Zappos, the online retailer, employing more than 1,000 people, selling footwear, clothes and fashion accessories, is one of the leading companies applying freedom at work. At the beginning of 2014, the company announced that it would abolish the existing management structure and introduce a new management system called holacracy. The idea of holacracy is to replace the traditional hierarchy of management by self-governing "circles" of employees. The media have been talking about it as one of the greatest experiments in the history of management. Has it succeeded?
Ten percent of Zappos employees have tried this new system during the year 2013. All employees should have been following it by the end of 2014. However, the implementation was slightly delayed until the end of April 2015. Employees were given a choice - either adopt the new system of self-management, or get three months severance pay and leave - by April 30. The result? Two hundred and ten people, equivalent to 14% of all employees, left the company in May 2015. Twenty of them were managers, representing 7% of all managers in the company.
Did Tony Hsieh just want to cut costs?
The key figure in Zappos is its founder and CEO Tony Hsieh. He created the company's vision which is literally to "deliver happiness" to both employees and customers. Its corporate culture is based on ten principles one of which says: "Create fun and a little weirdness." You can read more about the company's corporate culture in the successful book Delivering Happiness: A Path to Profits, Passion, and Purpose written by Tony Hsieh. The Czech translation entitled Štětší doručeno was published by the PeopleComm company.
Jeff Bezos, CEO of Amazon, which bought Zappos in 2009, and many other world-renowned leaders fully support Tony Hsieh in his effort to implement holacracy. Nevertheless, Hsieh faced public criticism for trying to enforce a democratic system in an autocratic way. Employees were divided into three camps - supporters, opponents and those who decided to stay despite their reservations.
Tony Hsieh has also been suspected of offering severance pay in order to get rid of employees and cut the company's operating costs. However, he categorically rejects these speculations and considers the fact that only 14% of employees left as a win. Brian Robertson, U.S. entrepreneur in the field of IT and management consultant who is the author of the holacracy model, is of the same opinion.
Will it work?
Regarding the company's financial results, Zappos has already announced that it predicts an operating profit of $97 million for this year which means an increase of 78% compared to 2014. The question remains how the company manages and will manage its day-to-day operations. According to the Business Insider website, processes related to payroll and ways of assigning and approving projects have not been finished yet. Even Tony Hsieh himself has to learn a new role in which he will not approve as many decisions as before.
Brian Robertson recalls that holacracy is actually an operating a system in which it is always necessary to correct bugs. "If it works, he thinks Zappos will become more agile and thus more profitable. And if it doesn't, it will still benefit from lessons learned," Robertson was quoted by the Business Insider. A few more years are necessary to show whether the system really works.
More information about this model of work can be found in our previous article here and on http://holacracy.org.
Books
Hsieh, Tony: Delivering Happiness: A Path to Profits, Passion, and Purpose. New York: Grand Central Publishing, 2010. 272 s.
Hsieh, Tony: Štěstí doručeno. Prague: PeopleComm, 2011. 254 s.
ROBERTSON, Brian J .: Holacracy: The New Management System for a Rapidly Changing World. New York: Henry Holt and Company, 2015. 240 s.
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