The fatal flaw of a company without bosses

Everything you need to know, in four paragraphs

(Image credit: Ruaridh Stewart/ZUMA Press/Corbis)

Everything you need to know, in four paragraphs:

Zappos is in the midst of "a peculiar experiment," said Alison Griswold at Slate. For the past year and a half, the Las Vegas–based online shoe and clothing retailer has embraced the "radical notion" that employees function better without managers. CEO Tony Hsieh has abolished job titles and management positions, implementing in their place a structure called holacracy, with self-governing teams of employees organized in "circles." In theory, a world without bosses "has a certain appeal," but it appears Hsieh's movement "has stumbled in practice." Eager to speed the transition to full holacracy across the company by April 30, Hsieh recently offered skeptical or dissatisfied employees three months' pay to quit if they weren't on board. In the space of a few weeks, 210 employees — 14 percent of the company — took him up on the offer and walked out the door.

It's unsurprising that holacracy "feels weird to most newcomers," said Adam Pisoni at Fast Company. It's a stark departure from the top-down "command and control" operating model that has dominated business for more than a century, but it's far better if you want to create a nimble, adaptive company that encourages experimentation and transparency. A company becomes less of a dictatorship and more of a democracy. And far from encouraging chaos, holacracy "relies on rules and process." Circles "can be created or destroyed anytime" to focus on new challenges and opportunities, and titles and rank are de-emphasized in favor of "roles" that can be adjusted or reassigned without bruising egos.

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It's easy to see why unconventional Silicon Valley startups might be attracted by the arrangement, said Jena McGregor at The Washington Post. But for every devotee, it seems there's also a frustrated critic calling the structure "impersonal, dogmatic, and comically hard to explain," with "protocol-driven meetings" and jargon that makes typical corporate lingo "sound like poetry." I, for one, don't understand why Hsieh wanted to transition Zappos to self-management in the first place, said Dan Pontefract at Forbes​. The online retailer is famous for its quirky, happy culture, but clearly "there is something amiss, if not awry" when a company can so quickly lose 14 percent of its workforce. With no obvious business rationale behind this transition, Zappos could destroy what it has built if this is just "change for the sake of change."

"The fact that a chief executive has to order a change to a system with no chief executive is only one of the apparent contradictions here," said Andrew Hill at Financial Times. "But while I am skeptical" of Zappos' move, I'm the first to admit holacracy could offer traditional corporations some tips. Recognizing team members for their contributions, not their titles, for example, "is compelling." Research has also shown that "shared leadership" among executives does indeed "improve creativity and performance." But Zappos' exceedingly fast transition leaves much to be desired. And if it creates "further pain and confusion," the "shouts of ‘I told you so' will almost certainly drown out the voices" that say Hsieh is on to something special.

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