Tony Hsieh and Zappos can take much of the credit for bringing the concept of "holacracy" into the business mainstream. But as much hype as holacracy has received, it's only one of many self-management systems you can choose from, if your goal is empowering your employees (so they'll stop badgering you with every little question).
You can read about most of those systems in a seminal 2014 book called "Reinventing Organizations" by Frederic Laloux, a former McKinsey consultant. Hsieh himself had a Skype call with Laloux for advice before drafting his now-immortal 4,700-word email to Zappos employees in March, offering buyout terms to those who wanted no part of holacracy.
Laloux calls radically flat companies "teal" organizations because they take the idea of a socially conscious "green" company one step further to include self-managing principles and a holistic sense of purpose. According to Laloux, one of the biggest benefits of becoming a teal organization is that it puts the soul back into your company. Instead of leaving your spiritual and emotional self at the door when you show up for work in an attempt to achieve "work-life balance," you and your employees have a shared mission that transcends paychecks and promotions. The result? Happier employees who get more done. "We are at our most productive and joyful when all of who we are is energized by a broader purpose that nourishes our calling and our soul," Laloux writes.
All told, Laloux studied 12 teal organizations to research his book. One of his chapters explores the necessary conditions, as seen in those companies, to maintain a soulful company. Here are seven of those conditions:
1. Leaders must sincerely believe in the big idea.
Board members might give a teal leader free rein when her methods deliver bottom-line results. But when times get tough, directors and owners "will want to get things under control in the only way that makes sense to them--through top-down, hierarchical command and control mechanisms," Laloux warns.
Some experts in self-management believe this is an ongoing risk of Zappos' holacracy initiative. Zappos runs so autonomously that it's easy to forget Hsieh himself has a boss: Someone you may have heard of named Jeff Bezos, the founder and CEO of Amazon, which acquired Zappos for $1.2 billion in 2009.
"There's an uber manager who could wipe it out," explains John Buck, a consultant specializing in sociocracy, another self-management system under the teal umbrella. His point is this: How bossless can a system be if there exists on paper a leader with the power to banish the system? The answer depends on how autonomous Zappos really is--something only Hsieh and Bezos know.
2. Leaders must role-model humility and vulnerability.
At FAVI, a 500-employee foundry in France that makes parts for the auto industry, a leader named Jean-Francois Zobrist transitioned the company from a hierarchy to self-managed teams in the mid-1980s.
When car orders plummeted in 1990 in the wake of the First Gulf War, there was not enough work to keep employees busy. An easy cost-cutting solution would've been firing short-term workers. But Zobrist--in keeping with teal principles--believed doing so would renege on a moral commitment FABI had made to these temps.
Unsure what to do, Zobrist literally stood on a soapbox on the factory floor and shared the quandary with everyone working that particular shift--including the temps. The workers shouted questions and proposals at him. One worker suggested that everyone--temps and full-timers--work three weeks that month, instead of four. That way, the temps could stay, no one would lose a job, yet the company would cut payroll costs. Zobrist asked for a show of hands.
The support--for what amounted to a 25 percent pay cut--was unanimous. Problem solved, in under one hour. "Zobrist's ability to keep his fear in check paved the way for a radically more productive and empowering approach and showed that it is possible to confront employees with a harsh problem and let them self-organize their way out of it," Laloux writes.
3. Leaders must protect the sanctity of teal structures, when problems arise.
In the same way that an impatient board will revert to top-down traditionalism when adversity strikes, so too will long-term employees, customers, or suppliers. In these situations, leaders "must ensure that trust prevails and that traditional management practices don't creep in through the back door," Laloux writes. He describes this as the act of "holding the space" for teal principles.
4. Leaders must accept limitations on their power.
Today, Morning Star is a textbook teal organization. The hierarchy-crushing, red-tape smashing powers of its self-managing teams were immortalized in Gary Hamel's oft-cited Harvard Business Review piece, "First, Let's Fire All the Managers." Founder-owner Chris Rufer faces a daily reality not many in his shoes could stomach: "It is not proper for him to make any decisions that meaningfully affect other people on his own without consulting them," Laloux writes.
Rufer can accept these principles because they are the basis on which he founded the company in 1970. But if you're a founder-owner hoping to convert your organization to a teal system, you need to be comfortable without powers that would be yours in traditional structures.
5. Leaders must admit to mistakes.
At Buurtzorg, a 7,000-employee nonprofit providing nursing services in the Netherlands, founder Jos de Blok noticed that on certain teams, workloads were spread unevenly. "Some were paid significant overtime, while others did less than their contracted hours, a financially detrimental situation," writes Laloux.
So de Blok decreed on an internal blog that overtime would only be paid if the team as a whole worked more than their contracted hours. He had no right to do this, given the rules governing Buurtzorg's teams. And within hours, many employees let him know it by commenting on his post.
Rather than disregarding the comments, de Blok posted a new message, acknowledging he'd made a mistake. He suggested the creation of a new team to address the overtime issue. Within a few hours, the outrage over his authoritarian misstep disappeared. "The incident reaffirmed rather than undermined the advice process," Laloux writes.
6. Leaders must run all of their decisions through a filter of organizational purpose.
Laloux suggests that teal leaders ask themselves a simple question before making any significant decision: What decision will best serve the organization's purpose? Granted, you can be a purpose-driven company without being a teal organization. But if you are teal, then part of your purpose is the execution of a democratic decision-making process. So owners and leaders need to continually remind themselves: Neither their decisions--nor anyone else's--should feel like decrees.
7. Leaders must not look over the shoulders of their empowered employees.
Laloux describes how at AES, a 40,000-employee energy company in Arlington, Virginia, co-founder Dennis Bakke had the chance to watch what was going on at every power plant, thanks to a monitoring system the IT staff was exploring. Rather than embracing the chance to keep his eyes everywhere, Bakke asked the IT staff to ditch the system entirely.
Laloux cites this story as an example of a subtle self-management truth: You have to let your teams monitor their own performances. You undermine your trust of the team's ability to make important decisions, if the team knows you are watching.