In an email dated March 23, 2015, Tony Hsieh, CEO of Zappos, an online shoes and clothing retailer, announced that the company would dramatically accelerate its journey to employee self-management. Zappos would replace its management hierarchy with “holacracy,” a system of self-organizing teams designed to simplify operations, streamline work flows and increase transparency—all in support of Zappos’ legendary customer service, itself based on similar flashes of creativity, innovation and initiative.
Is “holacracy” simply a smokescreen for eliminating job titles and managers, as many skeptics charge? Or, as purists may view it, a warmed-over version of earlier, largely unsuccessful efforts at employee empowerment? Not according to Hsieh, who views holacracy as a way to sever the link between size and complexity that has derailed so many fast-growing companies.
Industry and business have long aspired to team-based organization and self-management—the quality-of-work-life programs of the 1970s, for example, participative management, and even Toyota’s vaunted TQM (total quality management) processes of simplification and decentralization during the 1980s-90s. However, what was previously an aspiration is becoming reality at Zappos because business strategy demands it, and technology (in the form of off-the-shelf information management and communications tools) enables it.
The real question may ultimately not be whether holacracy completely replaces conventional management, but whether it enables Zappos to continue growing without losing its intimate customer relationships and the high level of employee enthusiasm on which that intimacy relies.
To fully appreciate Zappos’ ambition, it is essential to understand a bit more about the company’s history, business model and distinctive use of digital technology.