The New ZOMM (Zappos Organizational Management Model)

What Might It Mean for Their Employees? What Might It Mean for Their Customers?

Actually, the organizational management model recently announced by Zappos should more accurately be labeled “Non-Management”.  It’s a system called Holacracy, specifically designed to yield a less hierarchical, supervisor-free structure.  Designed by a consultant named Brian Robertson, a former software company founder, it eliminates formal job and function titles, supervisors and managers, and traditional enterprise levels.  What the holacracy organizational model features is a series of overlapping ‘circles’, where employees are likely to have several different roles.  This is reflected in the system’s ancient Greek root, the word ‘holon’, which means an entity that’s part of a greater whole.  A little abstract, perhaps, but you get the idea.

Why was holacracy adopted at Zappos?  Well, to begin, CEO Tony Hsieh has a history of, and is on record as, disliking traditional organizational models, feeling that they are restrictive to both efficiency and individual interaction.  So, with holacracy, a key objective will be to increase the level of accountability and involvement, where each employee is responsible to all co-workers rather than a single supervisor or manager.  Instead, there will be individuals known as ‘lead links’, who can assign employees to roles, or remove them, but do not actually tell people what to do. Decisions about role responsibilities and how teams function are made by a ‘governing process’ by people in each circle.  As noted by a Zappos senior executive, the model will also have leaders who “hold a bigger scope of purpose for the company”, likely meaning that there will be individuals who have broader functional management roles.

Sound complicated?  A core precept of holacracy is to enable the emergence of leaders who will take charge, rather than build leadership and promote from traditional management hierarchies.  Academics who’ve investigated holacracy believe that, potentially, the model can remove internal competition and politics, and create situations where clear decision authority is identified.  Zappos has had 10% of its employees on the new system for about eight months, and executives anticipate that the remainder of staff will transition by the end of 2014, with another six months for everyone to understand, and adjust to, its complexities.

Management approaches have been studied, and applied within all types of enterprise, for hundreds of years.  Holacracy is the latest organizational model, the most current response to changing societies, forms of communication and daily life, and economies; but, it’s more of an iterative, or evolutionary, change rather than a revolutionary one.  Before holacracy came matrix and lattice models.

Matrix organizations divide authority by functional area and/or by project.  It has a traditional hierarchy in that each employee is responsible to two supervisors, one functional, such as marketing or IT, and one project-based.  Companies have identified several operational and internal relationship advantages to matrix structures:

• Resource coordination – supervisors can focus on their areas of expertise (functional supervisors focus on hiring, training, and managing; project supervisors can focus on meeting the objectives of their projects or products)
• Specialization – employees can focus on a particular field or skill, instead of performing a variety of tasks with an array of responsibilities
• Communication – matrix models enables constant contact with members of different functional areas, also facilitating more fluid resource movement and collaboration
• Flexibility – the matrix structure allows human resources to be shared more flexibly across different projects or products

Matrix models do have their limitations and challenges, however.  For example, if an individual employee reports to two departments, there can be balancing conflicts in his/her duties.

Then we come to lattice, or team-based, flat organizational models, rather famously represented by companies like W. L. Gore, the makers of Gore-Tex fabrics.  The company is my paradigm for the extraordinary results that collaboration and hands-on innovation can yield. . Founder Bill Gore, almost singlehandedly, built on the Douglas McGregor thesis of basic humanity, and human interaction, to create a ‘lattice’ management style when he left duPont to form his own company in the late 1950’s.  Simply stated, lattice organizational models bring new employees into the organization for general work areas.  These areas have sponsors, and employees commit to projects that match their skills.  And, as stated on the Gore web site:  “All of this takes place in an environment that combines freedom with cooperation and autonomy with synergy”; and everyone can earn the credibility, with guidance by sponsors, to define and drive projects.  Note:  On the downside, it has been noted that there can be difficulty with compensation and rewards according to employee qualifications, standards, and levels of expertise.

Overall, Gore’s team-based approach to commitment and achievement has been well-documented, and many high-tech companies have sought to emulate both the culture and its results. Having seen the lattice model function first-hand, and studied it over the years, I can attest to its uniqueness and effectiveness. Management scientist Gary Hamel has chronicled Gore’s approach and achievements pretty well.

So, what might the holacracy model mean to Zappos’ employees and customers?  In theory at least, replacing traditional corporate hierarchy with the self-governing ‘circles’ approach gives employees more of a voice in how the company is run.  Currently at 1,500 people and growing, executives believe that this move will help keep the company from becoming too bureaucratic and too rigid. Since the theory has never been executed on a company of this size, holacracy is more theory than practice and results.

While the system removes traditional management layers, Zappos has stated that there is still structure, enabling individual employees’ and circles’ work to be observed and evaluated.  Organizational scientists have noted; however, that there are risks involved with holacracy.  For instance, it is often challenging for existing managers to give up control; and, likewise, it can be difficult for junior employees to see themselves as equal to people who were formerly their bosses.  In addition, there is a body of organizational structure research which has found that a) employees prefer the structure of traditional hierarchies and b) defined hierarchies enhance productivity, especially where cooperation is required.

If the holacracy model doesn’t work as forecast by Zappos executives, there is real potential for chaos.  The organization is so strongly focused on customer-centricity and loyalty that there is also the potential for negative trickledown to customers, with diminished experience and overall value delivery.  In 1150, St. Bernard of Clairvaux coined the saying “The road to Hell is paved with good intentions.”  Let’s hope Zappos employees and customers see more positive results from the application of holacracy.

If this subject interests you, why not attend my next webinar, ‘Successfully Building Employee Ambassadorship Into Your Company’s Customer Centricity Initiatives’? Click here.

My new training course for 2014, ‘Linking Employee Engagement & Customer Experience to Employee Ambassadorship’, which you may also find useful to your professional development, is now open for new registrations. Click here to find out more.