I admire Tony Hseih, not because he built a billion-dollar shoe company that he sold to Amazon, or that he wrote “Delivering Happiness,” a book that has reached #1 on the New York Times Bestseller List, or that he is helping to rebuild downtown Las Vegas. All of those achievements are laudable. I admire Hseih because he is constantly experimenting in order to keep improving Zappos as an organization and as a place where people want to work and do their best. He has created a culture driven by values and improved through continuous learning.

About a year ago, Hseih implemented the Holacracy model in Zappos because he wanted greater employee involvement and commitment.  Now, because Hseih believes that Zappo’s employees “…haven’t made fast enough progress towards self-management, self-organization, and more efficient structures…,” he is shaking up the culture again.

He wrote in a recent email to employees:

Something key to note here is that Holacracy just happens to be our current system in place to help facilitate our move to self-organization, and is one of many tools we plan to experiment with and evolve with in the future. Our main objective is not just to do Holacracy well, but to make 51yHTga6taL._AC_SX60_CR,0,0,60,60_ Zappos a fully self-organized, self-managed organization by combining a variety of different tools and processes. Reinventing Organizations calls this type of organization a Teal organization. You’ll learn examples of successful Teal organizations below and in the book. Each of the companies cited below and in the book have different tools and processes to help with self-management and self-organization. We won’t necessarily adopt all of them, but instead we will experiment and figure out the right tools and processes for Zappos, using Holacracy as the initial starting point and continually evolving as we dive deeper into the world of self-management and self-organization.

As an outsider and knowing only what I’ve read about the company (and what friends have said about the high quality of products and service), I am reluctant to make any judgements until the data is in on Hseih’s latest experiment with culture. However, I do wonder about an apparent disconnect between the intention to create a company in which there are no managers and self-management and self-organization are highly valued, yet the decision to become that kind of company was decided by the CEO and is being enforced as if the company is still hierarchical and command and control. Zappo’s might aspire to be leaderless, but that will be very hard to achieve for a company in which the charismatic founder and inspirational leader is still around and the parent company is a much more traditional organization.  

Gianpiero Petriglieri, Associate Professor of Organisational Behaviour at INSEAD echoes my concern in a HBR blog post titled Making Sense of Zappo’s War on Managers. He writes:

Under the guise of freeing people up, self-management is often an effort to free the organization up first and foremost. Self-managed and self-organizing systems are meant to make a company more flexible in ever-shifting markets. They do so by increasing demands on its people.

They make it a requirement—not an option—to pour one’s heart into one’s job. While they abolish managers, they increase the amount of management. People work harder, and control gets more pervasive once it is exercised by everyone rather than by one boss. Issues have to be sorted out rather than delegated up.

Petriglieri is cautioning us that with self-management and self-organizing comes more individual responsibility and greater individual accountability. Although, this might be good for the kind of agile, adaptive organization that is needed in a highly competitive, global business environment, not every employee wants or can handle this kind of responsibility and accountability.

Kris Taylor, in her blog post, asks, “Is Holacracy a new organizational structure that will catch on?” She withholds judgment, expressing appreciation for some aspects of the model (roles more important than job descriptions, shared leadership and decision-making, breaking down organizational silos, fluid rather than fixed roles) but raises questions about whether Zappos’ values are compatible with a 39-page Holacracy rule book.

Frederic Laloux, author of Reinventing Organizations has, because of his research, become a strong proponent of the values underlying the Holacracy model. He argues that self-management and self-organization are not new ideas and that these concepts have decades of proof in very successful companies, such as W.L. Gore, Whole Foods (in the stores), Orpheus Chamber Orchestra, and Wikipedia.

I am rooting for Zappos. I don’t think hierarchical, command-and-control organizations can create the kind of agile, adaptive learning culture that we need in most businesses today. Companies need to be willing to experiment with new ideas and new ways of organizing themselves. Companies need to learn how to learn from experiments to create the structure and culture that aligns with their mission and values. I’m hoping that Zappos will become another example of an organization that has created and is sustaining a learning culture.

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