Saying Goodbye to Titles – Zappos Adopts a Holacracy

April 28, 2014 Brian Beattie

Earlier this year Zappos, the online retail giant, announced that it is abandoning the typical organizational structure and instead implementing a holacracy. This will be a major change for the company, and will possibly become a trend in businesses across the globe. In this article, I'll explain what a holacracy is, why Zappos chose to go in this direction, and how this will affect companies worldwide.

What is a Holacracy?

A holacracy is a distributed authority system, founded by Brain Robertson in the early 2000s, that empowers people to be a leader in their roles, and a follower in others. The company is split up into groups (also called teams or circles) and each group is a self-contained democracy with no official job titles.

The key elements of a holacracy are: processing tensions, governance, and operations. A tension is the dissonance between what is and what could be (reality vs. purpose). Tensions can be good if they are used to spark change. Otherwise, they can cause burnout and disengagement.

Holacracy uses specific channels to process tensions - governance and operations - which are incorporated into every team at every level. 

Governance meetings are held regularly and dictate who is doing what. This way the team knows what everyone is doing, who is accountable, and any constraints. At every meeting, these change based on any tensions the group is sensing while working.

Along with governance meetings, teams participate in regular tactical meetings. Tactical meetings zero in on operations and ensure that whatever is in the way of getting work done is identified and dealt with.

Though no one has the title of a manager, that does not mean there are none. The roles which make up the various teams are very specific. So there can be people whose duties and requirements make them in every aspect a project manager, they just don't have the title.

It is widely believed that with a holacracy there is no hierarchy and everyone is on the same level. This is false. All the teams are placed in a hierarchy, so that each team knows what the other is doing and everyone understands how they fit in the organization.

A company still needs structure in order to function, but by eliminating the traditional hierarchy and job titles, a holacracy attempts to generate organizational clarity and help workers to focus on their tasks and not on impressing the boss.

Finally, a holacracy focuses on internal mechanisms and making sure the administrative work of an organization gets accomplished. It does not look to the customer or anyy other external influences for feedback on how the organization is doing.

Why Did Zappos Go This Route?

As an online retailer, Zappos has focused on providing customers with value and some could say that they have mastered that practice. 

Choosing to implement a holacracy is not a bad idea for them. Since they already have the processes in place to give customers maximum value and constantly get their feedback, they can afford to try an organizational structure that allows them to focus on the administrative.

By instituting a holacracy, they are "decoupling the professional development side of the business from the technical getting-the-work-done side", explains Zappos' John Bunch. It's a fairly heavy and democratic way to get the administrative done, but it is an option.

How Will This Affect Businesses?

Holacracy is fairly new (it become known in 2007) and as said before, it is a heavy system. For most organizations today, especially large ones, they have the administrative procedures in place and instead need to focus on customers, thus making holacracy is not a viable solution the way it is structured now.

Holacracy still might change and adapt to incorporate customer feedback, but for now it is not the optimal organizational structure. Internal feedback is important for businesses, but in today's world where the customer is king, most businesses cannot survive without having customer feedback.

That said, we're most likely not going to see a trend of companies adopting a holacracy anytime soon.

Your Turn

What are your thoughts on holacracy? How do you see this being incorporated into the business world? Is this something you company would implement? Let us know in the comments below.

About the Author

Brian Beattie

Brian Beattie is the Chief Financial Officer at Volaris Group. Besides overseeing the financial health of the company, he works closely with Volaris’ legal and M&A team on all new acquisitions. Brian is an expert on every stage of the M&A process – from sending out the non-disclosure agreement to executing the sales purchase agreement.

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