Holacracy at Zappos: A Case Study

This assignment examines Zappos' adoption of the holacracy management system, analyzing its impact on the organization and employees. It explores the benefits, such as employee empowerment and autonomy, alongside potential challenges like initial employee attrition and the need for a disciplined governance process. The analysis draws upon various sources including academic journals and news articles to provide a comprehensive understanding of holacracy at Zappos.

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Strategic change
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Introduction:
Zappos is an online clothing and shopping shop that is based in Las Vegas that has
recently changed its organizational structure by embracing framework of holacracy. Adoption of
this radical approach of management by this online retailer has stimulated a debate. Zappo’s has
unconventional culture and it is known for its noteworthy business achievements. The traditional
top down hierarchy is replaced by some new approach to management. Zappos has always been
standing out for this particular unconventional resource policy. A new management structure has
been promoted by organization that encourages collaboration by eradication of hierarchy at
workplace. Stimulating debate has been generated in business case due to decision of Zappos to
change its structure of organization by embracing holacracy. Organization is well known for
unconventional culture and remarkable business achievements. This will lead to revision of
operating system that will redistribute power among workforce and reset job roles.
It is perceived that such transition done by Zappos would increase the
competitiveness of organization and bring long-term benefits. Under this set up, decision making
and authority of management of Zappos are decentralized to self-managing units. Embracing of
holacracy would lead to scenario of equal distribution of leadership and accountability among
workforce. In the ever changing business environment, an ideal response of organization is
holacracy (Gouveia 2016). Holacratic model comes with several advantages along with some
inevitable challenges. It is inevitable for organizations to transform to flatter structure as a
natural advantage is provided to employees with implementation of such model who are being
concerned of broader of picture (Pisoni 2015). However, the result of such model has not been

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anticipated by company. For several years, Zappos has been following a management trend of
flattening hierarchies at workplace.
Discussion:
An organization that does not vest in the management strategy rather it distributes
decision-making and hierarchy through a holacracy of self-organizing team. Zappos is able to
control their activities in a new way by distributing power using holacracy that is a
comprehensive practice for governing and running organization (Batra 2016). One of the key
innovation of holacracy is to employer employees as there are no mangers and CEO leading to
creation of empowering environment. Employees have been ambiguously perceiving the self-
management concept of holacracy and this has led to adoption of holacracy by Zappos. One of
the core reasons for creating holacratic system of structure and governance. Employees working
in Zappos are capable of choosing one or several roles within organization and employees are
provided with the opportunity of decision making under this model (Gouveia 2016). The ability
of organization to grow due to such implementation is perceived well by employees. However, it
is reviewed by some research that authority equal distribution at the transformation of structure
to holacratic is leading to confusion and disorder among employees of Zappos. Further
successful development of holacratic structure is being believed by company, while existing
employees trying to get adopted to this new system (Gouveia 2016). Zappos is benefitted from
adoption of such decentralized system as per review of former and current employees are free
food, medical insurance, boosting of professional growth and entertainment activities. The
attitude of work life integration becomes a part of culture of Zappos due to embracing of
holacracy. Increased complexities resulting from expansion and acquisition in competitive

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environment sensed change in structure of organization of zappos (Robertson 2015). This change
is adopted in terms of embracing the holacracy model helps in managing the business in a way
that sought by each individual employees.
Literature review on Holacracy:
Concept of holacracy introduces an emerging way of distributing authority within Zappos
where superiors and leaders give their decision-making authority in the hand of employees (Van
De Kamp 2014).
There is no boss to contradict employees. Another key shift adopted by holacracy adds is
governance process to change things within functioning departments of Zappos. A disciplined
process adopted by Zappos helped in bringing process of change. Everyone working as a team
helps in bringing clarity. Autonomy of organization is protected as employees of able to take any
options that are required for the suitability of organization.
The process of decision making at Zappos is simplified by having a flat organizational
system mainly in the company advancement first stage. Adoption of holacratic self-management
system resulted in 18% loss of employees in first year of operation (Falcone 2017). This loss of
employees was seen as sacrifice made by organization to protect their assets. On other hand,
implementation of such model provides Zappos with empowered clear vision, celebration of
diversity and driving employee’s entrepreneur spirit. A software implemented by Holacracyone
was implemented by Zappos that resulted in division of authority and job facilitation within
organization. Every employee of organization can access employees.

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References
Batra, S., 2016. Do new ventures benefit from strategic change or persistence? A behavioral
perspective. Journal of Organizational Change Management, 29(2), pp.310-319.
Bernstein, E., Bunch, J., Canner, N. and Lee, M., 2016. Beyond the holacracy hype. Harvard
Business Review, 94(7/8), pp.38-49.
Business Insider. (2017). Inside Zappos CEO Tony Hsieh's radical management experiment that
prompted 14% of employees to quit. [online] Available at: http://www.businessinsider.in/Inside-
Zappos-CEO-Tony-Hsiehs-radical-management-experiment-that-prompted-14-of-employees-to-
quit/articleshow/47310297.cms [Accessed 8 Oct. 2017].
Falcone, A., 2017. Hierarchy-free forms of organization. Insights on the evolution and
application of different approaches.
Gouveia, L.B., 2016. Holacracy as an alternative to organisations governance.
Gouveia, L.B., 2016. Holacracy as an alternative to organisations governance.
Kim, Y., 2015. Holacracy: Myth or Truth?. Talent Management Monthly, 124, p.69.
Pisoni, A., 2015. Here's why you should care about holacracy. Fast Company.
Robinson, B.J., 2015. Holacracy: The new management system for a rapidly changing world.
Van De Kamp, P., 2014. Holacracy—A radical approach to organizational design. Elements of
the Software Development Process-Influences on Project Success and Failure. University of
Amsterdam, pp.13-26.

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