Allen Baler on Holacracy: Will Zappos’ New Paradigm Fly, or Flop?

Allen Baler Holacracy

In 2014, online retail giant Zappos made a huge shift in its operations. Rejecting the traditional hierarchy model of top-down management, CEO Tony Hsieh boldly navigated the company toward a new way of organizational management called “Holacracy.”

 

Undaunted by the naysayers, Hsieh even went so far as to offer unwilling employees a “no hard feelings” out: a generous severance and well wishes for future endeavors.

 

Since its adoption in early 2014, Zappos experiment in company culture has been something of a mixed bag, according to Steve Denning from Forbes in his recent op-ed, at least from the outside looking in.

 

So, what is “Holacracy?”

 

Without getting into the minutiae, here’s a general overview.

 

Taken directly from Zapposinsider.com:

 

“According to Holacracy.org, Holacracy is a comprehensive practice for structuring, governing, and running an organization. It replaces today’s top-down predict-and-control paradigm with a new way of achieving control by distributing power. It is a new “operating system” that instills rapid evolution in the core processes of an organization.”

 

The above definition is rather broad, but one could say it’s to improve innovation, cohesion, and overall employee satisfaction through individual empowerment. Gone are glass ceilings and being “lorded over” by micro-managers, as many cubicle dwellers are all too familiar. Holacracy sounds like a dream come true for enterprising workers. However, what makes a great theory may not always carry over 100% in practice.

 

Succinctly, holacracy means, “no job titles, no managers, no hierarchy.”

 

In many ways, I’ve got a lot of admiration for Zappos’ CEO Tony Hsieh. Obviously, he’s not afraid to challenge tired 20th century norms of doing business. He realizes that his human capital is the most important kind. Hsieh seemed to realize early on that there would be enthusiastic adopters of his new organizational philosophy, and those who’d rather not play in the sandbox at all. Normally a company with a low 1% attrition rate, 14% of Hsieh’s workforce (200 employees) said, “Thanks, but no thanks” and opted to leave as the date to implement holacracy drew near. It’s a result I’m sure he knew he was risking; only Hsieh himself can confirm it.

 

The only way to fairly consider the pros and cons of Holacracy is to give each its due.

 

So, what are the positives?

 

From what I’ve seen so far, here are my conclusions.

 

Empowered employees. No one can really argue that workers who feel valued and trusted will be more productive and longer term. Holacracy isn’t just a shift in company culture and operations, but in a collective conscience of responsibility entrusted to each individual team member.

 

Uninhibited innovation. Holacratic organizations like Zappos thrive on their employees’ freedom to innovate and implement bold solutions to common and complex problems. Because the culture isn’t obsessed with politicking or bureaucracy, new ideas can flourish no matter whom takes the credit.

 

And now, for the negatives…

 

Lack of accountability. With holacracy, a company is relying strictly on an honor system for people to get their work accomplished. And while an environment of trust is crucial for any successful organization, mile markers must be placed on individual achievement to understand who’s meeting their metrics – or not. It’s only fair to the group as a whole to make sure each person is measuring up.

 

Confusion of roles. With the power of a few spread across the board, the waters can become pretty murky. Exceptional people can pull their own weight and then some, but when some want to take on more than they can actually handle, the effects can be detrimental to other departments. This can impede productivity and cause internal chaos, adding to strife and overall employee dissatisfaction.

 

In the case of our company 4Patriots, I believe we’ve created a modern hybrid of traditional management with many new-millennium ideas. For one, we have what I call a “healthy hierarchy” that’s based on a deep personal and professional respect for each team member, regardless of role. Our recruiting protocol is very stringent, and we handpick each new employee after a long and arduous vetting process.

 

We strive to make each person feel empowered within the construct of his or her position, and as a human being in general. We do this in a structure that allows for a “culture of us” while having clearly defined teams with carefully chosen leadership.

 

We also practice this with our unconventional company policies, such as unlimited vacation days, fully paid maternity leave, and a wide-open door policy.

 

It will be interesting to see how Zappos’ bold experiment in company culture will pan out. My gut tells me it’s a “bridge too far” for most folks and won’t work as well as they hope, but you’ve got to give them a ton of credit for taking the leap.

Allen Baler is a leading entrepreneur and Harvard grad. Allen Baler is a Partner in 4Patriots LLC, based in Nashville.

Disclaimer: This blog post is not a substitute for the sound advice of a business professional with expertise in the subject matter discussed. Please seek appropriate counsel on what strategies make sense for your business.

 

Photo credit: nan palmero / Foter / CC BY