Weekly Wrap: No More Managers? It Just Won’t Work, Even at Zappos

I like Zappos CEO Tony Hsieh, and there are a lot of other people who do, too.

That’s because he’s an innovative business thinker with a ton of interesting ideas, but it doesn’t mean that every idea is golden.

In fact, here’s an example of one Tony Hsieh idea that makes very little sense: holacracy.

A system designed more for an Israeli kibbutz

A story in Entrepreneur last year described it like this:

Holacracy is a system of governance that takes things like managers, job titles and bureaucratic red tape out of the equation, distributing leadership and power evenly across an organization. Instead of a standard hierarchy, companies in a Holacracy  consist of different “circles” and employees can have any range of roles and responsibilities within those circles.”

The point I made back then, when the holacracy idea first emerged, was that I was struggling to understand “how Holacracy or any other egalitarian system that sounds like it was designed more for an Israeli kibbutz rather than a modern American business, is the answer to what organizations need in the 21st Century. ”

I added: “In any environment where decisions have to be made, somebody has to be in charge or designated with the authority to make the call. It’s wonderful to talk about flat business structures where everyone can have a say, but anyone who has dealt with group decision-making knows that it usually leads to chaos and anarchy — as the famous British comedy group Monty Python was fond of pointing out.”

Some Zappos employees aren’t being in, either

Well, guess what? I’m not the only one who has a problem with Tony Hsieh’s “holacracy” idea. Some of his employees aren’t buying it, either.

As The Washington Post reported:

In a recent memo, which was first reported by Quartz … Zappos CEO Tony Hsieh wrote that he is offering any exit strategy to any workers who aren’t sold on the unconventional idea. If they are an employee in good standing and meet certain criteria, they can leave the online retailer and get at least three months’ worth of severance. …

In one sense, it’s a way to help employees cope with radical change — while, in the process, filtering the employee pool of the least engaged folks. … But Hsieh’s memo is also a sign that not everyone is buying into the company’s radical new approach. In the lengthy memo, which clocks in at more than 4,700 words, Hsieh writes that “we haven’t made fast enough progress” toward the new approach and admits it’s “not for everyone.” As a result, Hsieh writes that he plans to “take a ‘rip the band aid’ approach” to speed adoption, offering employees who aren’t behind it a way out.”

OK, I get that traditional command-and-control systems don’t work very well in today’s workplace, and that is especially true when it comes to managing younger workers who want to feel that managers are working with them rather than standing over them.

But, it’s a big leap from saying that command-and-control doesn’t work to suddenly getting rid of all management titles. Doesn’t somebody below the CEO level need to be able to make a decision that others will follow?

Tony Hsieh doth protest too much

To show you the struggle Tony Hsieh is having making his staff drink the “holacracy” Kool Aid, the Quartz story on Zappos’ troubles added this tidbit:

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Since the rollout began in 2013, it’s been a bumpy ride for the Las Vegas-based company’s 1,400-some employees. Quartz reported earlier this year that the shift has led to some employee departures and questions over whether Holacracy is more about PR and branding for Zappos than systemic organizational change. Alexis Gonzales-Black, the Zappos recruiter tasked with co-leading the transition, left the company (citing personal reasons) in advance of (Hsieh’s) memo.”

Here’s an observation gleaned from years of dealing with dumb management schemes handed down from on high: When the person you’ve charged with leading the transition to the new system gets so fed up that THEY decide to leave, it’s a clear sign that something is terribly wrong.

And when the CEO pushing the system has to write a 4,700 word memo (that’s like 5-6 TLNT blog posts strung together) defending it, well, thou doth protest too much.

Headed for the junk pile of bad business ideas

I’ve said it before and I’ll say it again: Holacracy, and other similar systems, sound wonderful in the same way that communism sounds wonderful if you simply remove the human element from them. Problem is, humans don’t make group decisions all that well. Someone — anyone — needs to be the final arbiter if you ever want to get something decided and keep things moving ahead.

The notion of a “bossless” office is a great trend story, but count me as totally unconvinced that it actually works except in a handful of odd places. As quickly as the world is changing, I somehow doubt that it is changing so fast that we can eliminate having people in charge.

Yes, Tony Hsieh has a lot of great ideas, but he may be reaching the point where his want to generate the latest and greatest “big” idea has overtaken his common sense.

“Holacracy” is a management fad, pure and simple, and like most management fads, it’s destined to turn up someday on the junk pile of bad business ideas that were just too ridiculous to work.

5 myths of great workplaces

Of course, there’s more than a bad idea from Zappos in the news this week. Here are some HR and workplace-related items you may have missed. This is TLNT’s weekly round-up of news, trends, and insights from the world of talent management. I do it so you don’t have to.

  • How New York City’s paid sick lively is faring. According to Crain’s New York Business, only six employers have been fined under “the city’s expanded paid-sick-leave law … The violators include national corporations Best Buy and FedEx, as well as local shops Primo Cappuccino, American Girl Place Cafe, Lismir Cards and the East Harlem Council for Human Services. … In total, the city is seeking to collect $39,350 in fines from the six violators. FedEx alone is being targeted for $33,600 in fines, after an employee complaint led to a broader inquiry by the city. The city determined that the company had denied employees at its retail locations sick pay from April to December last year, and ordered it to credit sick time to 165 employees and pay $15,000 in restitution to 30 workers.”
  • New CEO, new workplace culture at American Apparel. The Los Angeles Times reports that a new CEO is bringing big changes to American Apparel, a manufacturer that sometimes seemed wild and uncontrolled under former management. “(New CEO Paula) Schneider aims to install a more grown-up structure and culture to replace (former CEO Dov) Charney’s eccentric micromanagement. Schneider is focused on the boring-but-important details of hiring — and empowering — experienced managers and drawing up evaluation protocols and organizational charts.
  • 5 Myths of Great Workplaces. The Harvard Business Review recently tore down some of the ongoing “myths” about what makes great workplaces great, including that “Everyone Is Incessantly Happy,” and that “They Hire for Cultural Fit.” It’s well worth your time, because is shows that you can’t reduce the building of a great workplace to just a few, easy-to-digest ideas.

John Hollon is Editor-at-Large at ERE Media and was the founding Editor of TLNT.com. A longtime newspaper, magazine, and business journal editor, John has deep roots in the talent management space. He's the former Editor of Workforce Management magazine and workforce.com, served as Editor of RecruitingDaily, and was Vice President for Content at HR technology firm Checkster. An award-winning journalist, John has written extensively about HR, talent management, leadership, and smart business practices, including for the popular Fistful of Talent blog. Contact him at johnhollon@ere.net, connect with him on LinkedIn, or follow him on Twitter @johnhollon.


4 Comments on “Weekly Wrap: No More Managers? It Just Won’t Work, Even at Zappos

  1. “In a recent memo, which was first reported by Quartz … Zappos CEO Tony Hsieh wrote that he is offering an exit strategy to any workers who aren’t sold on the unconventional idea.”

    Hmmm …. sounds a little bossy.

  2. Just sitting around on a Friday evening, enjoying articles and interacting….

    You seem to be making a wrong assumption, that leadership and management are the same – they’re not. Managerless businesses are indeed the future (and present) of businesses, but leaders will always be necessary. But when you ask, “Doesn’t somebody below the CEO level need to be able to make a decision that others will follow?”, you don’t seem to recognize this fact. Decisions are made throughout self-managed companies, and people follow those decisions. Leadership is present, managers are not.

    You also maybe don’t understand self-managed team history. Self-managed companies are not new. W. L. Gore, with 10,000 people, has been doing it since the 1950s; Semco w/ 3,000 since 1981, dozens more very large companies (The Morning Star Co., Davita, AES, Johnsonville, et al), and hundreds of smaller ones and thousands of tiny ones have been doing this for a very long time, very successfully. If your assumption that this is “just a fad” is accurate, you will have to explain the thousands of companies who have been hugely successful for a very long time and are all evangelists for the idea. (By the way, holocracy as one form of managerless copanies is a fad, but managerless companies are not – the two are nothing alike, they seem conflated in this article.)

    There are many myths of self-managed teams – here’s a few: 1) It’s a new/fad idea (see above), 2) It’s an untested/unproved idea (see above), 3) It’s a fringe idea (see above and we can point you to an avalanche of companies adopting it in every industry 4) there is no management – not true, they aren’t called self-“managed” for nothing. There is even more management in self-managed companies, it just isn’t vested in an overlord. 5) It claims to be easier – no, it doesn’t – it’s much harder, but worth it. As W. L. Gore said, “The simplicity and order of an authoritarian organization make it an almost irresistible temptation. Yet it is counter to the principles of individual freedom and smothers the creative growth of man. Freedom
    requires orderly restraint. (Self-managed teams are orderly and restrained, wholly unlike the anarchy you point to in your video.)

    One thing is VERY consistent in this article – almost everyone close to the HR and recruiting industry hates the idea because they feel threatened by this inevitable evolution. And almost none of them express facts to support their opinions, or can demonstrate rudimentary understanding of the concept of self-managed teams. I would encourage you to read the following if you want to say this idea doesn’t already work, “Maverick” by Ricardo Semler, “The Lattice Organization, by W. L. Gore, “The Human Side of Enterprise”, by MacGregor, my Inc. blog http://www.inc.com/author/chuck-blakeman, and my book, “Why Employees Are Always a Bad Idea,” and Frederic Laloux’s, “Reinventing Organizations” – many more.

    I’ll be sharing these ideas at a mega session at SHRM in July, encouraging the HR world see it is undergoing creative destruction. Love to see you there.

  3. I find it quite interesting that Tony made this decision for Zappos. It will be interesting how things develop in this company. Even though Tony has had a lot of criticism questioning his apparent efficient management skill, his decision could actually be just a way of making the company transition into a more laid back structure. The reason of this giving all employees the power and space to perform more tasks and maybe be more engaged in the company as well as in the decision making process. I highly doubt that Tony is trying to centralize all the power on him. On the contrary, I have hopes that this shift in organizational structure will help the company become more efficient and will bring more innovation.

  4. I’m not sure about holacracy, but some form of self organising is probably a better way to manage an organisation in a complex, constantly changing environment than the current, top down model (which tends to lead to pretty severe cases of corporate amnesia and employee disengagement). So let’s not throw the baby out with the bathwater with this holacracy thing. Check out the case studies in a book called “Reinventing organizations” by Frederic Laloux. There are actually quite a few successful organisations that use a form of decision making that is neither top down, nor consensus – and it works! And no, those organisations aren’t cool startups or tech companies – they are in manufacturing, healthcare etc.

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