In March, Zappos offered its employees an ultimatum: get behind their new organisation structure or leave in exchange for at least 3 months of redundancy (The Washington Post).
As a result of the ‘ultimatum’, approximately 14% of the the 1,500 workforce took redundancy.
Some may consider this relatively high, particularly as Zappos’ customer focused workforce is admired the world over and earns Zappos CEO, Tony Hsieh, much admiration, recognition and column inches.
But the proposed new organisation is radical: it has no managers or leaders, no job titles or hierarchies. Instead, “holacracy” replaces traditional hierarchies and reporting structures with self governed teams known as circles.
But “holacracy” raises questions about:
- how to build in recognition for good work when promotions don’t exist (will peer feedback and recognition work as well if it is not seen to have the same authority)
- how to expedite decision making (collaboration is great but takes time)
- how to nurture leadership potential (when there are fewer opportunities to practice it)
- without a structure to push or fight against, what will create or drive innovation and a hunger for change and growth
- who manages underperformance
- how do individuals get to play to their strengths (what happens if you are a great people manager but don’t get to do it – I guess you just leave Zappos).
Some of these concerns have played out at Morning Star which has a hierarchy free organisation. Quartered in Woodland, California, near Sacramento, Morning Star is the world’s largest tomato processor, handling between 25% and 30% of the tomatoes processed each year in the United States.
Rather than having no managers, at Morning Star everyone is a manager. They have experienced increases in collegiality, development of expertise, quality of decision making and greater flexibility and loyalty (they pay better as they don’t have to pay for management time). The main drawback seems to be around onboarding – nearly half of all seasoned hires leave – the culture is just too alien and different for them to get their heads around.
But I applaud Zappos and Morning Star. They are attempting to do radically reconfigure an organisational structure that many would argue is well past its use-by-date.
I shall watch with interest what transpires. And in the meantime, just in case someone might need some consulting input, I will read the book mandated by Tony Hsieh – Reinventing Organisations.