A Comprehensive Report on Management Challenges at Zappos: Case Study

This report presents a case study analysis of Zappos, examining the company's management challenges. It identifies key issues such as improper organizational culture, autocratic leadership, and the implementation of holacracy, which led to employee turnover. The study delves into various management theories, including contingency management, system management, and scientific management, to understand the root causes of these challenges. It highlights the impact of leadership practices and organizational design on employee engagement and sustainability. The report concludes with recommendations for addressing these management issues, emphasizing the need for training to improve organizational culture and leadership practices. The analysis also explores Zappos's shift towards self-management and its implications. It also touches upon the impact of globalization on management practices. Furthermore, the report highlights the importance of communication and work-life balance to foster employee satisfaction and long-term organizational growth.

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Name of the student
Name of the university
Author note

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Executive summary
In this study, it has been identified that in the competitive business environment reinforcing the
potential benefits to the customers, management practices have become necessary in terms of
ensuring the positive performance in the industry. Highlighting different management theories
such as contingency management theory, System management Theory , scientific management
theory the study has made the discussion on the root cause behind the challenges faced by the
company. Due to the improper management practices, the negative organizational culture can be
created which can drive the employee engagement as well as sustainability issues in the
workplace. Analyzing the challenges in Zappos, it has been identified that improper
organizational culture, autocratic leadership and improper implementation of holacracy
management design have created increasing numbers of employee turnover issues.

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Table of contents
Introduction......................................................................................................................................2
Key management challenges...........................................................................................................3
Case analysis....................................................................................................................................4
Recommendations............................................................................................................................8
Conclusion.....................................................................................................................................10
Reference list and bibliography.....................................................................................................10

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Introduction
Management operations are being considered as one of the complex practices in an organization
(Alvarez, Afuah & Gibson, 2018). In case of ensuring the efficiency as well as positive growth in
the workplace, the management practices are being introduced. In other words, it can be said that
due to increasing business opportunities as well as changing needs of the customers, the
management operations in an organization have also got influenced. In the words of Rosenberg
Hansen and Ferlie (2016), globalization has brought strong impact in case of driving the
independent business practices. On the other hand, it cannot be denied that in the competitive
business environment reinforcing the potential benefits to the customers, it has become necessary
in terms of ensuring the positive performance in the industry.
In the year 1999, Zappos was introduced in the market as a shoe retailer. The company aims to
share great experience with the customers through the introduction of quality products in the
market. By sharing the value as well as achievement stories with the customers, the company has
aimed to improve the living standard and ensures the community development. Therefore, it can
be said that in case of satisfying the needs of the community, the company aims to spread the
happiness. Due to traditional management policies, it becomes challenging for the company in
terms of satisfying its existing employees. Due to improper compensation structure as well as
lack of growth policy implementations, dissatisfaction among the employees gets increased.
Analyzing the leadership practices adopted by Zappos, it has been identified that the Autocratic
leadership practice are being followed in the company. In this case, few years back, 3 top level
managers in Zappos were terminated due to not following the commands of the CEO.

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The purpose of the study is to shed light on the key management challenges faced by Zappos.
Highlighting different management theories the study has made the discussion on the root cause
behind the challenges faced by the company. In the end of this study, measurable
recommendations have been provided that can play an effective role in case of dealing with the
emerging management issues faced by Zappos.
Key management challenges
In the emerging business scenario, increasing growth opportunities and larger market size have
influenced the complex management practices (McGrath & Bates, 2017). It is true the due to
changing business environment as well as technological innovation, acceptance of service and
products in the market has become challenging. In the changing socio economic situation, it has
become challenging for every organizations to maintain its management operations in right
manner. Therefore, in case of shaping the future history, the globalization influences the
empowerment and quality management concerns in the organizations. Mostly in the developed
countries, in the 19th century, globalization has introduced the independent management practices
have been introduced in the market.
In the current business scenario, lack of communication between the management and
employees has created one of the important key management challenges in different
organizations (Gassmann, Frankenberger & Sauer, 2016). With increasing growth opportunities
in the market, it has become challenging for the organizations to satisfy the needs of employees
and maintain the work life balance. In that case, dissatisfaction among the employees not only
influence the long term sustainability, but also it drives the negative impact on the growth
process.

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As stated by Mendling et al., (2018), Organizational culture has major impact in terms of
ensuring the positive organizational growth. Business expansion opportunities in the market has
brought opportunities for the global employees to get empowered. In case of diversified working
culture, conflicts among the employees creates the management challenges. Due to lack of
training, ensuring the acceptance of diversified working culture in the workplace becomes
challenging for the companies, which creates the negative organizational culture.
Leadership practices in the company also make the important contribution in terms of driving
the negative organizational culture (Johnson, 2018). Lack of understanding the responsibilities as
well as lack of encouragements are the major consequences of improper leadership practices in
an organization. In some of the cases, lack of opportunities for providing the abilities of
individuals’ create the negative management impact on employees’ mind. It can promote the
unethical behavior in the workplace which can cause huge problems in the management
operations.
Case analysis
Analyzing the situation in Zappos it has been identified that the company has contributed
towards ensuring the benefits to the larger aspects. Satisfying the needs of the community can be
considered as one of the important business philosophy adopted by the company. Examining the
emerging situation in Zappos it has been identified that managing the diversified working culture
has become one of the important concerns of the management team. In terms of implementing
new holocracy system in the market, the organization faces various challenges. In order to
expand its business Zappos has joined the Amazon Family in the year 2009. By making the Joint
venture with Amazon, the company has aimed to share the strong passion towards customers’
services so that the individuals’ growth can be ensured in the market. Comparing the

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organizational culture of Zappos and Amazon, it has been identified that due to huge difference
between both the companies create the management challenges. Due to increasing amount of
challenges, following the traditional management roles has become challenging for the company.
In the year 2015, the management transaction became the important concern for the company. in
this situation the speed of management transaction practices in the company got reduced, which
influenced the employee turnover issue in the company. Near about 18% of the employees in
Zappos leaved their job. In this situation, increasing amount of media challenges and the
confusing and complicated management practices, the company has got brought any attention
towards the rest of 82% employees, which indirectly influenced its growth process. The
company Zappos mainly focuses on introducing the self-management system with the
introduction of self-management practices through the holacracy system. In this situation,
increasing the decision making power of individuals the company has aimed to ensure
individuals contribution towards achieving the organizational goals.
In the contingency management theory, different internal and external situations of the company
are being measured (Vidgen, Shaw & Grant, 2017). In the contingency theory, it is true that
based on the structural influences of the organization, the change adoption process in the
workplace gets influenced. Rather than specifying the particular management practices, in the
contingency theory, different solutions based on the management issues are being introduced.
Analyzing the situation in Zappos, it can be said that in case of implementing the contingency
management theory the least preferred coworker scale can be measured in the company.
Analyzing the situation of Zappos in the market, it has been identified that people management
creates the major war in the company. Due to this reason the major philosophy of the
organization for sharing happiness gets affected. Due to traditional management policies, it

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becomes challenging for the company in terms of satisfying its existing employees. Due to
improper compensation structure as well as lack of growth policy implementations,
dissatisfaction among the employees gets increased. Analyzing the leadership practices adopted
by Zappos, it has been identified that the Autocratic leadership practice are being followed in the
company. In this case, few years back, 3 top level managers in Zappos were terminated due to
not following the commands of the CEO.
System management Theory is being considered as thee alternative approach for planning the
operational activities in a management.in this theory, the consistence of multiple components in
work harmony, the larger system function is being introduced (Karadag, 2015). As per this
theory, the success of an organization highly depends on the interrelations as well as
interdependence between the business elements. Employees are being considered as the
important components in every organization. The employees play crucial role in case of driving
the best management approach. Analyzing the situation of employees in the company, it has been
identified that due to improper management proactive and lack of employee management,
dissatisfaction among the employees has created important challenge for the company. In the
words of Rosenberg Hansen and Ferlie (2016), globalization has brought strong impact in case of
driving the independent business practices. On the other hand, it cannot be denied that in the
competitive business environment reinforcing the potential benefits to the customers as well as
employees, it has become necessary in terms of ensuring the positive performance in the
industry.
Holacracy is the organizational design model that focuses on empowering the core game of the
organization. It is also true that holacracy does not contribute towards convening the top-down or

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progressive bottom–up approaches (Peltoniemi, 2015). By sharing the integrated benefits to the
company, Holacracy ensures the parental leadership approaches in the workplace, in which
individuals get the chance for becoming their own leader. Without operating with the classical
demand of control, holacracy eliminates the control and command for simplifying the managerial
operations. Improper knowledge regarding the implementation of holacracy model in the
workplace, the managerial issues have been aroused in the company.
In the early 1980, the product quality has become one of the important concerns for the
company. It has been identified that lack of employee morale and improper product quality,
ensuring the long term sustainability become the important concern for the company. In this
situation restructuring the construction policies have become necessary for accompanying the
dismantling hierarchical structure in the company. Analyzing the challenges faced by Zappos, it
has been identified that sharing the organizational culture has increased the debatable topic in the
current business scenario. Selfish management experiments has increased the challenges for
ensuring the involvement of community. In most of the cases, drawing the attention for the
customers, rather than focusing on quality management, the profitability rate has got focused,
which indirectly impacted on the .internal management system. It has also been identified that
lack of innovation and creativity in the management practices, the company has faced various
challenges regarding its acceptance. In order to bring the management changes in the company,
improper leadership has created the major challenge.
Management theories are being introduced in case of providing the effective strategic solutions
in the market (Karadag, 2015). Highlighting several concepts of management, the management
theory reinforce the organizational culture as well as empowerment process in the company.
American mechanical engineer Frederiick Taylor introduced the scientific management theory

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based on the philosophy for emphasizing the individuals’ empowerment through increasing
productivity. The scientific theory not only focuses on measuring the rate of profitability, but
also in this theory the willingness of employees towards contributing the growth process has also
been mentioned. By standardizing the workplace rules, the theory aims to ensure the employee
motivation as well as job satisfaction in the workplace.
Recommendations
Training needs to be introduced for improving the organizational culture
Analyzing the situation in the company it can be suggested that by ensuring the positive
organizational emerging challenges in Zappos can be reduced. By continuing this, it can also be
said that introducing an effective training program the positive organizational culture in the
workplace can be ensured. Through the introduction of training process, it can also be easier for
Zappos to ensure the efficiency of the employees. Improving the organizational culture, the
internal policies in the company needs to be improved (Peltoniemi, 2015). Through the
introduction of effective organizational policies, it can be easier for avoiding the unethical
practices in the workplace.
Transformational leadership needs to be introduced
In the words of Vidgen, Shaw & Grant, (2017), transformational leadership practice is very
important in terms of ensuring the individuals engagement in the decision making process. It
cannot be denied that in the previous stages, defensive mentality of the managers against the
CEO, three of the managers in Zappos have been terminated. It is also true that in some of the
cases, dissimilarity regarding the growth perspectives of managers the overall situation in the
workplace gets affected. Some of the cases the managers focus on ensuring the values and

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beliefs and some of them has focused on increasing the profitability. In case of avoiding such
arguments in the workplace, transformational leadership practices can ensure the individuals
contribution towards the growth process.
Holacracy system of management needs to be improved
It cannot be denied that in order to improve the management practices Zappos has focused on
implementing the Holacracy management system. However, improper implementation
initiatives, the plan has faced the failure. In case of implementing thee holacracy management
practices, understanding the competitive business environment is very important for the
company. In this situation quality management initiatives are very important to be adopted.
Ensuring the change in management practices, transparency with the employees needs to be
maintained so that the quarries regarding the management changes can be effectively ensured
(DeCenzo, Robbins, & Verhulst, 2016).
Introduction of compensation policies
Employees are being considered as the important components in every organization. The
employees play crucial role in case of driving the best management approach. Analyzing the
situation of employees in the company, it has been identified that due to improper management
proactive and lack of employee management, dissatisfaction among the employees has created
important challenge for the company. Reward and recognitions are being considered as one of
the motivational factors that drive the employee engagement in an organization (Karadag, 2015).
By continuing this, it can also be said that based on the emerging situation avoiding the
employee turnover strong compensation policies needs to be introduced in the market.

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Introducing the standard organizational structure, it can be easier for the company in terms of
ensuring the employee retention rate by proving the job satisfaction.
Conclusion
In this study, it can be concluded that management practices have strong impact in terms of
ensuring the positive growth in an organization. Due to the improper management practices, the
negative organizational culture can be created which can drive the employee engagement as well
as sustainability issues in the workplace. Analyzing the challenges in Zappos, it has been
identified that improper organizational culture, autocratic leadership and improper
implementation of holacracy management design have created increasing numbers of employee
turnover issues. On the other hand, improper quality management and lack of morale values
among the employees the overall growth process in the company has got affected.