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Zappos CEO Tony Hsieh: Adopt Holacracy Or Leave (fastcompany.com)
115 points by jcrites on Apr 24, 2015 | hide | past | web | favorite | 103 comments

Without more context than the title and the linked email, it's pretty easy to call Hsieh's move brash or tried-and-futile. But the guy is often regarded as the premier management CEO of his generation, and homogenous culture is strongly enforced in his hiring process. Employees love Hsieh because they're (largely) on the same page, not bc of a reality distortion field. After seeing Hsieh's track record and reading "Delivering Happiness" (Zappos' story) and "The Everything Store" (Parent Amazon's story where Zappos gets a vignette), I'd rather watch and learn than shoot it down based on my engineering sensibilities.

> But the guy is often regarded as the premier management CEO of his generation

Erm...what? By whom? I only know of the incompetent Tony Hsieh that burned through cash at such a rate that his investors thought it a miracle that Zappos was still around when several large companies started looking to get into the online apparel business at the same time. It is widely rumored within Amazon that Zappos was a few weeks from bankruptcy when they were bought by Amazon, and it is pretty well known within Amazon today that they still aren't profitable. A match made in heaven?

Even if you don't see the same negative picture that I do, by every "track record" objective measure you can think of, he is two orders of magnitude worse of a CEO than Zuckerberg and Larry Page, and still not even in the same league as Elon Musk, or if you want to stick to apparel, Kevin Plank.

It is one thing to take puff pieces seriously, and another thing altogether to take autobiographical puff pieces seriously.

> Employees love Hsieh because they're (largely) on the same page, not bc of a reality distortion field.

His associate-level employees love him because they have a pretty good job that they couldn't get elsewhere. His managers hate him because they view him as incompetent and irresponsible. Everyone I know that works in or with Zappos sees this as a clear power play. He's trying to cut them out of the picture.

It's not about engineering sensibilities, it's about human sensibilities. So many great leaders in human history have been effective, loved by their followers, good at enforcing a homogeneous culture, and abusive.


I am impressed that the effort to enforce a corporate monoculture (if we want to be uncharitable to Hsieh) has such a humane escape clause—3+ months severance and COBRA is nothing to sneeze at. I would be curious to see if there's any kind of option for bailing later, as a sort of "I've tried it, and now I know it's not for me" option.

I have only skimmed the memo, so I may be missing something, but calling this an "ultimatum" and saying things like "adopt holacracy or leave" seems awfully overdramatic. If a CEO says "Hey, we're rearranging the org chart now," and you can't can't bear the thought of working under the new org chart, then unless you're in a position to talk him out of it, your only real option is to quit. Nobody has to mention the option explicitly; it's understood. That's not an "ultimatum," it's what being an employee means.

This guy is explicitly bringing it up because he's offering extra benefits to anyone who chooses to quit. He's being more accommodating than the average CEO, not less.

I am sorry that I cannot leave a comment of greater value, but this makes me wonder if Zappos needs to reduce the number of employees they have, and if this is a good way to essentially perform a stealth layoff by getting rid of those least willing to be true believers.

I have no reason based in fact to believe that this would be the case; this is just speculation based on my previous impression of Tony Hsieh with respect to his controversial impact on downtown Austin. He seems to be rather invested in being a visionary (if not messianic) figure.

It does flat out say anyone who doesn't like it will be given an offer. I assume that refers to the offer you get when you first join where they pay you to quit. So the letter does flat out say, join the holocracy, no more management, if you don't like it, we have a retirement offer for you.

Sure, but explicitly saying "if you don't like it, have a retirement offer" seems a lot more pleasant than the implicit "if you don't like it, don't let the door hit you in the ass on the way out" that comes with basically any major corporate communication. Those are always your two choices when changes come down from on high. All this guy's doing is making option #2 explicit.

It may not technically be an ultimatum, but it quacks like one.

In an essay collected in The Hall of Uselessness, Simon Leys quotes a Chinese writer's parable from the first half of the 20th Century, about a government afraid of its people that create a massive volume of laws. It had a blank first page, however, which only the initiated knew how to read. The first three entries were "1. Some cases must be treated with special severity. 2. Some cases must be treated with special lenity. 3. This does not apply in all cases." (Quoted from memory.)

What does it say on the blank first page of the Zappos employee manual?

>What does it say on the blank first page of the Zappos employee manual?

All employees are equal, but some are more equal than others.

An summary of the article and the concept that Tony Hsieh wrote:

"We’ve been operating partially under Holacracy and partially under the legacy management hierarchy in parallel for over a year now. Having one foot in one world while having the other foot in the other world has slowed down our transformation towards self-management and self-organization. [W]e haven't made fast enough progress towards self-management, self-organization, and more efficient structures to run our business.

"After many conversations and a lot of feedback about where we are versus our desired state of self-organization, self-management, increased autonomy, and increased efficiency, we are going to take a "rip the bandaid" approach to accelerate progress towards becoming a [self-managing] organization. As of 4/30/15, in order to eliminate the legacy management hierarchy, there will be effectively be no more people managers." He goes onto to describe more about how this will work.

What does Holacracy entail?

"Holacracy is a social technology or system of organizational governance in which authority and decision-making are distributed throughout a holarchy of self-organizing teams rather than being vested at the top of a hierarchy", according to Wikipedia.

> "Holacracy is a social technology or system of organizational governance in which authority and decision-making are distributed throughout a holarchy of self-organizing teams rather than being vested at the top of a hierarchy", according to Wikipedia.

Yet there he is at the top of the hierarchy telling people to do it.

The first comment below the article points to an interview by Brian Robertson (Holocracy author) which discuss precisely this irony: https://www.youtube.com/watch?v=DOpVJIQWgqk

In traditional organizations, ultimate power comes from the top so implementing a large scale change requires a heavy handed top down approach.

What if the holocracy decides they like hierarchies?

Brian: Please, please, please listen! I've got one or two things to say.

The Crowd: Tell us! Tell us both of them!

Brian: Look, you've got it all wrong! You don't NEED to follow ME, You don't NEED to follow ANYBODY! You've got to think for your selves! You're ALL individuals!

The Crowd: Yes! We're all individuals!

Brian: You're all different!

The Crowd: Yes, we ARE all different!

Man in crowd: I'm not...

The Crowd: Shhhhh!


Quote starts at 1:20. One of the funniest movies I've ever seen.

I admit I was thinking while reading the email that it would be rather funny if their ad hoc emergent groups elected managers to manage them, and replicated a hierarchical structure.

Right? My irony detection meter pegged when I read this article/email. Beautiful needs, tragic strategy.

You have to love invented Jargon that relies on invented Jargon in its definition.

Can you give an example of jargon that is not fabricated? Most people here have no idea what an onky bonk, a cookie, or a butcher flag is, precisely because they don't do film lighting. Jargon seems to spring up when people of different skill sets get together and do something without much in the way of previous models to pull from.

Not arguing for or against holocracy, just think it is interesting that the jargon is what you seem twerked by m8 </s>.

The opposite of formal management and hierarchy isn't "self-management" and "self-organization" but informal power structures and hierarchies. Ultimately, less security and more social pressure and control for the individual. Brave new world of work.

Yes non conformists do not do well in these sort of organizations

It's an interesting idea. It has many standard pitfalls, as a 1970s paper, "The Tyranny of Structurelessness" points out: http://www.jofreeman.com/joreen/tyranny.htm

Basically, informal systems are, by their nature, harder to regulate. And "unregulated" is not the same as "works well and fairly."

good thing Holacracy is everything except "informal", then.. literally the core idea is that you take the implicit jobs of management and make them explicit & open, and allow them to be claimed by more than just one individual.

So informal high school cliques vs a Hierarchy - I can guess what the average outcome will be.

This is my main concern. I have never studied the concept in detail but I don't see how self-organisation addresses any problem.

Self organization, when mirroring a biological system (such as our immune system) can be co-opted by cancers and auto-immune causing pathogens.

No system is perfect.

well i have worked at a worker coop we (collectively) did have over all control but there where still managers.

    > there will be effectively be no more people managers
I hope they've got some shit-hot HR and legal

This is a push to up-end the company culture, which is its own steep challenge. Kudos it they can do it.

Management has a role. Business politics is a real thing. Power struggles are not stymied by an egalitarian approach.

Any company will have decision makers at all levels of influence and control. In some situations, managers are those with time and wisdom to be able to sort out what is a regular ask and what is going to be an uphill challenge.

One of my favorite quotes from one of my managers was "I'll finish the fights you start." My autonomy in that role came from reinforcement from a wiser, steadied hand. I believe good people managers have a distinct place in employee growth.

Good people managers create employee groups that generate self-organizational habits, self-manage based on goals, and have increased efficiency. Poor people managers get in the way of this. Good people managers know when to step in to advocate for business importance where inexperienced employees may be able to generate good work product, but not be good advocates (yet!) They also understand longer term missions that may have been disclosed to them, so that they can prioritize correctly.

This prioritization is vital. I don't think the people lead themselves to the verdict that their work/problem is low on the totem pole. Quite the opposite, people own the role they are in and advocate as best they can. Self-organization and self-management require a distinct understanding of the business and where one's work lies in the scheme of things. Without management acting as a buffer, this could create a lot of noise.

Based on the "adapt or get out" tone and unironic use of jargon like "Teal Organization", I picture their emergent culture landing somewhere between Lord of the Flies and Scientology.

Sounds like a case for some "Tension Processing."

I don't even know what that is, and I already know what it is. Been working too long I guess.

Reading the Holacracy page on "processing tensions" [0] feels like document written by Dogbert. Poe's law resonates so strongly here that had I not known that this was for real (since there's a book, and Zappo's is doing it), I would have thought it was satirical.

I feel like I need to read it three times, and still it feels like mumbo-jumbo.

0: http://holacracy.org/blog/processing-tensions

>I don't even know what that is, and I already know what it is.

To paraphrase Shakespeare, pseudoscience by any other name would smell as familiar.

I thought you were being facetious.

So all manager positions have been eliminated. People that were formerly managers have the option of staying on in some nebulous capacity. For those former managers that do not want to work at a company in a nebulous capacity, they are offering a severance package. This severance package seems more like a legal maneuver to force resignations to avoid having hundreds of former managers suddenly file unemployment claims, wrongful termination suits, etc. against Zappos.

I find the language of the memo and the motivations behind it execrable. I do not believe there is anything inherently wrong with flat organizational structures and there's perhaps even some justification for using novel terminology to describe them. Valve's employee handbook is a great example of a flat org description done right. Eventually maybe Zappos will end up with a similar document. It's maybe a little harsh to judge them based on a rambling, incoherent, and cultish internal memo, but I know that I'm not inclined to work for Lead Link Grand Wizard Hsieh if this is the way he communicates.

A counterpoint to "holacracy", "The Tyranny of Structurelessness" by Joreen: http://www.jofreeman.com/joreen/tyranny.htm

Are you sure it's a counterpoint? The concluding "Principles of democratic structuring" are very much a recipe for implementing structurelessness effectively. The final words:

> When these principles are applied, they insure that whatever structures are developed by different movement groups will be controlled by and responsible to the group. The group of people in positions of authority will be diffuse, flexible, open, and temporary. They will not be in such an easy position to institutionalize their power because ultimate decisions will be made by the group at large. The group will have the power to determine who shall exercise authority within it.

one of the points he makes in the memo is that holocracy doesn't mean that there is no structure. it's just a different structure than the traditional hierarchy.

I've only worked for small companies. My current company has roughly 30 employees. My eyes glazed over during the 2nd paragraph. Is this what it's like when you have a lot of employees to manage? Sending Half-Hour Emails with Capitalized Words I've never heard of?

Holacracy? Glass Frog? Teal Organization? Reinventing Organizations? Huh?

Just let me do my work, damn.

Top level executives get bored and feel ineffective and look for things to do. CEOs especially can fall victim to wanting to be "bold" and being obsessed with whatever their idea of being a leader is at the time. They read articles and books which are written for them full of buzzwords and pseudo-science, and use these to justify taking action which they believe firmly will make a big difference, but really amounts to rearranging furniture.

Just read the linked email. It's non-stop buzzwords and references to "the book". This is the talk of a cult member not someone acting rationally. If you didn't know this was a CEO of a successful corporation, and instead you were told it was an internal Scientology memo, would you doubt it?

Self Management may or may not be a good way to run a company (it probably largely depends on the company), but there should be rational, compelling reasons for why it's the way to go. The articles included in the email are just Malcolm Gladwell style pseudoscience meant to lull top level executives into a hypnotic state of euphoria.

When it's just you and a couple dozen other people, just letting you do your work is a pretty safe bet. But, when its you and a few hundred or a few thousand highly variable people, just letting you do your work has a strong risk of setting you up for failure. Somebody in that huge mass of people is going to screw up your work by running full speed in the wrong direction. That somebody might be you -not out of incompetence, but because you were mis/uninformed.

So, how can I repeatedly communicate dense ideas about how to keep hundreds of people aligned in dozens of dimensions using only extremely low-bandwidth channels such as weekly emails? One option is to use shared-dictionary compression in the form of a custom vocabulary of capitalized words. Of course, the messages will be inscrutable to anyone outside the org because they won't have the dictionary. But, that's not my concern.

books about internal corporate communication dont exactly advocate "Dense ideas" at the executive level.

After all, who is going to read a 30 minute long email? Only if you are threatening their jobs (and Tony is!)

If you'd like further bait your creeping nausea, do a little research on Holocracy...

"Adopting Holacracy isn't cheap or easy. The system has its own set of rules and lingo, and is complicated to implement. The Holacracy parent company, HolacracyOne, helps companies transition by offering consulting services that run from $50,000 to $500,000, depending on how long it takes to achieve self-sufficiency. Even for much smaller companies, like Medium, which implemented Holacracy when it was just a couple dozen people in 2012, the journey takes multiple years and has a steep learning curve.

Holacracy was invented by Brian Robertson, a 35-year-old former programmer with barely any management experience. He created Holacracy in 2007 because he had a "burning sense that there has to be a better way to work together," he said in an interview with Fast Company. Robertson, who describes himself as a coding savant, says he taught himself to program at age 6..."

I guess startups that get tens of millions right off the bat have to do something with their money.

In a typical management structure, sending out org-wide emails is often a sign of bad management, since management is not trusting their lower tiers of management to get their message out and is essentially acting like the voice of god.

In a holocracy, who knows.

I imagine these emails are going to have to come almost exclusively from Hsieh, as one of the few remaining formal managers.

This is exactly what it's like when you have a lot of money to spend, which is what happens when you have a lot of employees.

The phrases are code words designed to reinforce the cult of whatever program or fad that the employees that operate the corporation (as opposed to producing whatever the corporation produces) use to control the rest of the employees.

This will be seen, among many other contexts, in official and formal employee evaluation processes. There will be "objective" measures, like "does the associate exhibit Glass behaviors? [rate 1 to 5]." "Does the associate promote Teal results, in their own work and the work of others? [rate 1 to 5]."

Yes, this is exactly what it's like in a large corporation. The names of the programs change, and the posters, colors and prayers, but it's all the same.

I actually like the idea of a Holacracy, and you see it in alot of small startups intentionally or not. The generally tend to loose this as they grow. I recently read one of Ricardo Selmer's books on how he used Holacracy at Semco http://www.amazon.com/Seven-Day-Weekend-Changing-Work-Works-... which is a huge multi national company. I highly suggest it.

Kind of reminds me of... scientology.

Replace sea org with teal organization, and auditing with 'tension meetings' and you got yourself a new cult!

Then again, I'm just jealous since I always wanted to start a cult :-(

Probably all it means is that some new management fad has come and replaced whatever was the previous fad (six sigma? Lean organizations?).

If you want to a lot of dough, read the books and memorize a few buzzwords, buy a suit and name yourself a consultant.

I doubt anything will actually change below a superficial level, but everybody wants to seem important and the way management does that is by making sweeping changes (we engineers aren't any different, we just want to build impressive and geeking things).

I work for an agency with thousands of employees. It's never like this. People do their work, they seek out the resources they need, and they self organize on short term teams to address issues. Traditional management structure exists to make sure no one is running in the wrong direction and to assess performance. "Just let me do my work" is basically what everyone wants, and a good manager will know/see that and be as hands-off as they can while still ensuring agency objectives are being appropriately accomplished.

"Holacracy is a social technology or system of organizational governance in which authority and decision-making are distributed throughout a holarchy of self-organizing teams rather than being vested at the top of a hierarchy.[1] Holacracy has been adopted in for-profit and non-profit organizations in the U.S., France, Germany, New Zealand, Australia, and the UK." - https://en.wikipedia.org/wiki/Holacracy

LOL using the root of the word you're looking up to define the word you're looking up, classic!

Wikipedia's "top notes" says "This article has multiple issues".

" Self-Management is not a startling new invention by any means. It is the way life has operated in the world for billions of years, bringing forth creatures and ecosystems so magnificent and complex we can hardly comprehend them. Self-organization is the life force of the world, thriving on the edge of chaos with just enough order to funnel its energy, but not so much as to slow down adaptation and learning."

I think he's referring to evolution here, but it has no end goal in mind. It just happens, and just as often as organisms adapt over time, many simply die off.

Similar ideas are expressed in Valve's Corporate Handbook, which describes a company culture where there is no hierarchy, either:


There is always a hierarchy. Either it is explicit or it is implicit (which does not mean I'm pro explicit hierarchies)

That's the stance taken in a famous feminist essay from 1970, "The Tyranny of Structurelessness": http://www.jofreeman.com/joreen/tyranny.htm

HN discussion: https://news.ycombinator.com/item?id=7409611

"Interestingly, none of the organizations I have researched for the book Reinventing Organizations are employee-owned; the question of employee ownership doesn’t seem to matter very much when power is truly distributed."

Excuse me while I raise a questioning eyebrow.

I think that's kind of right - it's the explicit awareness of hierarchy or other structures that works. (I'd argue that actually you can have hierarchy-less (sp?) organisations, but they require particular consideration - but you'll still overlay other assemblages - social hierarchies or whatever, on top of it. I did a bit responding to the Tony Hsieh email from our perspective as a company that's trying to implement Holarchy right now: http://blog.granttree.co.uk/post/117079306181/zappos-two-poi...

Yeah, and the problem with implicit hierarchies is that people are always wondering who has the power today. It's like the Roman Senate.

It didn't work. See Rich Geldreich's blog, http://richg42.blogspot.com/. People still try and optimize for looking good vs their coworkers on other teams vs simply doing the best work possible.

Examples, http://richg42.blogspot.com/2015/01/open-office-spaces-and-c..., http://richg42.blogspot.com/2015/01/microsofts-digs.html

Management theory is like cottage cheese - they keep finding surprising new ways to make me hate it.

Yet, it's surprisingly high in protein, and it makes me fart.



The really interesting part of this article for me is that they are adopting such an approach even though they are a public company. The previous adopters that I'd heard of were all private, and I never could quite figure out how they intended to handle the compliance requirements that come with being a public company (e.g. to prevent insider trading).

Zappos is a wholly owned subsidiary of Amazon, not a public company itself.

How do salary raises get decided under this system? To me it looks like he wants to have top management, a few superstars, and the rest of the company are totally interchangeable. Does your salary get reduced when you change roles?

Holacracy is not a system for determining salary, or any specific tactical question, in the same way that "Agile" isn't a system for determining what programming language to use. Holacracy just says how an organization can decide how to apportion responsibility and authority. Different organizations reach compensation decisions in a wide variety of ways, no matter their meta-organizational framework.

Commonly, salaries are decided in a way very similar to the process at a "normal" company.

> To me it looks like he wants to have top management, a few superstars, and the rest of the company are totally interchangeable.

As I said, not much different.

"These are hierarchies of influence, not position, and they’re built from the bottom up. At Morning Star one accumulates authority by demonstrating expertise, helping peers, and adding value. Stop doing those things, and your influence wanes—as will your pay."

Form the company's perspective this is probably a good thing but I think it results in a hyper-competitive situation for the regular employee.

So does that apply to the CEO as well? Is he going to drop his title?

Holacracy® replaces single, static titles and departments with multiple, dynamic roles and circles. He's probably the "Lead Link" of the "General Company Circle", e.g. https://glassfrog.holacracy.org/circles/25

So his static job title changes from "Chief Executive Officer" to "Lead Link of General Company Circle"? Can someone else step up and replace him as Lead Link? If not, doesn't seem very dynamic.

Sounds a little bit like the theory behind some communist parties' organization. Instead of a strict hierarchy, with leadership titles like Chairman or President and such, there are functional working groups or committees ("circles") with possibly intersecting membership. Then people have functional roles in those committees. The idea being that you aren't at a certain "rank" in the organization, but rather you are doing something specific in a specific sub-group of it.

It does have the problem you mention, that the leadership in practice will often end up not very dynamic. There's no leader, but the "lead link" of some particularly important "circle" will de facto be the leader of the organization, even if their official title is only something like Secretary.

"All animals are equal, but some animals are more equal than others."

Perhaps he'll become the CHO - Chief Holacracy Officer.

Not only that, will he take a pay cut like the existing managers will possibly have to do as they explore their new roles in the company?

No problem for him to take a paycut with his equity.

I would include that as part of his compensation.

While my eyebrows are raised past the top of my hairline right now, kudos to him for giving it a shot at a large scale.

Whatever the outcome, it's going to be a very interesting case study.

I'm glad I'm not a subject of the experiment.

It'll be like the first season of Survivor, the one that figures out the unforeseen strategies and rules of the new game first will win.

This is the most important part for me:

  And precisely for that reason, lots of natural, evolving, overlapping hierarchies can emerge
  ―hierarchies of development, skill, talent, expertise, and recognition

I wonder what proportion of Zappos' 1500+ employees actually spent 30 minutes reading that email.

Imagine this line 80% in

"Good job that you've made it this far reading the memo. Please send me back an e-mail with your name + banana in the title, and attach an image of a banana or else you're fired. Thank you!"

I wonder how much staff they would have to fire ...

I would not respond even if I read that email. Such company would be broken, and this seems like good way out.

Which would be exactly what he wanted.

And it wouldn't work because 1% of the employees would read the whole email and then tell all their friends to send an email with a banana image attached.

On a parallel note, say hello to games in the age of internet.

Different code-word for each recipient?

He'd want the worthwhile employees to leave?

It is completely possible to be worthwhile, incompatible and not welcome at the same time.

I am not passing judgement.

Wow, this sounds like an incredibly unhealthy way to work. I look forward to seeing the inevitable, expensive failure & blowback.

I applaud his boldness! I think that this will be a test of the strength of Zappos's culture as a driver of human behavior, and a test of how well they've been able to hire and retain only those people who fit in with and drive that culture.

To quote Larry Niven, "Anarchy is the least stable of social structures. It falls apart at a touch."

When I saw a missive which is commanded to take 30 minutes to read... my immediate thought is, ok they're doomed.

Every book on business management and communications repeats the "keep it simple and clear" over and over. Considering the words of the CEO are repeated by dozens if not hundreds of people, you don't want the message to shift.

I read the article about holocracy, and frankly anything that is described as "difficult" and "painful to transition" and "takes years" just seems like it better delivers huge benefits. And from the origin stories of holocracy, I have my suspects of why.

In the end, management is all about human dynamics. All the advantages and disadvantages of being human. You have to lean in to the advantages and minimize the disadvantages.

I would probably be net negative on holocracy for my own consideration however.

The concentration of middlebrow dismissal in this thread is appalling, and not at all in the spirit of intellectual curiosity.

Fortunately there are at least a few comments that didn't act like know-it-alls, and they did get upvoted.

It might help this email made it easy to visualise quite how the teams are supposed to approach a problem under this new paradigm. As it is, I've read the thing and I have no idea how it's meant to work. It might be a great idea, it might be a terrible one... either way, it's got a lot of buzz words, which is rarely a good sign.

Uncharitably lots of it sounds like giving up on managing - we'll set the strategy and the rest will somehow work itself out.

It seems like using "glassfrog" or something equiv is required. Makes more sense when you look at a "glassfrog" example: https://glassfrog.holacracy.org/organizations/5

I'm a bit pressed for time right now but wanted to leave a like to Ken Wilber[1] who did a lot to popularise the term holarchy. If you haven't heard of him or read any of his books ya'll might find him interesting.

1. http://en.wikipedia.org/wiki/Ken_Wilber

Whenever I read something that starts a sentence with "Leading scientists believe...", I immediately question my choices that led me to that point, and whether I want to continue reading, which I usually don't.

I'm not sure I've ever read those words outside a critique and found the document they were in worthwhile.

Well this reeks of consultant.

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