Zappo’s Holacracy Backfires as More than 200 Quit

Zappos Holocracy

“I am managing the work, but before I was managing the worker,” explained 26-year-old Zappos employee Brironni Alex, who was one of the many employees who made the transition from manager back to employee in the company’s recent restructuring.

What is Zappos’ Holacracy? Zappos Inc. has recently adopted a management philosophy called Holacracy, which removed management entirely and relies on employees to decide how to get work done.

It’s a revolutionary idea – and has some strong potential – but it has definitely ruffled feathers at the company. Ex-managers have not been guaranteed another job, and they could have their pay significantly cut in the next year (according to rumors – Zappos has declared that is unlikely).

Zappos also recently announced that 210 (roughly 14% of their 1500 employees) have decided to leave due to Holacracy. They were offered at least three months of severance pay as compensation. In a 4,700 word memo in March, Zappos Chief Executive Tony Hsieh that the company hadn’t made “fast enough progress towards self-management” and that, as a result, the buyouts were being made in order to “rip the Band-Aid.”

What about those who are staying at Zappos? As for those employees who are staying with Holacracy, they are facing the time consuming process of making a transition into new territories. There have been reports that the new system is confusing and time-consuming, especially as it is being implemented. It sometimes requires up to five extra hours of work per week for employees to meet with one another in “circles” to discuss and learn the vocabulary of the new non-management system.

The philosophy of Holacracy is outlined in a 30-page Constitution. For example, jobs are called “energizing a role” and workplace concerns are “tensions.” And many employees have tensions to share. Insiders wonder how they will receive pay raises and advance careers with no management track in place. In addition, the system is complicated and can feel like it flies in the face of one of their ten core values “Create Fun and a Little Weirdness.”

For now, CEO Hsieh admits that although the system takes time and has trial and error, he still has faith that it creates entrepreneurs in the workplace.


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