“Zappos just abolished bosses” – Baloney

“The latest management trend to sweep Silicon Valley requires CEOs to formally relinquish their authority and grants special protection for every employee to experiment with ideas. It’s called holacracy and big name tech leaders have jumped on the bandwagon,” proclaims Gregory Ferenstein in his post on Vox, July 11, 2014.

“Zappos CEO Tony Hsieh announced that he will transition his entire Las Vegas company ā€” with a billion dollars of revenue and 1500 workers ā€” to holacracy by the end of 2014.”

Holacracy is described as the latest management craze and it is just that – craziness. The problem with craziness is that a manager or CEO will read his article and naively follow a prescription that will cost hard dollars and create untold havoc. Following Ferenstein’s prescription could be fatal.

Holacracy is a weasel word. It attempts to use new (made up) terminology to mask a vague notion of contrived credibility.

“Holacracy is management by committee with an emphasis on experimentation. The CEO formally relinquishes authority to a constitution and re-organizes everyone into decentralized teams that choose their own roles roles and goals,” explains Ferenstein. Think about this. What is delegation? Delegation is the assignment of accountability and authority to complete a task. Delegation shifts the accountability and authority to a “decentralized” team that chooses to complete the task (or not).

And believe me. If the “decentralized” team chooses not to complete the task and adopts a six hour lunch break, some manager will step in and say “Guys and gals, that is not what we had in mind.”

If you read this column regularly, you know I am a structure guy focused on the research of Elliott Jaques. This notion of giving a team direction (an objective) and providing them latitude (time span of discretion), within limits, to solve a problem is not a new notion. Holacracy is baloney (weasel word).

Ferenstein would argue with the words “within limits.” He would argue that Hsieh would set those limits free. That will not be the case. Hsieh will define those limits (discretionary authority). Holacracy obscures what is really happening using words without meaning.

“Advocates for holacracy argue that centralization of power suffocates innovation.” Here is the biggest problem with Ferenstein’s description – most managers, CEOs and writers about management DO NOT UNDERSTAND the purpose for hierarchy. They believe that management is all about centralization of power. Hierarchy has little to do with power. Hierarchy has everything to do with accountability and authority.

So, is Tony Hseih misguided in his actions and decisions related to his management structure? No. What IS MISGUIDED is the understanding of what he is doing and its description as holacracy. Over my next few posts, we will look closer at what Tony is doing and see that it is nothing new. And if Tony understood his decisions more clearly, in the context that I will describe, those decisions would be more effective in creating his image of an organization.

The purpose of an organization is not to broker power, but to get work done. I know that is what Tony wants to do. The question is, what does that structure look like? It ain’t holacracy.

4 thoughts on ““Zappos just abolished bosses” – Baloney

  1. Michael Cardus

    Glad you are writing about this. I have already heard in the Organization Development world consultants developing Holocracy design workshops. Zapps has a good thing going and the CEO is open to experiment. The company will fall into what works. Looking forward to reading the future posts.

  2. Bernard McGillivray

    Holacracy is a misguided attempt to establish a proper organization by those who don’t understand how an organization should be structured or what it’s real purpose is. It does mean that people continue to be dissatisfied with the status quo and are trying to establish something better. But there is an unbelievable amount of lack of understanding about proper organization structure and proper management (role and practice) that folks are trying to address, with, in this case more gobbledygook, management-speak and just plain ignorance of what can and ought to be. I notice that the CEO role will continue to exist, which means that someone still thinks that a person in a role is still needed at the top of the organization. However, the rest of the Holacracy description (the constitution) is management confusion with new/different words and descriptions that will simply provide opportunity for consultants to further mess with organizations that are unable to get themselves sorted out. A sad day indeed.

  3. Chris Cowan

    Wow, I totally agree. You need clear decision-makers who have the power to make things happen without having to resort to politics or consensus. Of course, that is exactly what holacracy does, but most of the hype around it misses that point. My advice would be to attend a webinar or workshop on holacracy (and stop listening to people who write about it with zero direct experience…even the positive ones) and bring the full weight of your skepticism with you. I would love to address all of your criticisms point-by-point because they are legitimate issues. However, they are based on an article with some important inaccuracies, so most of what you’ve written (and are planning to write) is not actually about holacracy at all. Happy to discuss more (feel free to contact me).


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