Zappos Pays Up To Support Holacracy Vision

  • May 19, 2015 at 2:00 PM EDT
  • By Alicia Esposito
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Alicia head shotThe greatest part of my job at Retail TouchPoints is the ability to learn more about the brands I love and admire.

Over the years, Zappos has inched its way to the top of my “most loved” list. Prior to joining the retail world, I admired the company because it provided a great selection of products and designers at a reasonable price. As time went on, I came to appreciate the eTailer’s focus on great customer service and hassle-free delivery, returns and exchanges. But most recently, I’ve come to admire the company’s CEO Tony Hsieh for his ongoing focus on finding and retaining the best employees to drive his business forward.

It can easily be argued that Hsieh’s business practices are unorthodox. After all, what other C-level executive would actually pay his employees to leave the company?

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In 2008, Zappos made headlines when the general public got hold of a new onboarding policy. After employees are hired, they enter an extensive, four-week training program to learn about the overall company culture, as well as business strategies and processes. A week into the program, Zappos gives these employees the ultimate proposition, as noted by Bloomberg: “If you quit today, we will pay you for the amount of time you worked, plus a $2,000 bonus.”  

Now, the retailer is making even more waves with a new “Holacracy” model. As noted by Zappos Insights — the culture division within the Zappos Family of Companies — a Holacracy is a “comprehensive practice for structuring, governing and running an organization” that “instills rapid evolution in the core processes of an organization.”

Zappos made this shift in an effort to maintain its pace of innovation and collaboration, even as the company continues to grow. Rather than having a top-down approach to decision-making, authority is distributed throughout. So that means there are no traditional bosses or even job titles.

“Everyone becomes a leader of their roles and a follower of others’,” noted a description from Holacracy.org, “processing tensions with real authority and real responsibility, through dynamic governance and transparent operations.”

As someone who has been baked into a start-up environment fresh out of college, I could see myself easily supporting this kind of model. Although we are by no means a Holacracy, at Retail TouchPoints we are constantly collaborating, sharing ideas and are making actionable decisions on how to execute those ideas — whether they come from our founder or an associate editor.

However, it doesn’t seem like the entire Zappos team is on board. The company recently offered its entire staff three months’ severance if they decided to leave their positions by April 30. As a result, approximately 14% of the company’s entire employee base decided to throw in the towel, according to The Wall Street Journal. In March, Hsieh sent a memo to staff members, indicating that the company was taking too long to transition to the Holacracy. Undoubtedly, the April 30 deadline marked the official tipping point, and Zappos can now focus extensively on its new business model with its most engaged employees.

Despite rumblings of disagreement, I have to say that I commend Hsieh for going “all in” on this concept, and his business overall. He wants to ensure that he has the most loyal and dedicated employees.

We’re living in time when less than one third (31.5%) of U.S. workers are engaged in their jobs, according to research from Gallup. I think the Zappos leadership understands that the company’s culture and business practices aren’t for everyone, and they’re taking the appropriate measures to remove employees that may be an issue further down the line. Even more importantly, the Zappos team realizes that it’s not necessarily the employees’ fault if the business isn’t a fit, and the company offers them the appropriate compensation for their time and effort.

It’s still early days for the Zappos Holacracy, but I’m excited to see how employees adapt, and most importantly, how it will impact the company’s overall innovation and growth. We actually will have a member of Zappos Labs joining us at the Retail Innovation Conference in New York in June! She’ll be touching on two very important topics to the Zappos Culture: Innovation labs and employee collaboration! You can learn more here.

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