The Holacracy Structure of Zappos

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Employees and managerial staff have always characterized the traditional hierarchy of any business organization. Various organizations have adopted this hierarchy throughout the years, and although it may have some negative elements, it allows for order and focuses on prevailing in the place of business. However, new methods of the company running have emerged where instead of following the traditional hierarchy, it is dismantled completely to give to a flat structure. Most of the leaders of such companies believe that companies should not be focused on profits but should try to encourage innovation, client satisfaction, and employee development. Such leaders, therefore, promote the aspect of holacracy to support their dream of impacting their employees and clients. An excellent example of such companies is Zappos, an online shoe and clothing retailer that is popular for its fantastic client service. The company employed the holacracy structure since 2013 making it the most prominent holacracy run organization in the modern day. The company has removed all of its managers and replaced them with self-managing teams throughout the various departments.

Zappos holacracy reorganization satisfies the contingency theory of management. According to Business.com, “The basic premise of Contingency Theory is that there is no one best way to lead an organization. There are too many external and internal constraints that will alter what really is the best way to lead is in a given situation” (2018). Though many people believe that the traditional hierarchy style of leadership and management is the best, Zappos’ implementation and success of the holacracy business management strategy proves the contingency theory. Although Zappos has done away with the hierarchy form of organization leadership, it has not employed a completely flat system of leadership. Instead, it takes power and authority traditionally reserved for managers and executives and shares them across all the members of staff. According to Seema Rana’s article dubbed “Why is Zappos’ culture of holacracy catching on?”, “Holacracy is a system that removes traditional managerial hierarchies allowing employees to self-organize to complete work in a way that increases productivity, fosters innovation and empowers anyone in the company with the ability to make decisions that push the company forward…” (2018). This allows different people with great ideas to come forward and share them with the rest of the people. This element satisfies the contingency theory of management since it deviates from the same beliefs and doctrines of company leadership and allows new and innovative approaches to be explored from the rest of the employees.

Furthermore, the Zappos holacracy reorganization portrays true charismatic and transformational leadership. According to the ST. Thomas University website, “Transformational leadership inspires people to achieve unexpected or remarkable results. It gives workers autonomy over specific jobs, as well as the authority to make decisions once they have been trained…” (2018). Based on this definition, transformational leadership focuses on allowing employees to explore their potential and motivating them to achieve incredible milestones. This aspects of transformational leadership are evident in the holacracy reorganization of Zappos since employees are divided into self-organizing teams where they have the freedom to choose their roles which they feel gives them a purpose in the company. Occasionally, the teams hold meetings to discuss their progress and to evaluate new milestones. Furthermore, the self-organizing groups also allow employees to discover new ways in which they can contribute to the development of the company. As a result, Zappos employees experience the true meaning of transformational leadership courtesy of their CEO Tony Hsieh. Furthermore, the fact that the holacracy I the company has allowed each employee to explore a personal course while developing their skills. This factor ensures that employees are always motivated to beat their bets to showcase what they are ready to offer their company. Although they lack any strict forms of authority like the hierarchy form of management, workers are charged with important responsibilities which encourage them to deliver quality services so as not to derail the objectives of the business.

Another vital aspect of holacracy at Zappos is that it has encouraged teamwork among all the employees. Through the disbandment of the managerial positions, employees felt freer and safer sharing their ideas and thoughts on the business activities of the company.  Although managers are an essential part of business leadership, they can be a stumbling block in the development of a business. Since managers are supposed to ensure that things run smoothly, they can easily intimidate other employees with the power they have. For instance, an employee may be afraid to share their thoughts on a particular project for fear of being misunderstood by their superior, which can easily lead to loss of their jobs. Holacracy ensures that everyone is on a level ground where no one holds power over the other, and as a result, individuals can offer their genuine thoughts regarding various subjects and issues of the company. Therefore, Zappos employees unlike other workers in different companies have an easy time communicating their views since they are comfortable with each other because they know that no one is superior to the other.

However, Zappos’ adoption of holocracy does not coincide with the Blake and Mouton's grid theory of leadership, but the CEO Hsieh practices the Country Club leadership style that is part of the concept. Basically, the model highlights the leadership styles using a managerial grid that demonstrates the two main responsibility of a leader as the concern for the workers and production. When Zappos incorporated holocracy, the manager's positions were scrapped, meaning that it increased the worker's independence as they lacked a leader to oversee their abilities and the corporation’s production. According to Edward Helmore, a writer of The Guardian, “Almost 210 of its 1,500 employees took redundancy rather than relinquish familiar titles or positions and adapt to a holacratic system of "circles" in which employees decide for themselves how to do their job." The employees' decision depicts that they had little faith in the holacratic system because there would be no managers to guide them in case of any problem. In fact, despite Hsieh ideology that Holocracy would promote the worker's ability to work without restrictions, having no manager means that people would use longer channels to present their opinions as they have no representative. Evidently, holocracy and Blake and Mouton's grid theory of leadership contradict since the latter encourages the manager's presence to accelerate the organization's development. Nonetheless, the company's CEO Hsieh establishes that utilizing the Country Club, which is among the five resulting model types of the Blake and Mouton's grid theory of leadership is possible since he considers the need of the employees before money. With this in mind, Hsieh shows concern of his employees by introducing the holocracy method but denies the employees the chance of doing their works effectively under a manager's supervision.

Consequently, holacracy in Zappos Company does not allow potential leaders in the corporation to fulfill their ambitions, hence failing to abide by the followership theory. The concept insinuates that leadership is crucial in a corporation since they control the workers to perform their duties efficiently. Kariban Fabian’s article, “The Art of Followership: How to Be an Invaluable Team Player," argues that "not everyone wants to be a leader. Some people eschew management positions because they prefer to do the actual work rather than deal with the bureaucracy, paperwork, and meetings". Therefore, raising the question of how or who does these activities in Zappos if the employees concentrate on improving the company's state by indulging in their operations. Besides, not all leaders are concerned with creating profits, because many have words of wisdom that Zappos workers can never get from the holacracy method. Hsieh’s intention of introducing this holacratic system was to offer his employees with freedom in the workplace, and a ‘family-like’ office, where they can feel safe and be creative. However, this unlimited independence with minimal supervision is likely to hinder the workers from being productive. For instance, if an employee is granted a project to perform, he or she can keep procrastinating since there is no compelling force from the leader that can prompt him to submit the job. Thus, the followership theory lacks in Zappos, and this denies the employees the chance to experience good leadership from competent leaders.

In summary, the holacratic reorganization of Zappos has received a lot of criticism from individuals in the society who believe that it is a negative structure to employ in business. However, based on various theories of leadership, it is evident that holacracy has some significant advantages for the companies that utilize it. Therefore, even though it may have negative aspects attached, it is still a proper management structure to employ since it enhances the employees and motivates them to be productive. Furthermore, with the implementation of holacracy, the employees can easily follow up on the company’s goals and ensure contributing ideas to achieve them. Zappos has managed to develop its operations using this management structure and to become the largest organization using the management strategy, which is a significant milestone.

References

Fabian, K., 2017. The Art of Followership: How to Be an Invaluable Team Player. Business News Daily. Available at: https://www.businessnewsdaily.com/9743-followership.html [Accessed November 11, 2018].

Flinsch-Rodriguez, P., 2017. Contingency Management Theory. business.com. Available at: https://www.business.com/articles/contingency-management-theory/ [Accessed November 11, 2018].

Helmore, E., 2015. Bring back the boss class, say employees fed up with self-ruling 'holacracy.' The Guardian. Available at: https://www.theguardian.com/business/2015/may/30/bring-back-boss-class-holacracy-zappos [Accessed November 11, 2018].

Rana, S., 2018. Why is Zappos' culture of holacracy catching on? Nagarro. Available at: https://www.nagarro.com/en/blog/why-is-zappos-culture-of-holacracy-catching-on- [Accessed November 11, 2018].

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October 24, 2023
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