Holacracy May Be Teal
Zappos CEO Tony Hsieh wants the structure of his business to be more like a city and less like a conventional top-down command and control bureaucratic organization.
In a FastCompany story by Gregory Ferenstein, Hsieh (pronounced shay) says that self-organized, self managed entities such as cities have resilience to stand the test of time, while command and control structures do not. He notes research has shown when a city doubles in size, it’s economic productivity, rises dramatically and the productivity of its individual inhabitants increases too. Companies that grow aren’t always so lucky, and bigger is not always better.
Hsieh asserts that self-managed self-organized structures are the future of work and that they are they are the only structures that can get better as they get bigger. Zappos is an online shoe and clothing company now owned by Amazon that produces more than $2 billion in revenue annually. Hsieh says when the company reached 1,500 employees, “We just felt like things were moving slower than when we were 150 people. I don’t think it’s anyone’s fault, it’s just a by-product of normal hierarchical structure and processes.” In early 2014 he introduced sweeping changes with a management system called “Holacracy” that abolishes bosses and replaces them with overlapping networks of self-managed teams.
As described in another FastCompany story by Rebecca Greenfield, Holacracy doesn’t mean a flat organization. People and work are organized around circles within circles, and people have roles so that some team members have autonomy over their domains. Teams convene “tactical meetings” to get their work done. Authority is distributed throughout the whole organization, and roles can change as needed because the structure is very fluid. Without bureaucratic bottlenecks, the idea goes, decisions are made faster and more innovation is generated. While roles carry authority, no one has a title, and it turns out some people don’t like giving up their titles.
Zappos encouraged its dissatisfied employees to take a generous severance package and leave, and the New York Times reported that 18 percent—or 260 people—did so. Hsieh was undaunted. He told FastCompany a 20 percent turnover is not unusual in his business, and anyway, his goal has been to maximize highly committed employees who are enthusiastic about the culture.
Holacracy was invented in 2007 by Brian Robertson, a former programmer who thought he had designed a better way to work together. It has been adopted by companies around the world—including Medium, the alt-publishing platform from Twitter cofounder Ev Williams, and the David Allen Company, the productivity consultants.
In an interview with Dan Pontifract of Forbes, Hsieh explained his management thinking has been influenced by “Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness,” by Frederick Laloux, a Belgian business scholar and former management consultant for McKinsey & Co. Tracing the evolution of organizations, Laoux borrowed a descriptive system devised by the philosopher Ken Wilbur using sequences of ultraviolet light, from infrared to ultraviolet, to identify different stages. In this scheme, primitive human organizations that relied on violent force were red, and the most evolved organizations, where there is effort to nurture the whole person and the whole organization, are teal. In house at Zappos, Holacracy is called teal. Reaction to Laloux’s book has been mixed. New York Times business writer Tony Schwartz called it “the most important and inspiring book I’ve ever read.” According to the Forbes story, Dave Snowden called it “trivial.”