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How a Radical Shift to "Self-Management" Left Zappos Reeling (fortune.com)
100 points by pigpaws on Mar 7, 2016 | hide | past | web | favorite | 94 comments



The thing that strikes me about it is how this article makes Zappos sound so much like Scientology or other cults. Maybe it's just because I have a paranoid, skeptical, anti-ideological streak, but the similarities are striking to me. Let me count the ways:

You have the eccentric supreme leader, who claims to be just another equal among the group, yet issues edicts that the whole organization must follow. Scientology has Hubbard, Zappos has Hsieh.

You have the doctrine based on moving the organization and individuals towards a pure state, untainted by the way the rest of the world operates. Scientology has 'clear', Zappos has 'teal' and 'self-management'.

You have the lingo that only people within the fold understand. Everything that everyone does is couched in terms that are invented by the group, or especially words that are redefined with specific meaning, creating a kind of dialect for group members that diverges from the mainstream. This makes it difficult for them to communicate with outsiders or leave the group, and also makes it difficult for outsiders to investigate and understand the group. Scientology has words like 'tones' and 'ethics' and 'holidays', Zappos has 'circles' and 'lead links' and 'roles' and 'distractions'.

You have people who don't fit (i.e, accept and submit to the doctrine and leadership) be driven out. If you're one of these people, it's treated as a personal failing on your part: you haven't haven't been willing to accept the doctrine, which is taken to be self-evidently correct and ideal, and cannot be allowed to taint the group. Scientology has its 'suppressives', and Zappos has 'the Beach'.

Are there more? Maybe. Am I just imagining them, and it's really no stranger than any other company that's a bit insular... like Apple for example? I don't know. But reading this article definitely tripped my 'cult' alarm.


Rather, what strikes me is that for all the excitement over the buyout, Zappo's seems to have survived with management-by-holacracy for surprisingly long time with seemingly good results. One would have thought, based on the conventional wisdom at the time, that without a sclerotic managerial bureaucracy the organization would be completely unable to coordinate and manage itself. This does not seem to be the case.

Holacracy a cult? Why not traditional management a cult? The difference being simply that traditional management is broadly accepted as "normal" by society at large.

Ostracism via "the Beach" is just a different kind of social power than the traditional hierachical institutions, with different tradeoffs. Generally you think of these kind of power-diffuse societies as unable to scale, but Zappos has 1500 employees.


I don't know if it's a cult. That's why I hedged my whole comment with "maybe I'm imagining this but...".

It's too early to say whether it works. There's a saying I'm trying to remember, something about 'you can only see the rocks at low tide'. Almost anything will look wonderful in good times, and it's easy to attribute that success to whatever you're doing at the time. It's not until bad times that its flaws become visible.

Zappos was built to its current state on a hierarchical structure. They haven't yet had its decentralized structure tested in any significant way. If Zappos hits a slump in sales for whatever reason, how will the organization respond? Will Holacracy survive a crisis like that? That's where you'll really see if it's a useful system to govern a company.


Yep. But hierarchical bureaucracies are also rife with inefficiency and dysfunction. Coordinating the activity of groups of human beings at scale is just a hard problem. It could be that holacracy is effectively not much different than hierarchical bureaucracy, but with different tradeoffs and personalities. Then Zappos has to bear the weight of defending holacracy when it is not demonstrably the case that a traditional management structure would necessarily have done better.


Or it could be that it is significantly worse, and that the inertia of the brand keeps the boat moving (albeit slowing?). A shift to a newer model could be seen as a way to reduce headcount and contain costs.


It's interesting that one of the big role models in tech, Steve Jobs, was a total dictator. Exactly the opposite of holocracy.


> Holacracy a cult? Why not traditional management a cult? The difference being simply that traditional management is broadly accepted as "normal" by society at large.

You can't define 'cult' without an element of normative determination. It's right there in the first sentence on the Wiki page for cult, and in every dictionary definition I could find.

Also, the term does not necessarily carry a derogatory tone. I've seen many small spiritual groups self-describe as cults.


Traditional management structures are shit, but at least you know how they work, and there are lots of well-worn coping methods for dealing with them. The problem with crazy new management styles is that they often hide their true nature underneath a veneer of newness (for example, "flat"), and that true nature can sometimes be completely different from the ostensible version.


True. In practice, power in Zappos and holacracy is probably much more centralized, more arbitrary and less transparent than that of a hierarchical organization because there is no explicit structure. There is nothing protecting the lower rung people from the whims of those in the top.


> Holacracy a cult? Why not traditional management a cult? The difference being simply that traditional management is broadly accepted as "normal" by society at large.

Well, the only difference between a cult and a religion is age. And possibly whether they tell you to see a doctor if you get sick, not sure what the parallel to that would be.


You know, I honestly got that vibe about Hsieh companies when I tried reading his book Delivering Happiness. There was this cultish feel that your life had to be centered around your colleagues. Hang out with them during work, hang out with them out of work, that's how you make a happy family with team chemistry. I couldn't imagine being happy in a company with that culture. I have a lot of friends and interests outside of work too.

The most interesting question was when they upped and moved the company to Vegas and you really had to make a life decision about whether to go, knowing full well that your support group would be your colleagues, and you would be also their support group. Like triple the isolation and dependence? But it was for business reasons! Just coincidentally had very demanding cultural requirements as consequences.


Yeah it has that vibe. But I think that is kind of part and parcel of what's necessary to make change and have buy in from the group you're trying to coöpt into your vision.

I think there are lots of industries where holocracy could be just as good as the top down model is. For example, retail, hotel work, taxi companies, etc. Anywhere where mom and pops could have a business... That is wherever your average non MBA graduate can have a modicum of success you could probably create a workforce of equally qualified workers who could self assemble into workgroups according to their dispositions and aptitude. It's not far off from how the workgroups were supposed to work in practice in communist doctrine. Of course in their practice 5 year plans meant top down control.

Importantly you don't need highly paid managers to manage low level operations. Operations which don't require a whole lot of external supervision if you indoctrinate the workers to self regulate.


Its a good test really. If you find yourself using jargon for ordinary things that could just as easily be said in plain words, its a warning sign. This is doubly true if it seems like the reason for this is obfuscation or to make it sound less troubling than it would otherwise to an "outsider".

Now if you get to the point where ordinary words are being redefined to mean something complete different (or even opposite), you are already late for the door. Run.


How is the pay at Zappos? How do you ever get promoted and/or get a raise? My cynical self suspects that this is the dream of company owners. The owner himself is safe in his position and the little guys have to constantly fight for relevance until they have been used up.

It seems it's probably a good workplace to start your career but I doubt it works for a long career.


You only missed the part where members are isolated from friends, family and others who might point out that "this isn't really a good thing." What you listed is necessary infrastructure, but the isolation is the key to making any cult work, and it's why deprogramming is a thing, or at least a meme.

I haven't heard of any isolation at Zappos ...


They uprooted everyone and moved to Vegas, leaving behind friends and family, and ensuring everyone who moved only knew Zappos people when they landed there. Maybe it's not a boat in the ocean level of isolation, but it is isolation. One startup founder who moved his startup along with Zappos (it was a multi-startup move, kinda like a corporate migration) eventually committed suicide...


>One startup founder who moved his startup along with Zappos (it was a multi-startup move, kinda like a corporate migration) eventually committed suicide...

Woah, got some more info on that?


Sorry for the delayed response: http://recode.net/2014/10/01/the-downtown-project-suicides-c...

Looks like there were a few!


As I read this, the sibling comment immediately under yours[1] is talking about the Zappos move to Vegas, and how it resulted in your colleagues being your support group, and you theirs...

1: https://news.ycombinator.com/item?id=11240230


Wow. Reading your and VonGuard's comment makes me kind of queasy. Now it sounds like a cult is at least plausible.


True. It especially comes across to me like that because it all seems so focused on itself. As an adolescent who cannot think about anything except for his own feelings about love, betrayal, depression, etc.

I think however that the general tendency to play with power is a worthwhile one. If people have to play games with each other, they probably also become better in games with the outside world. It is important that they don't develop an idiom only understood my themselves however. A hierarchical structure might also be good training material.

Then, if friendly interaction with customers and getting new customers seeps into the entire organization through nonhierarchical means, this would be a great win. I can imagine that a dynamic structure that reflects the company goals directly, will be really good!


Wouldn't most of those comparisons also fit with most other companies?


Not really. Most companies has some inside baseball terms, but largely they follow agile or six sigma, or some other standardized management flow.


Yep, every group of people comes up with their own lingo, but its directed at the common (business, sports, etc.) process not the people themselves.


Amen.

It's smart from a culture management perspective though. Creepy (intimidating?), possibly unethical at times, but effective... Cult structure as a filter for all but the ultra-loyal sure seems wrong from the outside, but internally it fosters unity and rock-solid hierarchies under a guise of self-actualization. Isn't that what every human organization tries to pull off?


>Another beneficiary is Derek Noel, 30, a onetime customer-service employee. Noel had wanted to transfer to Zappos’s culture team but found himself blocked by his manager. “As soon as I found out about how holacracy worked,” he says, “I was like, ‘Actually, my boss can’t tell me that.’ ” Noel’s ideas, which included weekday events where employees watch a movie in the auditorium while working on their laptops, gained traction. Now he works in the Fungineering circle, a kind of events-planning/pep squad.

Want to spend all day at work planning fun activities? No one can tell you no!


>Want to spend all day at work planning fun activities? No one can tell you no!

And one day, perhaps due to bad luck or competition, Zappos won't be Zappos. Sales will suffer, restructuring will be required, and layoffs will be necessary. Inevitably, there will be comments here asking, "Why is it that these common workers pay the price?"


>Inevitably, there will be comments here asking, "Why is it that these common workers pay the price?"

Well, such comments will be much less "inevitable" if workers indeed have such freedom in the shaping of the company's future.


They go into more detail near the end of the article on how this works in practice - each circle apparently has a different amount of points that the lead distributes to participants, and each person is expected to do 100 points worth of work. Doubtful that Mr. Noel got 100 points solely from Fungineering.


> Want to spend all day at work planning fun activities? No one can tell you no!

Oddly, though, the invisible hand of those who actually run the company will ensure that the Will of the People is that, after enough party members are on a team, no more than that will join. It's quite curious, and no one quite understands how that will happen, but the Will of the People is clearly observable. (Sorry, should have capitalized Party there).


At the same time, if you want to transfer to another department, why should your boss be able to stop you?


If they don't have a need for another person, yes.


That's for the other department to decide, not your current boss.


This working environment looks like a cramped nightmare. How can anyone focus?

https://fortunedotcom.files.wordpress.com/2016/03/zap03-15_b...

Compared to, say the Basecamp offices, which look open, airy, and peaceful:

https://basecamp.com/about/office


Crucially though, you know that chap in the Zapos office wants to work in that environment. He made it that way. He's happy. That's great. That might be the case with Basecamp, but you don't really know.

The choice isn't between the clutter of Zapos or the open space zen of Basecamp. It's between the "make your own ideal workspace" freedom of Zapos (on a relatively small budget) and the "this what we made for you" design of Basecamp (on a relatively high budget). Some people will prefer Basecamp, but not everyone.


you know that chap in the Zapos office wants to work in that environment.

I don't know that at all. All I know is that social pressure works, even at Zappos.

If every desk at Zappos has a bunch of crap on it, then by damned your desk better have some crap on it too. Otherwise, you could end up on a hero's journey to figure out why you're not fitting in.

Remember that 'conforming' doesn't always look like clean desks with the stapler always in the upper left hand corner.


Looking at the Zappos office all I can think is "pieces of flair" with respect to the cubicle decorations.


It's so cluttered, it's giving me anxiety just looking at those photos. I keep a fairly clean desk, I don't think I could function well in that environment...


But that's a person's own desk. If you wanted to keep a clean desk then surely you could.


Could you? I'm thinking michaelbuckbee[1] is right about the flair thing. I would bet that if you keep a clean, organized desk with no decoration you would get asked about your feeling working there and maybe not be seen as Zappos material.

I'm not sure who's working PR as Zappos but that picture[2] cballard[3] linked to is probably not a good corporate message given the sign in the upper left corner.

1) https://news.ycombinator.com/item?id=11239602

2) https://fortunedotcom.files.wordpress.com/2016/03/zap03-15_b...

3) https://news.ycombinator.com/item?id=11239584


Many years ago I worked for a stint at ebay and I was definitely considered a pariah for not flaring out my desk with juvenile toys. I did that in Grade 9 with my locker


I know it's not fair to whoever's desk that is, but I'm tidy/OCD enough that sitting near that disaster would cause me serious anxiety.


"Stig of the Dump" immediately jumped to my mind looking at that [0].

[0]: https://en.wikipedia.org/wiki/Stig_of_the_Dump


This was precisely my thought as well. https://www.youtube.com/watch?v=KJtrLKGZZFg


Basecamp has 14 office employees (though they have more employees, and are big proponents of remote working) sharing a 10,000 sq foot space, compared to every office it's going to be open and airy.


Wow I worked in a place where I could have spit on the 10 people that sat around me they were so close. I think I had 10sf to myself.


Here are more pictures of the Zappos office: http://officesnapshots.com/2013/12/16/new-zappos-downtown-la...

The open areas are Basecamp-esque cleanliness, the cubicles are the quirky-and-random crampiness.


From what I remember about my tour of Zappos, those larger open plan areas are primarily for customer support whose staff operate on shifts meaning that not 100% of those desks are filled at any one time (except maybe the busy seasons).


If you carefully look at the desk next to him, it's quite neat. That chap is... chock-full of flair. And I suspect the desk next to him had to put up no boys allowed to keep his stuff from spilling.


Am I seeing things or, in the Zappos picture, is he using an older flat screen monitor as some kind of a cork board for storing random pieces of paper, like that calendar?


...and oppressively sterile. Grim, even.


> This working environment looks like a cramped nightmare. How can anyone focus?

Still more space than I have now. :(


Like putting stickers all over the bumper of your car, this is the most superficial and shallow and uninteresting way to shout to the world, "I am interesting! I have interests!"


I can't tell if it's brave of Zappos to experiment with different company structures, or foolish. I can't imagine this holocracy thing working long term. It's a system, which means it can be exploited. Favoritism is one way. Besides, saying that everyone is equal just means that there is no explicitly defined power dynamic. Don't be fooled: just because you are told that as a brand new employee you are equal to the senior-most team member who is also the "team link" or whatever, you are in fact not. It's just that this way the person who is actually more powerful in the organization to you will have to exercise that power differently. Then again, the "normal" corporate structure is less than ideal, to put it generously. Perhaps we need this type of innovation. Personally, I wouldn't bet my whole business on it, instead maybe having a small subset of the company doing these types of experiments.

What I do know for sure is this: I have never been a Zappos customer and am not planning on it. All these experiments seem to be leaving them with prices that are just much higher than alternatives. Even their parent company, Amazon, often has better prices on similar products.


I think it's both brave and foolish.

Zappos has been very successful and had a clear positive trajectory before holacracy/Teal. Clearly foolish to jeopardize that to such a degree!

At the same time, you may believe that a new system could truly pay off and take you to the Next Level. Maybe there would be a temporary setback, but you have to grit your teeth and believe in your reasoning that it will work out in the end, better than had you kept the status quo.

I can't help but think of Hsieh as a kind of artist. He isn't trying to just make money or "be successful" like most people. He wants to create something new and exceptional. And will reach for it while paying little mind to the risks.


Starting with a single department as a test case, and then moving out from there probably would have been a way to meet foolish and brave inbetween.


That's actually exactly what they did. If you read the whole article they started with the HR department.


So, honest question: How does all this Holacracy stuff square with the many and several seemingly-likely-to-be top-down initiatives mentioned in this article, including the switch to "Teal", the refocusing of the sales priorities, the apparently high-touch structures implementing the holacracy, the badges payment system, and the software migration?

Is holacracy's scope confined, where there are still execs above it that can make those decisions? Were these decisions actually decided "holacratically", meaning my expectations of making it difficult to do such sweeping changes in such a system are wrong? etc.

Again, let me emphasize, honest questions. I clearly have preconceptions in those questions but I'm trying to avoid opinions, as I don't have enough data. (And I am suspicious of the tone of the article, admittedly. But still, honest questions.)


there's definitely a migration period where the people who originally held power continue to hold it. One of their tasks is delineate those powers and delegate as appropriate. Certainly a founder or formerly c-level executive will continue to hold lots of power. Holacracy asks/empowers participants to admit that there are informal groups, cliques, cabals, who hold lots of cachet and at least document their existence.

I worked in a partially "holacratic" organization for about six months, and had a lot of good experiences, but remain something of a skeptic. Certainly it's problematic that the companies most likely to adopt it are already in the bad state that necessitates a major shake-up. I think a lot of the criticism of Zappos by outsiders and message-board nerds is misguided or ignorant, but they seem to be in a bad spot no matter what.


It doesn't. Power matters.

Just as Lenin, et al had to maintain a repressive aristocracy during the "transition period" in the journey to the dictatorship of the proletariat, there's always an incentive to keep the transition period a little longer.


I'm torn. The premise of holacracy is really interesting. On the other hand, for all the talk about how this idea is a human-centric thing and about the people and their happiness, everything sounds like Zappo's focus is on the system, with the actual workers a very secondary consideration. We're totally about the workers, we've just had to get rid of a lot of them.


Why is Self-Organization such a bad thing? Why are we hitting it over and over, esp. in the traditional offices where people are spending time in busy-ness instead of business productivity. I swear, 90% of traditional workers work 2 hours of their 8 hour day and middle management is lucky to be 50% right or worse, parrot what ever the megalomaniac who works higher in the hierarchy says. What is really Zappos doing, at least unlike many people in SV they do not claim to put a dent in the Universe. They are SouthWest on steroids, where employee happiness is central to the mission. Even if Zappos fails in its mission, there would be great lesson. I would love to work in a Halocracy, it will have its downsides, and people pretending to be busy and important does not seem to be one of them.


From the outside, I think a lot is demonstrated by comparing Valve and Zappos

Namely, Valve just did it, Zappos made a big deal about doing it

( I know that Zappos consulted Valve about their organization, at least according to a friend that works at Valve, but no idea what Zappos took from that consultation )


In all fairness, Zappos has about 5x the number of employees as Valve, according to a quick Google. That's the kind of thing that matters a lot.


And valve's handbook is short, 37 pages of common sense English, cover and blank pages, and some great full and half page illustrations in a pdf [1]. It seems Zappos requires a translator, proprietary HR software, and at least one consultant along with whatever they call training.

[1] http://www.valvesoftware.com/company/Valve_Handbook_LowRes.p...


I didn't get the impression that this article was overly critical of self-organization. Zappos seems to have had some struggles in transition, but the article still seems to end on a cautiously optimistic tone.


> Why is Self-Organization such a bad thing?

My guess: the bystander effect


As long as Zappos is a profit making organization, the case against Halocracy does not have teeth.


I have no opinion on Zappos specifically. But I've seen lots of dysfunctional organizations doing a lot of stupid things that were profitable--until they weren't. Profitability is one indicator that a company is doing things mostly right (probably particularly in the case of something like a retail business that isn't highly differentiated). But it's not really evidence.


That logic does not follow. One could argue that Zappos could be making more money with a traditional org structure.


One could also argue that Zappos would be making less money with a traditional org structure.

Both would be baseless opinions. It's damn near impossible to compare like for like here.

I'd file the idea under "interesting", but I'm not going to be rushing to send Zappos my business card because there are creepy and inappropriate overtones - not least is the insistence that Work is Family[tm].

But... I think it would be definitely a good thing if more corps experimented like this, so that "business culture" actually meant something identifiable, and there was a lot more corporate diversity, with a much wider variety of management structures and personnel styles.

Then if you didn't like a culture, you could avoid a corp. It would be easy.

The problem now is that a lot of business culture is implied, and the rules - which are at least as strong as those used in holacracy - are unspoken. Sometimes they're deliberately misleading.

I don't think this particular solution has much hope of transcending office politics. But I still think it's a more interesting culture than anything offered by (say) HP, Oracle, or IBM.


Amazon works quite well but from whatever I hear their work environment is not much fun. A profitable company can be a bad workplace. At least for the lower ranks.


I don't know if one can really say that.


If you read / believe in Teal, profit making isn't the sole function of Teal organizations.


Many people aren't trained or interested in self management. Also, most companies who preach self management are in fact not self managed environments.

It is no surprise that this is a difficult and long process. They are breaking some longstanding, fundamental human processes at a large scale. This is a hard thing to do and it might not be possible.

Hat tip to Zappos for trying.


This sounds similar to the Valve model and they've been an incredible success. Maybe it only works in certain industries, with certain personality types, or certain types of work. Game dev and shoe sales are two very different beasts.


Do you have more information about Valve? I would be interested.

I've only found in the past the Valve employee handbook, some people raving about Valve and some people talking about highschool style bullying.


> I've only found in the past...

Your description succinctly summarizes the 7 references in Wikipedia for that topic https://en.wikipedia.org/wiki/Valve_Corporation#Organization... .


There's a lot out there on "flat management style," especially Valve's verson of it, but I like this simple and short interview with Gabe Newell as an intro.

http://www.bloomberg.com/bw/articles/2012-04-27/why-there-ar...

This BBC article touches upon the concept more broadly:

http://www.bbc.com/news/technology-24205497


I know I'm lucky in my work environment, but where I work, the majority of people explicitly don't want to be managers. It's a lot of extra non-engineering work and meetings. Holacracy makes it sound like all employees have to go to the equivalent of what here would be manager-only meetings, which I suppose is great if you don't trust your manager, but is a big negative if you do trust your manager.


The one thing that stuck out to me is the "resident artist". I'm curious is that the person's only role? Will more companies look at the talents of their employees and enable them to pursue their real interests? Is this even feasible to propose?

My dream job is to be a resident Game Developer for a non-game development company. Literally paid to make whatever games I want, no manager micro-managing me, no committee telling me what to make or what "they want int the game." This article gives me a small amount of hope that one day I could do this, but my question above is the big "speed bump."

Thoughts?


Sounds like you should start your own game company. Which would indeed be a big "speed bump."


With the current instability of the entire industry, and my genuine disinterest in console or mobile development (one market is fading and one market is too cluttered) no matter how I run the numbers it would take at least 5 years before I would see profit.

I'll keep running numbers however and figuring out timing and niche!


What about PC indie development? I think one of the top games on Steam right now was made by one person (Stardew Valley). Admittedly it did take him 4 years to make; I don't know if he worked on it full time.


I admire the experimentation, I'm sure there's room to innovate on things like company structure, but you have to balance the desire to experiment with the wellbeing and security of your staff, and this particular example seems to take that responsibility way way too lightly. It's all well and good to play around with things when you have capital and can live in an RV for the novelty of it, but your employees are working because they need to work. Participating in this experiment isn't optional for a lot of them. At some point it can become cruel.


why does this page have self-playing video

why can't i make this page stop playing its video

why is there a text element sitting over a flash video player blocking me from being able to make it stop playing

did you know that safari's 'reader' functionality will hide self-playing flash elements, but will not make them stop? now i know this.

oh, and now i know that clicking the blue speaker icon in safari's title bar will make this page STFU.


"Failure of experimentation leads to stagnation."

I think it's very brave to take this decision and I'm very curious to see how it plays out in the following 5-10 years - maybe they've struck gold, but it's still covered in some dirt.


Um, IIRC, weren't Zappos numbers in the trash even before this management crap?

Once the brick and mortar retailers started taking online returns, Zappos lost its biggest differentiator--its no hassle return policy--and had to eat the return cost of shipping.


Another puff piece about self-management with no details o how it actually works. calling teams "circles" and managers "leaders" doesn't change the org chart.


It's funny but none of the circles mentioned in the article seem to have anything to do with selling shoes. I would be concerned if I was a shareholder.


As long as they make money they can do whatever they want. What happens when sales tanks (for whatever reason) and layoffs are necessary that it will become interesting.


Every Zappos article I've read has the vibe of "YOU WILL ENJOY WORKING HERE OR WE WILL PAY YOU TO LEAVE. OR ELSE."


Amazon is having issues with strict hierarchical management and stacked ranking. Everybody has issues. Zappos is, at least, trying something that has a good chance of creating a disruptively different outcome. Good or bad, we'll see, but there is little point in tweaks on the margins.


Amazon has far more problems than hierarchy and review process:

https://sites.google.com/site/thefaceofamazon/




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