In 2013, Zappos’ CEO Tony Hsieh, already known as an unconventional executive, made the audacious decision to strip the company’s formal hierarchy and implement “holacracy,” a self-management philosophy where there are no bosses and employees group themselves in informal teams to get work done.
At Zappos, the transition has brought heaps of confusion — and criticism.
The e-commerce retailer, which is owned by Amazon.com, has lost 18 percent of its workforce — or 260 employees out of 1,500 — since March 2015, according to a blog post written by Chief Operating Officer Arun Rajan. Overall, Las Vegas-based Zappos’ turnover rate in 2015 was 30 percent, 10 percentage points above its typical rate of attrition.
Unsurprisingly, proponents of traditional corporate structures have been out in full force denouncing Zappos’ self-management structure as a “radical experiment” that is “driving employees out the doors.” What’s more, various business publications have declared the company’s transition a failure.
To some degree, this is fair criticism. New and influential management philosophies should be examined closely, often with a healthy level of skepticism.
But I would stop short of calling Zappos’ self-management transition a failed alternative to traditional corporate structure.
For starters, the fact that Zappos is willing to experiment with an out-of-the-box management approach is admirable. It’s even more commendable that it is willing to pay people to leave if they don’t feel their interests align. Not every company has the mettle and financial resources to do that.
Second, several other companies, such as manufacturer W.L. Gore & Associates, have found success with their own spin on the self-management model.
Many of these firms didn’t have a former hierarchy to begin with, and others transitioned over the span of many years. This means that Zappos’ transition, by relative standards, is still in its infancy. Give it time.
The lesson here is that — surprise, surprise — change is hard, and major change is even harder in the short term. Things will eventually start to come together. Employees will buy in; the confusion will slowly give way to clarity.
And if none of these things happen for Zappos, it doesn’t mean holacracy is a failed experiment or that Zappos was stupid for trying (as of this writing, there’s no evidence the move has significantly hurt its business). It just means that, for whatever reason, it didn’t work at Zappos. That’s OK.
Too often traditional business thinkers are quick to write off outside-the-box experiments as too risky, or conclude at the first hiccup that something new and different is not working and must be shifted back to the old order.
Talent leaders shouldn’t shy away from making the sort of bold changes that have enough upside to make the risks involved worthwhile — especially if they work for a company that has the time and resources to withstand whatever discomfort it might bring along the way.
Time will tell if Zappos’ shift to self-management works out. Meanwhile, don’t deride companies that make bold and unorthodox moves in search for new efficiencies. Embrace them.
Originally published at www.talentmgt.com.
