zapHollie Delaney is one cool leader. She’s taking Zappos on a cultural journey to a new way of working called Holacracy. By December this year she will relinquish her job as Zappos’ Director of People Experiences to take up a series of roles in separate “circles” across the organisation. Indeed, there will be no more job titles for anyone in the organisation! This is a radical restructuring of an already extraordinary organisation.

“Who are Zappos?” you may ask. Zappos is one of the world’s largest on-line shoe stores. It was started 15 years ago by Nick Swinmurn and Tony Hsieh and was bought by Amazon for $1.2b some 5 years ago. Recently Zappos expanded into clothing and accessories. Based in Las Vegas and employing around 1,500 people, Zappos has built its reputation on outstanding customer service. Last year it was placed 31st in Fortune’s list of the best places to work.

Delaney believes that one of the reasons people love working for Zappos because “we trust them to do the right thing by the customer and to do the right thing by one another.”. All Zappos employees have lots of autonomy to make their own decisions and enjoy access to anyone in the company to discuss ideas and explore how to live out the company’s values. Zappos’ values are its bedrock. Delaney recalls sending the staff an e-mail asking what they most wanted. Thirty-nine values came back. These clustered into 10 core values which spell out “how we work here” and underpin Zappos’ buzzing culture.

Recruitment is based 50% on cultural fit and 50% on technical competence, experience, etc. New recruits are given four weeks’ training focussing on the Zappos culture and customer service. During this time they live and breathe these core values and decide whether Zappos is for them. Then, or at any time later, “we will pay you to quit” says Delaney. “One month’s salary. We hire slowly and fire quickly. There will be feedback and development opportunities, but we don’t drag out the termination process.”

Maintenance and evolution of this corporate culture is seen as everyone’s job. Performance reviews are delegated down the hierarchy and there are few policies. “Why would we create policies just because one person might do something wrong?” Team leaders are expected to spend 10% – 20% of their time outside the office with their team on Zappos’ time. Team work and relationship building are leadership priorities. “Employees feel the trust in the organisation via their work and the community/charity events” continues Delaney “it’s more than just a job. There’s a lot of fun in the working environment and it inspires creativity and brings teams together. Everything ties in to our values and goals. There are other programmes too”

The three programmes that stuck with me were the Wellness programme – Hollie Delaney herself benefitted from this losing 6 stones in weight over 3 years and has just run a half-marathon. They now have a new company gym and reimburse sign-up costs for sporting events like marathons or triathlons once people have actually done them. Apparently, this has resulted in increased organisational loyalty.

There is also a co-worker’s bonus. Every employee has 12 $50 bonus awards each year that they can give to anyone in the company! Hollie Delaney admits to being horrified by the idea when it was first mooted, but she gave it a go and trusted people to be responsible and to choose carefully those who they believed deserved special recognition. This scheme’s been running 7 years now and there has been no abuse.

And then there is the “Wishez” programme. This is a wish card that any employee can complete to wish for something – it has ranged from chocolate cake to baby buggies to citizenship – and other employees fulfil their wish. What would you wish for?

What exactly is a holacracy? That was my first question too!

A “holon” is simultaneously a whole (which is autonomous and self-reliant) and a part (of a greater whole on which it is dependent). Think child and family. This greater whole is also a holon. Think family and community – then community and society.

So, there is a hierarchy of holons – sometimes nested, but always somehow connected to one another called a holarchy.2  When a group of holons is configured for organisational governance this system is called a holacracy. The consultancy firm HolacracyOne3, led  by Brian Robertson4, has developed a comprehensive service to deliver holacracy in organisations. Zappos is one of HolacracyOne’s clients. Robertson defines holacracy as a “social technology for purposeful organization. It radically changes how an organization is structured, how decisions are made, and how power is distributed.”. Another definition is “Holacracy is the governance of the organisation through the people for the purpose.”.5

Hollie Delaney likes the visibility and voice holacracy gives individual employees who are empowered to make decisions. Because the structure is built around the work and not the people, there is no need for management titles. Leaders exist but are there to inspire, not to direct.

The work is broken down into roles (which carry accountabilities) and are applied across various domains. These roles form ‘circles’ of activity that sit within a hierarchy of circles.  Each person holds 6-10 roles, maybe in several different domains. Top people may have 20-25 roles. This creates an environment where people can be self-motivating through engagement, mastery and using their judgement based on experience.

At Zappos, adopting a holacratic approach means that individuals will have the authority (and expectation) to make policy (if necessary), create procedures and develop roles (theirs’ and others’). While they may take advice from anyone, the final decision is theirs. Employees are given autonomy, but are also held accountable by one another for fulfilling their roles. Inevitably, tensions arise. Tensions will exist wherever there is a gap between “what is” and “what could be”. It may be seen as positive or negative: an opportunity or a frustration. Either way, resolution releases energy for change. Tensions are expected to be resolved during regular operational meetings where the objective is “to get things done”.

Delaney believes this new approach will bring great things out of people as they will no longer need to ask permission or take orders. Anyone who senses tension anywhere in the company can rapidly and reliably process it into meaningful change. Even I think it sounds a little anarchic! But it isn’t because there are strict process rules and higher-level circles can direct lower-level circles but not the other way round. “In future”, Delaney says  “no-one will come to Zappos to apply for a job but to join a company”.  I have a sneaking suspicion they already do.
Bottom line: Holacracy is a system of distributed authority which reduces the burden on managers to make every decision. It does not remove the need for managers altogether. Some high-level circles have “lead links” with special accountabilities enabling them to change priorities, reassign roles and resources (including people) and define both strategies and metrics for lower-level circles.  Top managers must relinquish their hierarchical power to a written constitution of rules supplied externally (by HolacracyOne based on their experience of what works well). But, once adopted this constitution keeps evolving as tensions emerge and are resolved. In effect, “restructuring” happens every day as a result of emergent tensions being resolved. The holacratic organisation is in a constant state of change and so remains aligned to its changing environment, both internally and externally.

Stephen Denning draws attention to the dangers of holacracy. Denning worries that everyone will become too internally-focussed and neglect the customer. He wonders whether Zappos actually need whole-hearted adoption of the holacratic approach. They are already agile and almost obsessively customer-focussed. Holacracy, he argues, can help control the administrivia, but pays no explicit attention to the marketplace. The customer has no voice.  But at Zappos, the employees care about the customer – they are its voice – at the moment anyway. Another danger that I see is that the “rule book” could inhibit creativity

To address some of these concerns Delaney has put training in place for those giving up their old authority as well  to build confidence in those who will be assuming new authority. She has also been running a pilot group to help identify the important needs of the new approach. Beyond the obvious need for learning how to work within this new system, the pilot group has identified ‘Living with Change’ and ‘Learning to Lead’ as new Zappos U courses. Everyone will be taking these courses as they will all be experiencing change now that “everyone is a leader”. Delaney is expecting the first 6-12 months of 2015 will be about “changing our mindset and building new skills”. There is also a hefty bottom-line to bring in which worries some commentators – can Zappos make this transition without dropping productivity, profitability and their ‘great place to work’ status?

I wish Delaney and Zappos well with this bold initiative. To transform the way you manage your organisation by increasing your trust in the employees to accept the new responsibilities of self-management is a huge leap of faith. Is it one that you and your organisation might dare take?

Endnotes
1 HSIEH,T (2010) Delivering Happiness: a path to profits, passion and purpose Business Plus (Hachette), New York.
2 This term was coined by Arthur Koestler in 1967 in his book The Ghost in the Machine.
3 HolacracyOne web site.
4 Robertson, Brian (2009) Organization Evolved: Introducing HolacracyTM.
5 Bernard Marie Chiquet, iGi Partners.


Jacquie Drake

Jacquie Drake

Dr Jacquie Drake is Founder of cool-leadership.com and Editor of the cool-leadership newsletter.