Management Issue in Zappos

This report discusses the management issue in Zappos, focusing on the inefficacy of the holacracy structure and providing recommendations for the future of the organization.

Running head: MANAGEMENT ISSUE IN ZAPPOS
Management Issue in Zappos
Name of the student
Name of the University
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Executive Summary
The primary purpose of this report is to elaborate on the company background of Zappos and
the holacracy structure prevalent in Zappos. The report also discusses about the inefficacy of
the holacracy system within Zappos and the recommendations for the future of the
organization.

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Table of Contents
Introduction................................................................................................................................3
Organizational Background and Holacracy Structure................................................................3
Outcome of implementation of Holacracy in Zappos................................................................5
Recommendations for future of Zappos.....................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

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Introduction
Management refers to administration and the activities that helps in setting strategy
within an organization. It helps in co-ordination of efforts of employees that helps in
accomplishing the objectives by the utilisation of resources. It makes use of various kinds of
resources that includes the financial, technological along with the human resources. It helps
in organizing and forecasting the major processes in an organization. The aspect of
management helps in the identification of mission along with the objective of an
organization. Zappos is the name of online shoe along with the clothing retailer that is based
within Las Vegas (Zappos.com. ,2019). Zappos wants to provide the best service to the
customers that can help in increasing the popularity of the retail store within the market. This
report discusses about the contemporary issues that are faced by the managers in various
levels of the organization in Zappos. This report deals with the holacracy structure prevalent
in Zappos and its effect on the organization. The report also states the recommendations that
can help the company in dealing with the issue in the future.
Organizational Background and Holacracy Structure
The company Zappos was founded in the year 1999 by that of Nick Swinmurn who
was inspired on account of the fact that he could not find the pair of the brown Airwalks in
the local mall. Swinmurn was instrumental in approaching Tony Hsieh along with Alfred Lin
so that he could sell the shoes in the online platform. Initially Hsieh was sceptical and he
deleted the voice mail of Swinmurn. Swinmurn mentioned the fact that the footwear within
US has become a 40 billion dollar market. It has been found that 5 % is sold with the help of
the paper mail order catalogues. Hsieh along with Lin wanted to invest around $ 2 million by
taking recourse to the investment firm called Venture Frogs (Time.com., 2019). In the month
of July in the year 1999, name of the company was changed from that of Shoesite to that of
Zappos. In the year 2000, Venture Capital was instrumental in investing capital into the

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business that helped Zappos in moving into the office space. In the year 2001, Hsieh came
into the board as the co-CEO with the Nick Swinmurn (Zapposinsights.com., 2019).
The management style of called Holacracy rejects the traditional workplace
hierarchy along with the job titles. Holacracy rejects the norms along with the staples
pertaining to the traditional workplace. Zappos is losing the employees owing to the
unorthodox style of the management that was implemented in the organization. The new style
of the management caused fourteen percent of the employees of Zappos to leave the
organization. During initial round of the buyouts, a large number of employees left the
company (Eremina & Puhakka, 2017). It was found that more employees were leaving the
company at the time of second buyout process. The implementation of the Holacracy
structure in Zappos caused confusion in the company that compelled many people to leave
the company. It was found that 50 employees wanted to accept second buyout deal. There
were around 260 people who left the company that caused loss of the resources for the
company.
The company has struggled with the implementation of the holacracy structure. The
removal of the basic organizational tenant can prove to be more harmful for the company.
The implementing of the holacracy structure in a mature organization acted as a challenge for
Zappos. There were past attempts for democratising the aspect of the decision making that
have not been successful in the company. The CEO of Zappos called Tony Hsieh has
acknowledged the fact that taking recourse to Holacracy acts as an obstacle in the path of
management of the company (Forbes.com., 2019). The new style of the management
necessitated the need of the self-management on the part of the employees of the company.
The employees of Zappos knows the expectation that the management has from them and this
can help in improving the state of affairs in a company. The idea of the self-management can
help in utilization of the potential of the employees of an organization. The pre-defined set of

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the rules along with the process of Zappos has helped the employees in utilizing their creative
manner. Zappos focuses on the aspect of the delivering of the customer service. The
employees knowing about the needs of the customer can play an important role in an
organization achieving excellence. It can help the employees in responding to the feedback of
the customer. The tool of Holacracy can help the employees in acting on the basis of the
feedback that can pave the path for growth of organization (Golden, Pandey & O’Rourke,
2017).
The element of holacracy helps in laying emphasis on the people of an organization
that creates the way for the development of an organization. It helps in laying stress on the
aspect of culture along with the people that can help an organization in deriving the benefits.
Holacracy helps in the creation of less layers in between the employees and the customers. It
can help in bringing forth the creative decisions in the employees that can help in improving
the aspect of the customer satisfaction (Kurt, 2019). The employees in Zappos have the
authority of the making the vital decisions that can bring about positive effects in an
organization. It can help in empowering the employees of an organization that can provide
them with encouragement (Gouveia, 2016). It helps the employees in understanding about
the functioning of an organization that helps them in utilizing their full potential in an
organization. It can help in making clear the goals of the employees of an organization that
can help them in working in an effective manner. It can help in making clear the rules along
with the guidelines that can work to the benefit of the employees of a company (Velinov,
Vassilev & Denisov, 2018). It can be of help in the arena of communication that can help in
fulfilling the purpose of a company.
Outcome of implementation of Holacracy in Zappos
The culture that a company has can play an important role in the success or the
failure of a company. A large number of the employees could not adjust themselves with the

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new management style and they had to leave the organization. The bringing in of the concept
of the holacracy has paved the path for the elimination of the managers in the organization. It
has paved the path for destroying the voices of dissent of the employees of Zappos that has
devastating results on Zappos. The remaining people who were still working in the company
could not speak about their problems that has a bad effect on the employees of an
organization. It has acted like a hindrance in the path of development of the organization. The
holacracy structure has eliminated the aspect of the management but there were still leaders
who could not contribute themselves positively to the company. The aspect of the promotions
becomes meaningless in the case of the holacracy structure that has bad effects on an
organization. The achievements of the person were not acknowledged in Zappos that caused
the employees to suffer the losses (Workforce.com., 2019). The employees could not success
ad they did not feel motivated within the organization. Zappos got rid of the aspect of the
performance reviews that had bad effect on the overall performance of the company. The
badge system was brought in within the framework of the organization. The traditional
relationship that existed between the employers and the employees were destroyed in the new
kind of organizational culture that had bad effects on the organization. It has been found that
the people in an organization feel motivated in the event of getting the opportunity of leading
that can help an organization in getting the rewards.
The holacracy structure took away the opportunities pertaining to the traditional
promotions that gave rise to the management issues in Zappos. The traditional positions were
replaced with the vague positions that caused the organization to suffer the losses. The
element of the holacracy provided employees with ability of working in different kinds of
areas. It helped the employees in the exploration of various areas of the interest that was
beyond their job description. It helped in increasing the aspect of the autonomy in the
organization however it proved to be detrimental for the bottom line of the organization. The

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human element is lost completely in the case of the holacracy structure that had devastating
consequences on the fate of Zappos. The employees felt unsettled regarding holacracy that
made the company to suffer damaging impacts. The employees were uncomfortable with that
of the new company structure that had bad effect on the annual results of the company. The
system of the “badging” along with the “people points” that were taken recourse to in the
organization did not work well for the company that severely damaged the reputation of the
company (Cnbc.com., 2019). The unallocated people in the company had to find the new
roles that made the company instable in the present environment. Elimination of that of
“human element” led to resentment within Zappos that dealt a heavy blow on the company.
The employees were dissatisfied with the holacracy culture that caused a third of the
employees of the company to walk out of the doors (Davis & Gilson, 2017).
The human relations theory talks about the fact that providing attention on the
employees can be instrumental in improving the performance of the employees. This theory
states that the employees in the organization being able to voice their grievances can help the
employees in exercising their freedom. The collaboration can help in bringing about positive
results for the employees of an organization. The holacracy structure in Zappos went against
human relations theory that proved to be disastrous for the organization. The employees were
becoming obsessed with the aspect of the process that resulted into causing irreparable
damage for the company. The tasks in the organization were not delegated to the right people
that brought about negative results for the organization. It was affecting the efficiency of the
performance of employees of Zappos. The average employees in Zappos were overworked
that affected the performance of employees. The employees in Zappos were undertrained that
had adverse effects on the organization. The employees of Zappos felt that they were part of
the code and were operating within the algorithm that had disturbing results for the
organization (Baumgartner & Rauter, 2017). The employees under the holacracy system in

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Zappos did not feel themselves to be more powerful however they felt confined under the
new kind of the organizational structure. The new kind o system in Zappos took away the
aspect of the natural authenticity that took away the feeling of the liveliness of the employees
of an organization. The holacracy structure in Zappos brought about the confluence of the
human aspect with that of technology in the organization. It created problem within the
organization that hampered the progression of the organization.
The people in the case of the holacracy system became the numbers and algorithms
became rules that affected the efficacy of the organization. It created vulnerability within that
of the organizational structure that was detrimental for the overall growth of organization
(Morden, 2016). It prevented the organization from working in a flexible manner that
prevented the organization from its working. The employees are not happy with the holacracy
culture as it gave rise to misunderstandings within the framework of the organization. The
decisions were made in an autocratic manner in the organization that heavily hurt the aspect
of the profit that was made by the organization (Bernstein et al., 2016). The roles along with
the responsibilities of the employees of Zappos were stored within the software that made it
difficult for the employees of the organization to use it. The organization had to face
challenge on account of the fact that everything was not updated in the organization that was
hurting the organization. It gave rise to tension among the employees of Zappos.
Recommendations for future of Zappos
 Zappos can apply the principle of the specialization that can help in improving the
operations of an organization. The persons in Zappos should be assigned specific
functions that can help in the development of the organization (Robertson, 2015).
Specialized operations implemented in the company can create the way for the
increase in efficiency of performance of employees. The area of the specialization

9MANAGEMENT ISSUE IN ZAPPOS
should be inter-related to that of total integrated system by co-ordinating the work of
different activities of departments.
 The organization should work on the basis of the flexible guidelines that can help in
the growth of the organization. It can help the organization in adjusting itself to the
changing conditions. There should be simplicity in all the avenues of the organization
that can Zappos in getting rid of the organizational problems. There should be
participative decision making in the organization that can help Zappos in achieving its
aims. It can help in the stimulation of the aspect of the creativity that can help in the
optimization of all kinds of resources within the organization. It can help the
organization in realizing the aims that can help it in functioning effectively within the
competitive environment.
Conclusion
Management is indicative of the activities that can be instrumental for setting the
strategy in an organization. It can co-ordinate efforts of employees which can help an
organization for achieving objectives. Zappos could not cope well by implementing holacracy
structure. The organizational tenants were removed in the case of the holacracy structure that
proved to be damaging for the company. Zappos was a mature organization and it could not
implement well the holacracy system. The employees were concerned about the process that
caused damage to Zappos. Tasks within Zappos were not allocated to the right people that
brought about adverse effects for organization. It was having a detrimental effect on
performance of employees within Zappos. The employees were deprived of the power that
made them feel confined within the organizational structure. The new system deprived the
employees of the aspect of natural authenticity that took away liveliness of employees.
Zappos can make use of principle of specialization which can be instrumental in improving of

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operations in the company. The people in the company should be provided with the specific
functions which can develop organization.

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References
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Production, 140, 81-92.
Bernstein, E., Bunch, J., Canner, N., & Lee, M. (2016). Beyond the holacracy hype. Harvard
business review, 94(7), 8.
Cnbc.com. (2019). Zappos CEO Tony Hsieh on getting rid of managers: What I wish I’d
done differently. Retrieved from https://www.cnbc.com/2016/09/13/zappos-ceo-
tony-hsieh-the-thing-i-regret-about-getting-rid-of-managers.html
Davis, W. D., & Gilson, L. L. (2017). Connecting the dots: Integrating diverse theoretical
perspectives to understand emerging management issues.
Eremina, A., & Puhakka, V. (2017). Comparison of Organizational Structures–Case
Zappos. International Business Management.
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and-holacracy/
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Retrieved from https://www.zappos.com/
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