While not entirely new, management by Holacracy was thrown into the spotlight when Zappos adopted this contrarian management philosophy. In case you're unfamiliar with the term, Holacracy management philosophy is about eliminating the traditional role of the manager who oversees employees and instead relying on the employees themselves to decide how to get their day-to-day responsibilities completed.
According to a recent article in The Wall Street Journal, there are at least 300 firms who have adopted Holacracy in the past decade, and 80 percent are still embracing this management style after one year. According to the article's author, Rachel Emma Silverman, there are 5 things to know about having no boss:
Silverman explains that "Day-to-day routines [at Zappos] were thrown into doubt, too. In many companies, managers announce new projects and direct employees to meet specified deadlines. The bosses usually track performance, make crucial decisions, and swoop in if problems erupt. Holacracy-driven employees establish their own priorities and raise problems with the rest of their 'circle.' Meetings end with an opportunity for employee to say whatever is on their minds."
Zappos Chooses Disruption Over Complacency
Even after being bought by Amazon for $1.2 billion in 2009, Zappos negotiated its ability to operate as an autonomous subsidiary, thereby controlling its own culture, systems, and process, rather than adopting those of Amazon. Normally, when dramatic management overhauls like Holacracy occur, it's a sign that the business is struggling. But at Zappos, this doesn't appear to be the case. Why, then, should Zappos take this massive action, one that they themselves admit may take several years to be fully embraced, adopted, accepted, and optimized?
While Zappos' high purpose is to "Deliver Happiness," their culture includes "Create Fun and a Little Weirdness" as one of its 10 core values. Zappos has a reputation for doing things differently and embracing innovative approaches to getting work done. The traditional hierarchical structure at most companies often leads to power struggles, corporate politics, slower approval processes, and an excessive number of meetings. Conventional wisdom dictates that this hierarchical structure is necessary for individual employee accountability, management by objectives, and success measurement.
While 210, or 14 percent, of Zappos's 1,500 employees opted out of the new Holacracy philosophy, CEO Tony Hsieh told The Wall Street Journal, "Another way to look at it is that 86 percent of employees chose to walk away from the 'easy money' and stay with the company." Which implies that the bulk of the company is on board with the new direction and is embracing this management disruption in a desire to continue to grow and dominate in its space.
Benefit of Self-Disruption
What I take away from all of this is an important lesson for entrepreneurs: When you are most successful, it's important to never stop looking for ways to improve--even if that improvement requires short-term pain. In my previous article, "You Are Either Uber or You Are Being Ubered," I explored the idea that disruption is not about having the best idea or even thinking differently about a problem. It's about successfully implementing ideas inside your company that lead to new, scalable business models. Having a great idea is only one part of the equation. It's the act of delivering on a great idea that is truly disruptive. So don't just innovate--deliver on your vision and build a successful business model to ensure long-term viability.
This is why I have confidence that despite the spotlight and the arguably negative press Zappos is getting right now about their move to a Holacracy management philosophy, they will ultimately be successful. Tony Hsieh is a great leader who is unafraid of breaking current models that serve Zappos well in exchange for new models that have the potential for dramatic increases in efficiency and growth. To me, that's what it means to stay an entrepreneur, even after you have built a billion-dollar business. I'm truly glad that even after being acquired by Amazon, Tony Hsieh is still reinventing himself and his company, and that he embraces these opportunities for disruption that will likely lead to a new level of growth.