Zappos Embarks On Radical Restructuring Adventure Towards Holacracy

By Anna Rose Welch, Editorial & Community Director, Advancing RNA

While restructuring brings new challenges (and skeptics), the company aspires to more flexibility  

Online retailer Zappos is taking several more steps outside the realms of tradition. In addition to calling executives “monkeys” and hosting a meeting themed “Gone Wild” in which an employee crawled into a case filled with tarantulas to retrieve a prize, CEO Tony Hsieh is planning for a major reorganization of the company’s structure.  This move will take the company from the traditional top-down hierarchy to a Holacracy with no job titles and no managers. Rather, there will be roughly 400 self-governing circles by the completion of this rollout in December 2014, and the employees in these circles will play a variety of roles. Zappos, with 1,500 employees, will be the largest company to date to implement Holacracy.

This move is all part of the company’s attempt to remain flexible and adapt. Zappos’ John Bunch says, “As we scaled, we noticed that the bureaucracy we were all used to was getting in the way of adaptability.” And adaptability is the only way to survive in this market, CEO Hsieh says. “Darwin said it’s not the fastest or strongest that survive. It’s the ones most adaptive to change.”

While this move will, in essence, eliminate managers from the company, Bunch says that the company is really “decoupling the professional development side of the business from the technical getting-the-work-done side.” It also expects to see leaders emerging among the workers. In fact, theoretically, this structure is supposed to give Zappos’ employees more of a voice in the way the company is run. This type of structure does have people known as “lead links:” employees with the ability to assign or reassign employees to various roles. However these “lead links” are not able to tell people what to do. Rather, each circle is responsible for deciding what is expected of the various roles and how each team should be functioning. Zappos still says the work will remain structured and the employees will still be accountable for performance, regardless of this restructuring.

The announcement of the company’s plans, of course, has left some feeling skeptical about the feasibility and success this strategy will bring the company. As Allison Griswold writes in her Business Insider article, this “super flat structure,” while still a relatively new concept, has been explored in the past. And these attempts have not always resulted in success. In the 80’s, factories and bigger companies, like Shell Oil, explored “self-management” teams, MIT lecturer Jan Klein says. However, most companies that implemented this structure according to Klein haven’t seen success with it. Why? Teams and individuals weren’t as capable of self-regulation or discipline as the companies had hoped. “We’re human beings; we just don’t do that. We’re social beings, and social issues get in the way of logic sometimes,” Klein says. Indeed, Stanford professor of business Bob Sutton says, “Show me any group of five human beings or five apes or five dogs, and I want to see the one where a status difference does not emerge. It’s who we are as creatures.”

Obviously, how Holacracy will work out for the company has yet to be seen. So far, Zappos has transitioned 10 employees to this new system, with the expectations that the transitions will be complete by the end of 2014. Bunch does say it could take more time because of how “we’re so ingrained in the traditional work paradigm.” However, considering the retailer has always done things its own way, it could see future success from this new, untraditional structure.

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