Is Zappos Leading a New Management Trend With ‘Holacracy?’

Management

Tony Hsieh and Evan Williams have seen the future, and it’s called holacracy.

Hsieh, the CEO of Zappos, and Williams, the Twitter co-founder now starting up the Medium blogging hub, have both embraced this new approach to organizational structure and management. It eliminates traditional job descriptions and reporting layers and, its advocates say, puts power into the hands of the rank and file. Vox says it’s becoming the latest thing in Silicon Valley.

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That all sounds very touchy-feely, but in fact holacracy seems cleverly pragmatic: It organizes a company into a series of “circles,” each around a specific something that has to get done. Each circle may have sub-circles that are responsible for narrower portions of the task. Each has a leader, and meetings are carefully formatted to emphasize action tasks rather than discussion.

Because the company is now organized around things to do, teams aren’t arbitrarily segmented into groups of people with similar job descriptions. A website development team, for example, could include someone from customer service who has great product knowledge. Each person in a circle has a specific role, which comes with the “autocratic” authority to meet their defined responsibilities in most any way they see fit. At the end of the day, each role and each circle is judged on its results.

It’s the Work that Counts

The key to holacracy is the notion that companies should be organized around the work to be done, not some broad definition of group responsibility. Just as website development involves more than design and coding, marketing involves more than copywriting, and strategic planning involves more than data and market analysis. Holacracy’s circles include defined “roles,” each responsible for getting a certain aspect of the overall task done. So, from the outset, the website development circle could include roles for people with knowledge of the target market, SEO and content, as well as UI development and programming.

“What happens in a traditional organizational hierarchy structure is that most people play a lot of different roles but those roles aren’t defined,” Zappos executive Fred Mossler told Vox’s Gregory Ferenstein. “Holacracy forces you to define the work that you do and it forces you to define your roles and accountabilities.”

Viewed another way, a developer could find herself working in circles tasked with building the website, hiring a resource, planning a marketing campaign and implementing a new billing system. Her job would be based on things that need to be accomplished, rather than a description limited by a single department’s scope. Each circle has a leader—a “lead link,” in holacracy parlance—who recruits specific people to fill each role. In finding people, he’s governed by the need to identify people with the necessary skills, not simply pick those with the right job description or who happen to reside in a particular space on the org chart.

Trusting the Team

A basic tenet of holacracy is that each employee is trying to do a good job. Lead links can’t fire someone, but they can remove an individual from a role if they’re not performing. The overall rules of the game are laid out in a constitution-like document that the CEO and board agree to, so everyone knows where authority lies. But the idea is to push more authority down into the circles, thus allowing the company to move quickly and nimbly.

Of course, it remains to be seen whether holacracy becomes a real trend or is just another organizational flavor-of-the-month. Zappos has committed to implementing it company-wide by the end of this year: a real commitment by a billion-dollar company. And holacracy rides on a 20-year trend of studies showing that the use of teams over top-down management structures is on the rise.

“Especially in today’s world, where everything is changing much faster than it was 10 years ago, I think flexibility and adaptability is what’s actually going to be the competitive advantage. And holacracy allows for faster flexibility and adaptability,” Hsieh told Ferenstein.

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