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An Extreme Take on Restructuring: No Job Titles, No Managers, No Politics

Zappos is the latest company to switch to a “holacracy,” but will the concept work with some 3,000 employees?

(originally published by Booz & Company)

This past November, the CEO of Zappos, Tony Hseih, called the company’s employees together for an all-hands meeting and made an extraordinary announcement: Zappos would become a “holacracy.” Instead of the customer-focused yet relatively conventional hierarchy that has brought the online shoe retailer such extraordinary success, Hseih was revamping the organization into a new structure with no job titles and no managers, in which all work is done in circles.

Holacracy, an exceedingly awkward term, is the trademark of consultancy HolacracyOne. Zappos, which Hsieh wants to achieve full-on holacracy-hood by December 2014, will be the largest company ever to attempt this wholesale transformation, by a factor of about 30. 

Holacracies are alleged by supporters to be “politics-free,” based on the belief that political tensions of the sort that make life in many organizations painful will somehow vanish if they are aired immediately in regular town halls. Apparently no one in a holacracy fears retribution for speaking up because no one holds sufficient positional power–– and because the Holacracy Constitution forbids such all-too-human behaviors.

I don’t want to sound too snarky here. In fact, as the author of The Web of Inclusion, I’ve spent decades advocating for less hierarchy in organizations, less focus on power stemming from one’s position, more collaborative decision making, and more circles instead of layers. But I never imagined that such a structure would banish politics entirely from any collective human endeavor. And one thing I learned as I was doing case studies of companies that operated more or less as webs is that the push for such transformation has the best chance of actually working when it comes from the bottom up. I also found that webs are more successful when they evolve in response to a particular business challenge, then influence structure and behavior in other parts of the organization.

A typical example is the now-classic Intel Inside campaign, in which a unit in the trademark legal department in Santa Clara began collaborating with a marketing team in Colorado to find a way around customer resistance to an updated microprocessor (after the trademark on the then state-of-the-art 386 was lost). To that point, the term “customer” at Intel had always referred to an original equipment manufacturer like Dell, since the company conceived of its microprocessors as components of finished computers.

The legal and marketing groups wondered if Intel might have more power in the marketplace if it branded its products and made the case to computer buyers, in essence bypassing the OEMs. This was a truly radical strategy because it not only changed the company’s customer base but also redefined its identity in global markets. Non-positional power was always explicitly honored at Intel, and the company had a history of allocating funds to support innovative grassroots efforts, so it was able to give this idea a try. In essence, people in diverse units and divisions mobilized the power of expertise, personal authority, and connections (as opposed to purely positional power) to organically transform the organization.

This is a far cry from what seems to be happening at Zappos. To me, the kind of top-down, all-at once approach to instituting comprehensive change that Hsieh is attempting always evokes thoughts of Thermidor. That’s the name chosen by leaders of the French Revolution to describe the middle month of summer, a pompous term meant to replace the familiar Juillet, or July. The revolution promised to change everything overnight—a change so complete that it apparently required tossing out the calendar. The grand Parisian experiment begun in 1789 offers perhaps the best historic example of an effort to decree total transformation as if throwing a switch, which is why Thermidor has become a byword for radical goals and strategies, for all-at-once changes announced from the top.

What gets lost in such efforts, as Andrew Hill suggested in his thoughtful column for the Financial Times, is the actual impact of such efforts on people who are expected to suddenly alter every aspect of how they work. As Hill notes, the result of such grand announcements about transformation is usually a state of confusion.

In one grand announcement, people at Zappos must suddenly alter every aspect of how they work. 

I witnessed precisely such a situation in August 2011 while doing some work with Hewlett Packard in Singapore. HP employees had convened from across Asia to consider which leadership competencies would be required as the company moved forward. But the meeting was thrown into turmoil when then-CEO Leo Apotheker announced suddenly in Palo Alto that, effective immediately, the company would discontinue its mobile business, abandon its just-released tablet, start divesting its PC division, and move to acquire a British software firm at a significant premium.

HP’s stock immediately dropped 25 percent, but more noteworthy in Singapore was the paralyzing impact of Apotheker’s news on everyone gathered. No one knew what these decisions meant for them, their jobs, their unit or division, their colleagues, that meeting, or the company’s future. They knew only that their CEO was taking the organization in an abrupt and unforeseen direction and that they were expected to get with the program, no questions asked.

Apotheker survived in office for about three more weeks, hardly surprising given that the company had lost nearly 40 percent of its value during his 10-month tenure. Obviously, this is a different situation than what’s going on at Zappos, a company that is visibly riding high. But I believe there’s a cautionary tale in HP’s Thermidor moment about the inherent problems of whole-new-day change. The Zappos example is particularly noteworthy because of the almost too-rich irony of a leader, backed by his consultant, vehemently proclaiming that his people, starting now, are being empowered.

Sally Helgesen

Sally Helgesen is the author of seven books on leadership, most recently How Women Rise: Break the 12 Habits Holding You Back from Your Next Raise, Promotion, or Job, coauthored with Marshall Goldsmith. She delivers workshops and keynote addresses around the world and has been a contributor to s+b since 2005. 

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