CASE: ZAPPOS Approximately two years into what has been a sluggish restructuring of the organization toward “Holocracy,” Tony Hsieh, Zappos’ CEO, sent out a 4,700-word e-mail to all employees telling them essentially to get on board or get out. Hsieh was not happy with the progress that had been made in restructuring up to that point. He even went so far as to offer the equivalent of three months’ worth of salary to employees who would quit the organization if they didn’t feel they could fit in the new structure. More than 200 employees (14% of the organization) took him up on the offer—a massive number of people given Zappos’ normal turnover rate of 1% annually. Clearly, not everyone felt comfortable in a company with very little structure or formality to jobs. Hsieh felt like the move was necessary though, saying, “A lot of people in the organization, including myself, felt like there were more and more layers of bureaucracy.” Hsieh does note that the change to Holocracy “takes time and a lot of trial and error.” Brian Robertson (the consultant who created Holocracy) says, “When you are adopting a huge painful change—and Holacracy is a huge, painful change—even if it’s for all the right reasons, people experience the pain first.” That change has required big adjustments for both current employees and new hires. As a current employee, you might think that not having a lot of rules and formal roles would make life easier as an employee, but in fact, for many Zappos’ employees, it created the opposite feeling. This isn’t made easier by the 15,000-word “Holocracy constitution” that employees are supposed to use to operate in the new structure. Imagine the 269 Zappos managers who were no longer in a position of power or no longer responsible for managing anyone to do anything. All of sudden, the job they had worked for over the course of their career was gone. John Bunch, the employee leading the transition, says, “Most managers will be able to grow into new areas of technical work to replace the time they were doing people management. It’s a gradual process, it’s not a light switch.” For new employees, Holocracy training added three days to an already two-week-long, intense orientation process. (Any new hire who shows up late for any of the 7 a.m. start times is fired on the spot, and all have to pass a final exam after orientation with a 90 percent test score.) Like current employees, new hires learning how to operate within the new structure find it to be just as demanding and different. “Holacracy is like a sport or a new language. You can read about it, you can hear people tell you about it. You won’t understand it until you start using it,” says introductory class teacher Jake McCrea. New-hire trainer Megan Petrini says, “Some people are weirded out.” Similar to the offer made to current employees, new hires are offered a one-month salary buyout one week into orientation. A number of them take it.
1. Do you think Hsieh’s offering of three months’ salary to employees who would quit was a good idea under the circumstances?
2. What are the positives about an organizational structure like Holocracy? The negatives?
3. What kind of people do you think Zappos’ new structure will attract from a recruiting standpoint? Would you want to work there?