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Holacracy at Zappos: "It's not anarchy," co-founder says

Aaron Task
Editor in Chief

Zappos made headlines recently amid the fallout from its decision to adopt Holacracy, "a system that removes traditional managerial hierarchies allowing employees to self-organize to complete work in a way that increases productivity, fosters innovation and empowers anyone in the company with the ability to make decisions that push the company forward," according to a memo from founder Tony Hsieh.

In other words, no bosses with underlings waiting for marching orders, but a decentralized system where everyone's role is defined around the work they're doing at that moment vs. their title.

Zappos adopted Holacracy in 2013 and earlier this year Hsieh decided to "rip [off] the band aid" and accelerate the process toward self-management by offering at least three-months of severance to any employee who decided the system wasn't for them. About 14% of Zappos employees took the buyout as of a month ago, leading The Wall Street Journal to declare that Holacracy had brought "confusion" to the Amazon.com subsidiary.



"The other side of that story is that 86% [of employees] turned down a lot of money to stay and be part of a major change in the corporate structure," says HolacracyOne co-founder Brian Robertson, who is "generally regarded as the primary developer of the system" and a "recovering CEO," according to HolacracyOne's Web site.

In the accompanying video,  Robertson counters what he claims is "a little sensationalized" coverage about what's happening at Zappos.

"I don’t think it’s all that much more radical than any major restructuring," Robertson says of the events at Zappos. "I think you can expect to lose low double digits percentage-wise over the course of a year or two after any major restructuring. What Zappos did that I thought was so clever was offering a really sizable buyout for anyone who wanted to leave. They front-ended all that change... they got everybody to happily leave who wasn’t completely sure they wanted to be there."



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About 300 firms had adopted Holacracy in the past decade, according to The Journal, including blog-publishing platform Medium, which is led by Twitter co-founder Ev Williams, and The David Allen Co., a consulting firm. W. L. Gore & Associates, which makes Gore-Tex, has used a flat management structure since its founding that predates the holacracy method. 

"Holacracy is not without structure... it's not anarchy," Robertson explains, suggesting most businesses are still operating with models built for the industrial vs. the information age.   

"There been massive changes in the world, and yet our approach to management has not kept up," he says. "So whether it’s Holacracy or something else I think we need new ways of organizing that are more responsive, more agile [and] more adaptive to change."

It's hard to argue with that given the accelerating pace of change in the world around us. But what do you think? Holacracy sounds good in theory but can it stand the test of time in the "real" world?



Aaron Task is Editor-at-Large of Yahoo Finance. You can follow him on Twitter at @aarontask or email him at atask@yahoo-inc.com.

CORRECTION: An earlier version of the article clamed W.L. Gore & Associates adopted holacracy. In fact, W. L. Gore & Associates does have a non-hierarchical, lattice structure, but it predates holacracy.