Zappos Goes Holocratic: Are They Throwing The Baby Out With The Bathwater

Zappos is following up on the move to their new headquarters with a complete realignment of their organization. They are doing away with titles and substantially flattening the hierarchy of the company. The strategy sounds almost utopian and compelling. But, I have some questions about their strategy. First read the article and then come back for my thoughts.

Is what Zappos is doing a solution in search of a problem? If so, what are the real problems that the solution addresses? Internal politics? Conflict? Boring work? Rigid ceilings on advancement?  Is holacracy yet another social engineering strategy that flies in the face of human nature? (Like open space schools and non-disciplining of children.) Is it possible to reduce the politics and bureaucracy, harness the conflict and increase the relevance of people and their work without eliminating structure which all people need? I believe that it is possible to do those things in a structure that is rational and not rigid. What is required to do that will be the subject of the next blog in this series.

Let’s frame this as a marketing problem: if we want to build an organization that addresses employee wants and needs so that the company does even better at satisfying customers wants and needs, what would that look like? Jim Collins eloquently documented one critical strategy in Good to Great: Make sure employees are in the right seats “on the bus.”

In other words have people in the right jobs doing the right things working to their strengths. Next, make sure that every employee understands his or her job, its importance to the success of the company and their relevance to the overall organization’s objectives. Create a culture of continuous improvement by having the people who do the work design the work and have the authority to commission improvements in that work. The improvements can either be applied to processes inside their own department or to the linkages they have with other company areas in the accomplishment of overall objectives, or both.

Now, here is the seemingly radical strategy: build a continuous system that measures individual and group accomplishments of meeting objectives that are directly linked to company success and allows employees to share in the success. What percentage of their compensation do you want to be variable? If you believe that all of us need some structure in our lives and work, then can you really sustain a work culture that has little or no structure? The key is to have a structure that harnesses employee energy and motivation not stifles it.