The online shoe seller subscribes to a management culture called Holacracy, and if it’s not the right fit, employees have been offered buyouts to leave.
(Bloomberg Business)—DeVonTae Browne didn’t know anything about the management discipline of Holacracy before showing up at orientation for his new job in customer service at Zappos. “I wasn’t entirely sure what it meant,” he admits. Three weeks into the online shoe retailer’s monthlong on-boarding slog, Browne is a convert to the avant garde management strategy. “I’m pretty much buying whatever someone is selling, as far as Holacracy goes,” Browne says. “I’m definitely all-in.”
Holacracy replaces the traditional top-down office hierarchy with an alternative-org chart of circles within circles within circles. Employees no longer take job titles; instead they inhabit roles that create autonomy over their work. It’s not anarchy: A series of highly structured “governance” and “tactical” meetings help define who does what. More than 300 organizations have at least dabbled in Holacracy over the last decade, including part of the Washington State government and the company of productivity guru David Allen, but Zappos is the largest and most famous business to embrace the philosophy completely.
The transition over the last year and a half has by, many accounts, been rocky. Not everyone at the Amazon-owned shoe retailer shares Zappos CEO Tony Hsieh’s enthusiasm for giving up hard-earned positions on the corporate ladder. Many employees left rather than join the new order, urged along byseverance pay, equal to three months’ salary, available to anyone who didn’t feel at home in the system. 14% of the Zappos workforce took the deal, and even those who stuck around have expressed skepticism about what Holacracy means for their jobs. Hsieh has reportedly extended an even more attractive buyout, known as the SuperCloud Offer, to a smaller cohort of workers, who now have until the end of the year to make a decision.
More than 200 employees have tasted the life of Holocracy and opted out. But what about Zappos newcomers making the decision to opt in?
Orientation at Zappos has always been a weighty and time-consuming affair. The company originally designed a two-week indoctrination into its famously “fun” office culture that has since evolved to a four-week affair. After the first week, Zappos offers a buyout of one month’s salary to new employees who don’t feel the vibe. Anyone who shows up late for the daily 7 a.m. start is fired on the spot. New employees must pass a final exam by answering at least 90% of questions correctly—or they’re out of the job. The standard orientation includes mandatory two-week telephone training, even for jobs without a customer-service component. “The reason that we have such an intensive on-boarding program is it’s important that they understand the culture to understand their real jobs,” says Megan Petrini, a new-hire trainer at Zappos.
Holocracy education, which Zappos added to orientation this month, takes place over a three-day period grafted on to this already long process. The first official discussion of Holocracy, a three-hour lecture that comes in the second week of orientation, is almost certainly not the first time new hires will have heard about the philosophy. Words with holocratic significance—tension, circle, lead link—permeate orientation from day one, and allusions start as early as the job interview.
Hayden Balow first heard about Holacracy while interviewing for the job as a people operations analyst—Zappos-speak for human resources. “I heard mixed reactions,” he recalls. “Certain people were excited about it, and other people were more hesitant. I wasn’t really surprised, but I was excited to learn about it.” In the end, he says, Balow felt drawn to the distinctive office culture when he was deciding to accept the job offer.
Holocracy class serves as an introduction to a complex system with strict rules and a bizarre lexicon. People often come in with “misconceptions” that cause “confusion,” says Jake McCrea, who teaches the introductory class. “Some people are weirded out,” adds Petrini.
The class highlights benefits such as less emphasis on authority and a focus on giving everyone the power to make changes. “Our unique way of doing things will empower you in ways you’ve never dreamed possible,” reads one orientation handout. After a quick history of hierarchy, McCrea introduces the basic concepts of Holacracy: tension processing, tactical meetings, and governance meetings, circles, and roles. A Zappos-made video simulation shows these meetings in action. The class ends with a quiz and a question-and-answer period.
The newly indoctrinated tend to leave with mixed feelings. “There are some people who are very confused, but they’re excited and they’re optimistic about it,” says McCrea. “There are some people who aren’t so optimistic and they’re skeptics.”
Browne, the 24-year-old customer service hire, falls into the excited and optimistic category. “I think it’s a great and wonderful idea,” he says. “I’ve worked enough working jobs to where it was the corporate structure. You follow this person’s ideas and goals. I hated that.” Balow, the human resources hire, is hopeful, if a little wary of the learning curve. “I definitely wouldn’t be able to jump into a Holacracy meeting right away,” he says.
Zappos changed its orientation this month to address those kinds of lingering doubts. Before it added the three-day Holocracy class, new employees would go directly into real meetings without first practicing. It led to a lot of confusion. “Holacracy is like a sport or a new language,” says McCrea. “You can read about it, you can hear people tell you about it. You won’t understand it until you start using it.”
That ethos is at the center of Holacracy’s many training routines for practitioners. The Holacracy Way is to learn by doing, and a full organizational transition is a yearslong process. HolacracyOne, an umbrella group for the management philosophy, offers various training sessions for organizations, all of which cost money. When companies adopt the management system, for example, often a paid consultant from the HolacracyOne mothership leads a launch week, with a mixture of lectures and workshop-based learning.
Medium, the online-publishing startup led by Twitter co- founder Ev Williams, relied heavily on HolacracyOne for companywide training in 2012. Consultants came for a launch week and worked with Medium throughout the first few months of implementation. After three years under the system, employees within the organization have been designated Holacracy ambassadors and take the advanced courses offered by HolacracyOne. Medium, which isn’t growing at the pace of Zappos, also struggles with how to introduce new employees the complex system. At one point each rookie spent at least an hour with Jason Stirman, Medium’s in-house Holacracy guru, to learn the ways of autonomous work. Mostly, the new hires learn by observing and participating in meetings.