Sunday, 18 October 2015

Holacracy at Zappos - how it all started

When Alexis Gonzales-Black (pictured right) came across holacracy for the first time she was working as a recruiter in talent acquisition at Zappos. Most significantly she was part of the first pilot group to implement the revolutionary management system inside the entire company. 

Defined as 'bossless' holacracy is a relatively new way of running organisations, which promises agility and adaptability without resorting to politics, and by combining the elements of both hierarchy and a more collaborative approach. 

Gonzales-Black realised that the new operating system resonated with her own way of working. "I always tried to self-manage in the past; I tried to take ownership over my work and a lot of the principles that we saw in holacracy just reflected the way that I had personally tried to conduct myself. So, I was very intrigued early on, and very quickly became a part of the implementation team. I joined up the team and then helped to roll out to the rest of company. I have spent about 2 and half years doing that." 

The influence of holacracy on Gonzales-Black was so strong that ultimately she decided to set up her own consultancy. Today, she helps other organisations implement this alternative way of working.

I wanted to speak with Gonzales-Black to explore the principles and practice of holacracy; the Zappos story - when did it all start?; as well as the benefits, challenges and skills required when adopting this radical management approach. 

Gloria Lombardi: When was the idea of implementing holacracy at Zappos originated? 

Alexis Gonzales-Black: Our CEO Tony Hsieh read ‘Triumph of the City’ by Harvard Professor Edward Glaeser. The book claims that as the size of a city doubles, innovation and productivity per citizen increase by around 50%. So, as cities become denser, they actually become more productive and innovative. 

What struck Tony was that the opposite tends to be true with companies – as organisations grow, they tend to become more bureaucratic, siloed, and have much more difficulty in communicating across teams. 

So, the question that was really presented to us was: How can we make Zappos more like a city? As we grow and become denser, how can we make our networks become more efficient, productive and creative? 

Holacracy was the system that we chose to implement. 


GL: Why holacracy? What benefits does it bring to the organisation?
 
AG-B: The first benefit that we saw early on in the Zappos implementation was about releasing the potential of our employees. In holacracy you are not confined to one area of the company; you are free to reach out across different teams and silos to take on work that you are passionate about. Many employees who had a desire to take on more responsibilities and make a bigger impact in Zappos, they were all of a sudden freed up to do that. 

So, we found that people were happier because they were pursuing their interests and they were also contributing more to the business. In terms of creating an environment that releases the potential of your people, holacracy is a superior choice over the traditional hierarchy. 

Another benefit is around the pace of the decision-making and the desire for more rapid iteration. Many companies struggle with the long time that it takes for them to make decisions and re-organise the company. Some decisions can take months to get buy-in and consensus. What holacracy does is that it creates a system that allows you to iterate very quickly, and allows the company to evolve. At Zappos, at any given day, there were a hundred changes going on - the company was growing, shifting and evolving as data and feedback changed. 

GL: How did you communicate the launch of holacracy - which is quite controversial in some respects - to Zappos employees?
 
AG-B: We knew that the first step had to be around education. This was, as you mentioned, a totally radical idea that was going to change the way we had always thought about management. So, we started with a series of classes called Holacracy 101, where we described the theory, the basics tenants and practices. We did that for the whole company. 

However, we learned primarily by practice. Without much hesitation we started conducting holacracy in governance meetings and tactical meetings. Through practice employees were able to understand how and why this system worked. 

GL: Has anyone said a firm 'no' to this new way of working?

AG-B: Originally, there was a lot of fear around the decision to move into holacracy because it is a very rigid and structured system. As described in the Constitution there are very explicit rules about what you can and cannot do. 

For some employees, the initial reaction was, ‘This is not in line with our culture; Zappos has long been known as this incredible family, spirit, fun culture; we are free flowing, very organic and natural. This is not who we are and what are values are.’ 

To help people with the change we had to encourage them to feel comfortable and to really understand why all those rules were in place. Once we all understood those structures, then we could make an educated decision on what was right for us, which parts of holacracy were right for us and aligned with our culture. 

But some of our people had to go through a period of real pain and challenge. 


GL: Have some people left Zappos as a consequence of holacracy being implemented? 

AG-B: This spring, our CEO, pulled out an offer – knowing that holacracy was going to be our official way of working, he gave a very lucrative package to people who wanted to leave the company. 

About 210 employees left. However, I am not sure how many of them left because of holacracy. They did not do a study about: ‘Was it holacracy that really made you leave?’ 

Probably, some people left because the new system did not align with their own personal set of values. But, from the outside looking in it seems that a lot of workers were also enthused by the offer. 

GL: In your own case, you left Zappos because you wanted a career change.

AG-B: Yes. A lot of people would say, ‘Oh, you left because of holacracy’. Many times I had to explain that I did not leave Zappos because of that. I actually left because I wanted to bring operating system into other companies. It is a big difference. 

GL: In your view, we will see other large corporates adopting holacracy as widely and successfully as Zappos?
 
AG-B: Zappos is definitely the most difficult implementation that I have ever seen because it was big. We were 1500 people when we started the implementation. 

Most of the companies I work with now are smaller; it is easier to implement holacracy with smaller teams. It is really advisable that you start thinking strategically about your structure when the company is still very young. 

Holacracy is not for everybody. But it can work for different companies depending on the size, the age and most importantly for having an entrepreneurial mindset – which it is very important when it comes to operating well with holacracy. In fact, one of the elements a business can look at to see if holacracy is for them is: ‘Do your employees and your company possess that entrepreneurial mindset?’ 

There are many other social technologies, or operating systems, that are similar to holacracy. All of them are considered to be responsive or revolutionary. When you look down the road, 5 years, 10 years, 20 years, companies will have to move towards those more responsive systems in order to stay relevant in the marketplace and to evolve quickly enough to stay on top of the game.

I think that the system of holacracy is one of them and it will continue to grow among business communities. 


GL: You mentioned the entrepreneurial mindset. What other competencies and skills are required by employees who need to engage with holacracy?
 
AG-B: The entrepreneurial mind-set incorporates a few different skills that people need to possess.
First of all it is mindfulness - this is the ability to recognise the tensions going on inside the company. Then, it is about being able to think critically about those tensions, being solution-oriented, and being able to generate proposals around that. 

What is difficult about holacracy is that most people for the majority of their career have given challenges and decisions to their managers to solve. In contrast, with holacracy, instead of giving decisions to somebody else or hiding behind somebody else’s approval, you have the full responsibility to process it on your own. This way of operating can be liberating but it can also be very scary. 

So, it is a whole suite of skills that employees need to develop and grow in a self-organised environment - from building that entrepreneurial mindset we mentioned earlier, to mindfulness about setting tension, and critical thinking skills along with boldness and courage to speak up in meetings – the confidence of speaking up and pushing back respectfully while having difficult conversations. 

GL: What does all this mean for leadership?
 
AG-B: We see a much more thoughtful and nuanced leadership. Instead of leadership being a title or a number of years that you have been inside a company, leadership is emerging all across the company and in many different ways. 

Leaders lead by influencing and motivating others, by using enquiry and by being partners rather than autocratic decision makers. It is about inspiring and questioning as opposed to the rigid management practices that we have mostly known until now.