Holacracy & How Zappos Lost 20% Of It’s Workforce

In this week’s column Kehlan looks at Holacracy, the new management experiment that’s taking over some of the biggest companies in the world. What is it and why has it seen one major retailer lose nearly twenty percent of its workforce because of it?

Zappos is one of the largest online shoe and clothing retailers in the world. It has always had a reputation for being a ‘free’ workplace. A fun atmosphere with generous perks and employee orientated. However recently the COO of the company Arun Rajan announced that since their implementation of Holacracy, self-management in the workplace, they have lost nearly twenty percent of their workforce.

Holacracy in the workplace is effectively where normal management structures within a company are taken away and employees must therefore collaborate more with the teams and people around them rather look to a central point of contact for direction.

Zappos Screenshot Holacracy
New York Times reported large hemorrhaging of workforce at Zappos

In a recent article the New York Times had pointed out that the online re-seller has had major interruption to moving over to a super cloud server system because nearly forty percent of people working on it had left the company. This has had a knock on effect to the retailer’s website and its operations as well. Those who wanted to leave the company we’re told they could have a buy out if it they were not happy to converge to the new style of doing things. Many have taken it.

In my piece a few weeks looking at the things to expect for 2016 I talked about changes in the workplace and how the shift of moving away from management to employee would continue. Here is an example of that, perhaps in its more dramatic form. It is, in essence, the democratising of the workplace.

But is this a great theory or something that can really take hold in our workplaces? Well to answer that we have to look hard at Holacracy and what it really is.

office space working cubicle
Teams are charged with the responsibility for all projects, including decision making on them

~The Idea~
For centuries workplaces have had the same framework for workplaces and their environments. There is a boss, upper management, minor management and workers. There was a hierarchy and those on the level above made decisions for those below them. From corporations to small business the structure is essential the same. People need to be led and there is a chain of command.

In the past decade that structure has slowly began to unravel as employees look for greater autonomy in the workplace and management appears more of hindrance than a help. Decisions have to move up and down a pyramid which can stifle the speed of productivity in the workplace. Management is becoming its own worst enemy.

Enter Holacracy from stage right. Firstly, it’s important to point out that Holacracy doesn’t want to fire every manager. So don’t worry your job is still safe. A company needs direction and accountability so their will almost always be a need for some hierarchy structure within a workplace. However it does want to redefine how employees move on projects and just what role each person should have in them.

The roots of this new practice goes back to cybernetics and sociocracy. Effectively speaking its decision making by consent where everyone is equal and everyone responsible for the decision making process.

Imagine you have four departments within a company. Each one these departments is represented as circle. Within that circle you have the employees who are beholden to each other within that circle or project. So projects are discussed, updated and delegated for by the people involved within those project circles. So collaboration is brought to the fore within the group. This means ideas and solutions to problems are moved upon by those who are involved directly with the project. There is no one person in command or making decisions on the project. Management will still oversee direction, but it will be up to the employees themselves to make it work. Everybody has the same level of accountability for that project.

So if you move out from that and draw lines between them, connecting the four departments to each other, what you get is an organisation in which all the members of each project are connected with each other and in turn each department is connected with each other. Everything is collaborating and moving on what needs to be done. It also gives a voice to everybody within the organisation and a platform to have ideas and conversations about the issues on the table. No hoping that management will see the importance of something, problems and solutions are implemented within the group.
Another important point is that no one person is outside the scope of this new way of doing business. Every manager, every boardroom director is part of this. You have employee circles but you also have management circles too.

Zappos Warehouse

What happened at Zappos?
Zappos in its approach to introducing Holacracy to the company forgot even the fundamental part of Holacracy. There was no collaboration with employees, no drive to get their opinions on it. The fact that their CEO, Tony Hsieh, issued the ultimatum that people accept the new way or take a buyout from the company showed that perhaps he himself didn’t quite understand what it was all about. You can’t talk about collaboration and a new democratic workplace and then give ultimatums before it’s even begun to be implemented.

Hsieh’s fundamental misunderstanding has led to confusion within the organisation and many not understanding their new roles within the company. In fact, experts say that the best way to introduce this into a company is to take management implementation out of the equation all together. No directives or orders, just let somebody come in and introduce this to employees freely and independently. A steady introduction to the new concept, rather than wholesale sweeping changes that leave everybody feeling like rabbits in headlights.

That is the real stumbling block for this new model of company structure. The ability for management to let go of control. To understand that not every facet of information needs to run through them. For some this will be a step to far in just how much influence and employee has within a company. But for those it might be worth noting that employees expect a lot more from the places that they work at now. More independence, more ability to make decisions and more influence on the direction that the company is going in.

For Holacracy to work it first needs management to understand that being agood manager isn’t about control. This is about the re-distribution of power within the company element where everybody has a hand in the future of the company, not just a few decision makers at the top. That will take some getting used to. Zappos implementation is an example how not to introduce this to a company. It is a slow steady process that may need a lot longer to become effective than one might hope it to be. However, if you get it right, it may change forever how your company operates and just how productive it can really be.

This appeared in Irish national newspaper The Irish Examiner on 18/01/2016