Can Management Principles from Zappos’ Holacracy Teach Nonprofits?

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December 30, 2013; Quartz

For anyone who is a fan of participatory management, chaotic thinking, etc., this new experiment in the corporate sector will seem like another step in what has been a twenty-five year journey to replace the industrial model hierarchy with something more suited to the twenty-first century workplace. We’d love to hear what you think about this.

Zappos, the online retail outlet, is notable from the outside for outstanding customer service that leaves the buyer with the sense of being listened to while at the same time being served with enormous efficiency. Now, CEO Tony Hsieh has plans to transform Zappos through implementing a “self-governing” operating system with no job titles and no managers.

The system is called a “holacracy” based on the Greek word holon—a whole that’s part of a greater whole. The “holarchy” will distribute power more evenly among the corporation’s 1500 employees, and organization will be done through 400 different circles in which employees can have any number of roles. All of this is aided by and aimed at producing “radical transparency,” and Hsieh believes that it will result in high adaptability, saying, “Darwin said that it’s not the fastest or strongest that survive. It’s the ones most adaptive to change.”

Hsieh is being helped in this venture by Brian Robertson from the management consultancy HolacracyOne. “Zappos’ focus on core values and culture has done a remarkably good job of getting around the limits of a conventional corporate structure,” says Robertson, “Leaders that already understand the limits of conventional structures are the ones that are attracted to holacracy.”  

“We’re classically trained to think of ‘work’ in the traditional paradigm,” says John Bunch, who, along with Alexis Gonzales-Black, is leading the transition to holacracy at Zappos. “One of the core principles is people taking personal accountability for their work. It’s not leaderless. There are certainly people who hold a bigger scope of purpose for the organization than others. What it does do is distribute leadership into each role. Everybody is expected to lead and be an entrepreneur in their own roles, and holacracy empowers them to do so.”   

John Bunch, who is working to help implement the change, says the system is “politics-free [and] quickly evolving to define and operate the purpose of the organization, responding to market and real-world conditions in real time. It’s creating a structure in which people have flexibility to pursue what they’re passionate about.”

Robertson says that “a high capacity to see the complex systems at play in their organizations,” can aid the success of holocracy. “It’s not linear or a matter of just following the logical argument; it’s seeing the cloud of interconnections and influences, beyond just cause and effect thinking.”—Ruth McCambridge

  • Michael Wyland

    I just returned from my first-ever trip to Las Vegas. While I was taking a tour, the guide pointed to a downtown building. She explained that it was the old city government building and had been purchased by Zappos as its new corporate headquarters. Further, the guide said that Hsieh has committed to spending $150 million in personal funds to revitalize downtown Las Vegas.

  • Michael Gold

    This is truly an evolutionary step for organizations and business. But when John Bunch says “the system is “politics-free [and] quickly evolving to define and operate the purpose of the organization, responding to market and real-world conditions in real time. . . ” that raises a question.

    How can any social system be politics free? There will always be tension, ambiguity and uncertainty in any social system and political response is deeply inbred into human nature.

    One way I’ve found to help people manage the Holocratic approach is to use the model of a jazz ensemble.
    There are roles in the jazz ensemble but leadership is decentralized and distributed. The reason it works is that jazz musicians spend 10000 hours learning the skills of improvisation.

    Tony Hseih is essentially trying to teach Zappos to improvise.


    Michael Gold, PhD

  • John Schinnerer

    Understandably for a news-bite article there are a lot of details missing regarding the system Zappos is experimenting with. Some of those details might help readers understand better how it works. A crucial piece of the system is the connection, or “linking,” between the circles of employees. The concept of “double-linking” between circles – which Holacracy borrows from the whole systems governance method known as sociocracy (a.k.a. dynamic governance) – provides the structurally integrated two-way flow of information between circles that is the organization’s feedback system. This feedback system is foundational for the adaptability and agility of the organization, and fundamentally different from the one-way flow typical of hierarchical-only business organizations (Holacracy also borrows sociocracy’s synthesis of hierarchical and non-hierarchical methods).
    Mr. Gold’s jazz metaphor is also quite well stated.

  • Melissa Ransdell

    While Holacracy isn’t for everyone, people working with or in nonprofits who have come to know the limitations and insufficiency of existing models of governance and operations will likely find value in learning more about it.

    I’m biased. I like Holacracy and feel that it has a lot to offer the nonprofit sector, particularly in becoming more nimble, innovative, and effective in addressing the tensions around sustainability, leadership, and other emerging issue of our times. I’ve been a student and practitioner of Holacracy for three years and am currently helping an association of leaders from nonprofits and government agencies adopt it as their operating system.

    To be clear, Holacracy requires an investment of time for understanding and implementation. At first we’re looking at it through an old and irrelevant frame and, quoting a recent tweet from the developers, “initial questions are akin to ‘how often do you have to change the oil in your cat?’”

    A few of Holacracy’s features include: 1) Aligns all activity around organizational purpose (a natural fit for nonprofits, also ensures no mission drift) 2) Distributes leadership (addressing founders syndrome, reducing dependence on specific people in leadership roles and opens opportunity for staff growth) 3) Clear roles and expectations for all (engages board, eliminates staff board communication issues and frustration) 4) Highly effective meetings (less time on and in meetings, board members appreciate efficiency and ability to contribute unique perspective and expertise) 5) Highly effective decision making process (strong voices and egos don’t dominate, inclusive yet not consensus).

    Finally, while the recent headlines on Zappos’ adoption of Holacracy are intriguing, (“Zappos to Ditch Job Titles, Bosses, for Self-Managed Teams” and “Wish you could get rid of your office management? Zappos is doing it”) the assumptions they trigger are typically not true. In Holacracy job titles are actually replaced by role titles. Each staff member typically has multiple roles, each with explicit accountabilities. Though the traditional hierarchical structure goes away, it is replaced with a highly structured and ordered process.