking meeting results, organizing roles and “visualizing” the organizational holarchy. The platform, accessible to all Zappos employees, allows teams to solicit, document and act on rich information and peer feedback. In earlier times—the heyday of QWL in the US auto industry, for example—such information would have been hidden or simply too difficult to find. Now, according to Bunch, “You can capture projects in Glass Frog, and other people in your team or in the company, can log in and see, ‘What is John Bunch’s role, what are the major projects he’s working on?’ The organizational structure is completely visible.”

Though some teams, like human resources, finance and legal, can keep data private, most do not. Bunch insists that “unless you have some really good reason to make something private, it should be public, up to and including the leadership team,” which is known as “the internal board”—Hsieh and his direct reports, who are responsible for overall business strategy and integration. Any employee can “follow” a circle’s work—including that of the internal board. Followers receive email notifications each time a circle meets or publishes changes to roles, authority, policies or domains. 

Hsieh serves as the lead link for the internal board, which is one of the most followed circles. “Anyone can click on ‘internal board’ and see [the circle’s] purpose, the current strategies they’re using, all the roles that are being filled and by whom. Then they can see what policies [the circle] passes, its meeting history and meeting notes,” Hsieh explains. 

Zappos’ Glass Frog software and similar apps will function as “journey tools,” serving as personal dashboards to provide each employee with a record of their skills, accomplishments, tasks and roles.

Ambitious vision

Glass Frog and holacracy are only two components of an even more ambitious vision of employee self-management. Rachael Brown, senior developer, envisions that in the future, Glass Frog and similar apps will function as “journey tools,” serving as personal dashboards to provide each employee with a record of their skills, accomplishments, tasks and roles. As employees take more responsibility for self-management, career development and self-evaluation enabled by data through these technology tools, the roles of lead link would become streamlined. 

“So say you want a new role, for example,” says Brown. “You have all your [performance] information available. You’ll be able to see the different skillsets required and sector goals. So if I want to become a software developer working on Java, for example, I should be able to look at that job and those skills, assess the skills that I don’t have and find a way to learn them.” She and colleague Darshan Bhatt collect performance data on all Zappos employees to create the dashboards so employees could review and assess their skills. “They will have all the information in front of them and it’s up to them, as individuals, to help themselves,” notes Brown. 

Conclusion

Hsieh believes that holacracy and Glass Frog will enable Zappos employees to become more productive as the company grows. Even more important, he argues, employees will benefit from the growing size of the organization because they have better access to data that reinforces the company’s core values—which comes back full circle to what is at the heart of the Zappos culture: outstanding customer service.

Citations

1. Annie Sunny, "Zappos Holacracy," People's Lab blog, MSL Group, February 27, 2014, http://peopleslab.mslgroup.com/peoplesinsights/zappos-holacracy/, accessed September 29, 2014.

2. Unless otherwise indicated, quotes are from interviews conducted by Accenture.

3. Aimee Groth, "Zappos is going holacratic: no job titles, no managers, no hierarchy," Quartz, December 30, 2013, http://qz.com/161210/zappos-is-going-holacratic-no-job-titles-no-managers-no-hierarchy/, accessed September 29, 2014.

Outlook: Accenture’s Journal of High-Performance Business

As a showcase for the most innovative thinking on high-performance business,Outlook focuses on six core themes: Redefining Competitiveness, Digital Disruption, Global Operating Model, Open Innovation, Sustainability and Workforce of the Future. We feature original content devoted to these topics as well as a selection of unique insights offered by professionals throughout Accenture.


AUTHORS

 

 

Bob Thomas

is managing director of research for the Accenture Institute for High Performance and a managing director in Accenture Strategy. He is based in Boston; he also teaches at Brandeis University and publishes frequently in the Harvard Business Review.

Yaarit Silverstone

is a functional strategy director responsible for organization effectiveness offerings in Accenture Strategy. She is based in Atlanta.

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