Can a Company Really Disrupt Itself? Roger Hodge on Zappos and Holacracy

zappos
From a Zappos office tour. Photo by techcocktail, Flickr

Roger Hodge went inside Zappos for his October 2015 in the The New Republic, investigating CEO Tony Hsieh’s radical decision to eliminate management and fully embrace the concept of Holacracy at the online shoe retailer. 

Holacracy is a system created by Brian Robertson, and embraced by a handful of tech companies, with the goal of foregoing a traditional management structure to empower employees and remove hierarchical bottlenecks. Hsieh’s changes at Zappos are inspired by the book Reinventing Organizations, by Frederic Laloux (“generally referred to as ‘the book’ by Zapponians,” per Hodge’s piece) which gives color coding to the different phases of corporate evolution. “Teal” is the ideal: It is a company that achieves breakthroughs in “self-management,” “wholeness” and “evolutionary purpose” or meaning in its work.

Reading Hodge’s piece, one comes away with the sense that, no matter how much Hsieh and Zappos have tried to change their structure, those who previously held power inside the company still had the same implied power, if not in title or job description:

power is just reframing itself
In an email chat with Longreads, Hodge says Hsieh and Zappos gave him full access and were “incredibly cooperative and generous. Tony Hsieh seems genuinely committed to openness and transparency, and he made no attempt to prevent me from speaking with critics.”

As for whether these changes are working, Hodge confirms that there’s a conflict between the dramatic change within the company’s ranks and the lack of change in Zappos’ top leadership, which “from what I can tell, has remained pretty stable through the various upheavals”:

After observing the cultural dynamics at Zappos, talking with employees, and immersing myself in the literature of Teal, I couldn’t help but notice a number of ironies or ‘tensions’ in Tony Hsieh’s heroic attempts to impose creativity from above. Holacracy, for instance, aims to eradicate office politics and cliques, yet Hsieh’s inner circle is nothing if not a clique. When a company lacks a comprehensible organizational structure, or when that structure looks like radiating Venn diagrams, power naturally radiates from proximity to the CEO.

In his drive to make Zappos go Teal according to a predetermined timetable, Hsieh has eliminated all previously existing metrics of performance evaluation and compensation, as well as any clear path for advancement. Wittingly or not, he has demanded that employees take a leap of faith and conform to his vision, whatever it turns out to be. The message of Hsieh’s offer boils down to the following: You must free yourself by submitting to my will. Many creative and independent individuals, people like Chris Coy, will be naturally repulsed by the contradiction. Hsieh has thus ensured that at least some talented and creative innovators will choose to self-organize themselves in some other company.

Despite all that, Hodge says there are signs that those within the company will help employees adapt to the new system, and improve it:

Fortunately for him, and for Zappos, people like Rachel Murch and Tammy Williams will come along and make it better, heal the wounds, and put a human face on the Teal revolution.

If a company decided to implement some variation of this, what were the most effective elements, based on what’s happening at Zappos?

Oh, there are lots of good general ideas floating around in the Tealiosphere, and I’m all for minimal management and flexibility and unleashing creativity. But there’s a positive side to management as well as a bad one. Anyone who’s ever worked for a good manager — one who has your back and protects you from the whims and impulses of distant executives — knows that to be true. What’s interesting is that most of the unhappiness at Zappos was the result of people feeling that they didn’t know how to get their work done.

Hodge’s piece raises a more basic question: Is it better to be a founder-driven company, or one that can operate independently of one visionary? It took Hsieh’s creative force to make such a huge change, but that same personality could also impede the process of becoming a different company.

Stories discussed, and further reading:

First, We Fire All the Bosses (Roger D. Hodge, New Republic)
Tony Hsieh’s Memo to Employees (Quartz)
The Zappos Way of Managing (Max Chafkin, Inc., 2009)
When G.M. Was Google (Nicholas Lemann, The New Yorker)

Books:

Reinventing Organizations (Frederic Laloux)
My Years with General Motors (Alfred P. Sloan)