June 2015
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Change Management and the Zappos Holacracy

Monday, May 11, 2015

In a bittersweet example of change management in action, Zappos, an online footwear retailer, is losing about 14 percent of its employees as it makes the transition to a horizontal management style known as holacracy. The CEO of the company, Tony Hsieh, says he thinks the transition will take up to five years to complete, and will trade the traditional hierarchical layers of management for a flattened-out system. But there are concerns that the egalitarian system, in which no one reports to a manager or supervisor, could cause problems. Bob Sutton, professor of organizational behavior at the Stanford Graduate School of Business, argues that eliminating these positions doesn’t necessarily eliminate a hierarchy. “Some headlines suggest that the company is getting rid of bosses—that isn't quite right. While more power is being pushed down the hierarchy, it persists under the new structure,” Sutton writes. He also notes Hsieh will still be the CEO. However, there is reason to believe Zappos will succeed in the endeavor—the company has a strong track record when it comes to experimentation and employee happiness.

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