Tag Archives: Zappos

Misconceptions about Sociocracy

In an excellent article in the 10 September 2015 issue of the Harvard Business Review Georges Romme analyzes the misconceptions in the press about Holacracy and about sociocracy, “The Big Misconceptions Holding Holacracy Back.” Romme has been centrally involved with Gerard Endenburg and sociocracy for decades. The following is a summary and commentary on Romme’s article, which I also encourage you to read.

A key management practices is concentrating leadership in top management and suppressing or ignoring any ideas or concerns from other levels of the organization. Self management, like that in sociocracy, is believed to correct autocratic leadership but the misconceptions about how it does that have seriously affected the willingness of organizations, businesses in particular, from adopting it.

Misconceptions about Sociocracy

Romme focuses on three misconceptions:

  1. It is non-hierarchical,
  2.  Implementation specifics aren’t important, and
  3.  The board’s functioning shouldn’t be affected.

Since sociocracy approaches the whole concept of organization from an unfamiliar direction it is often misunderstood, as can be clearly seen in descriptions in the news media of the implementation of Holacracy at Zappos. While certainly not the first corporation to implement principles and practices of self management — there probably thousands of businesses, non-profit organizations, and associations using sociocracy and other self management structures—Zappos has received the most attention for doing so.

Misconception 1. Abandonment of Hierarchy

Although self management methods are fundamentally different from command-and-control structures, they still have a hierarchy that provides an overall purpose and direction for the organization. A lack of hierarchy leaves an organization without a clear sense of who is accountable for what. While some are moving to a structure more similar to a network, they still have a clear patterns of coordination and accountability between nodes.

Self management, self-organization,  and distributed policy decisions balance and complement the hierarchy of daily operations. “Power and authority can flow in virtually any direction, but with an eye to maximizing efficiency … Instead of conferring authority, the hierarchy establishes an unambiguous sequence of levels of accountability.”

Misconception 2: The goal justifies any means.

Once the blueprint of the new organizational structure has been adopted, the misconception is that any implementation strategy is acceptable. The ends justifies the means. At Zappos, the CEO sent a memo to employees — embrace holacracy or accept a buyout. Empowering employees was thus expected to be the result of exercising authority. A mixed message that could lead to mixed results.***

The implementation process must itself be empowering and include employees’ ideas and ensuring that they understand and embrace the change. The best approach is for the top executives to tend to their own responsibilities and allow the employees to self-organize with the help of a dedicated implementation team.

“The pace of change must also be deliberate and well-orchestrated. The brand-strategy consulting firm Fabrique, for example, first defined shared objectives and had a project team pilot-test whether sociocracy served to realize those objectives. Then, on the basis of the evidence collected, it had the project team, together with the executive team, make a shared “go/no-go” decision (the result was a “go”). An approach like this signals top managers’ deep understanding of distributed management and leadership and establishes them as role models.”

Misconception 3: The boardroom is unaffected.

Executives and directors often try to take themselves out of the process as if the change only affects operations and middle managers. They assume they will still have autocratic power over any decisions made. But sociocracy requires a fundamental redistribution of authority in the whole organization. There are mechanisms for measurement and correction but how a team or department accomplishes its mission is under their control as long as it doesn’t negatively affect the work of another or is in conflict with the purpose of the organization.

The distribution of management optimally extends to a financial restructuring so neither owner or shareholders can unilaterally sell or close the company. The company should “own itself” and be financially self sustaining. Endenburg Elektrotechniek and MyWheels,  in the Netherlands, and the Terra Viva Group in Brazil are examples of companies that have restructured financially to ensure their independence and continuity.

A self-sustaining company is different from an employee-owned company. Employee owned companies are just as often managed autocratically as private companies and stockholder owned corporations. A completely sociocratic company is controlled equally by all its members,  not the board.

Integral Education & Distributed Management

Another practice in sociocracy, one not mentioned by Romme, is that the move toward distributed management and self-organization is balanced with strong support for continuing education. Referred to as “Integral education” it requires a  plan for personal and team development as part of annual planning. One estimate is that organizations should devote 5% of their budget to education and research for employees, not only for top management and aside from that delegated to a research department. That is 5% distributed to each employee at all levels of the organization.

Integral education ensures quality in every detail of operations, engages the intelligence and energy of each employee, and develops the skills required to assume greater responsibilities. The expectation of self-organization develops leadership, which further ensures the sustainability of the company.

Georges RommeGeorges Romme  has a background in economics and business administration, with a MSc in economics (cum laude) from Tilburg University and a doctoral degree in business administration from Maastricht University. Previously, he was on the staff of Tilburg University and Maastricht University. His current position is professor of Entrepreneurship & Innovation at Eindhoven University of Technology (TU/e). From 2007 to 2014 he also served as dean of the Industrial Engineering & Innovation Sciences department. He is author of the forthcoming The Quest for Professionalism: The Case of Management and Entrepreneurship (Oxford University Press). 

*** An added comment on Tony Hsieh’s memo of  26 March 2015 to Zappos employees:

While Tony Hsieh did say “we are going to take a ‘rip the bandaid’ approach to accelerate progress towards becoming a Teal organization (as described in the book Reinventing Organizations),” he also went on to explain at length how further implementation of Holacracy at Zappos would take place and how. The process was very well considered and explained.

The very long memo gave many options for understanding the reasons for acceleration toward self-management, including readings. His memo was described in the press as an “ultimatum” and there would be a tendency for employees accustomed to an autocratic leadership to view it this way. In fact, it was a request that employees inform themselves and offering a buy-out to those who did not want to accept self-management.

I softened the language in this passage and in several places used “self management” instead of “distributed management.” It is more accurate to describe the organizational structure as “self management” and “distributed policy decisions.”

The full memo is online in Aimee Groth’s article published on Quartz.

Self-Management at Zappos

Zappos Logo Several articles have appeared in the last month or so on the implementation of  self-management at Zappos. After having adopted Holacracy, which is based on the principles of sociocracy, Tony Hsieh, CEO of Zappos, sent a memo on 24 March 2015 to employees offering three months of salary to any employee who would read a book on Holacracy and quit if they were still not happy in an organization based on self-management.

It was a long complex memo, and not a simple command to “self-organize or leave” as it has been portrayed. Hsieh said:

Our main objective is not just to do Holacracy well, but to make Zappos a fully self-organized, self-managed organization by combining a variety of different tools and processes.

The full email/memo is on the Quartz site.

Zappos has regularly paid new employees if they decided the new job wasn’t for them and quit in the first month or so. But for this offer 14% of Zappos employees, 210 people, quit. Undoubtedly many were planning to leave for other reasons,  like the move in 2013 to downtown Las Vegas. This was just a convenient time to leave. Thus far there hasn’t been an analysis published on why the employees left. It may well have been poor implementation and confusion, not the expectations to self-manage and self-organize.

And we also don’t know why the 86% of Zappos employees stayed. It may also have nothing to do with liking the new system.

Why Self-Organizing and Self-Management Are So Hard

Why Self-Organizing is So Hard is a blog post by Bud Caddell, a founding member of the NOBL Collective. NOBL is a consulting network that works with organizations to empower “the creativity and capability required for a world of constant change.” They work to “to re-align teams, refocus products, and re-imagine work for the 21st century.” Caddell has worked in an organization using Holacracy and NOBL uses elements of sociocracy, Holacracy, and other self-governing methods in their work.

 

Caddell’s analysis compares Holacracy to a game of Dungeons and Dragons:

Holacracy, itself, is too complex, dogmatic, and rigid. It feels like playing a game of Management Dungeons and Dragons. Everything you already understand about working in teams is reinvented with confusing language (e.g. circles, tensions, IDM, etc.) and a confusing process. Because of this frustration, some companies are trying to pioneer a cognitively slimmed down version. Blinkist, for example, calls theirs Holacracy Lite.

The same can be said of sociocracy when people begin emphasizing structure before purpose, playing the language card—go directly to jail, do not pass go, do not collect $200—when someone says agree instead of consent. Or insisting on the distinction between a top circle and a board of directors. It diverts the emphasis from “a more humane way of organizing” to “the right  way.” As if the right language will produce accomplishment of the purpose.

Unless the right word means the accurate and commonly understood word that conveys meaning naturally, it is an impediment to those who are trying to get their work done.

Too often, right means “our word or your word but only in the way we define it.”

Ordered or Programmed?

It’s a thin line between order and homogenization.

An organization isn’t an operating system. It is like an operating system in that all the parts need to work together without conflict so they all contribute to  achieving the same purpose. That doesn’t make people plug-ins for a software program. A big difference.

The Place to Start

Caddell has four recommendations for the implementation of   governance methods based on self-organization:

  1. Focus on self-management first.
  2. Adapt your own model.
  3. Dedicate a Complexity Reduction Officer (CRO).
  4. Tell more human stories.

The last recommendation is a nice one. In the articles on Hsieh’s so-called command to self-organize and the people who left, there are no personal stories from the people who left and those who stayed. Maybe that comes next.

More articles related to self-organization and management:

Internal Memo: Zappos is offering severance to employees who aren’t all in with Holacracy by Aimee Groth on the Quartz website. Includes the full text of the memo asking that employees “take 30 minutes” to read it.

Inside Zappos CEO Tony Hsieh’s radical management experiment that prompted 14% of employees to quit by Richard Feloni on the Business Insider UK website. A history of Zappos unique company culture which is atypical to say the least, and the story of its adoption of Holacracy. A long article on the historical context of Hsieh’s leadership.

Is Holacracy Succeeding At Zappos? by Steve Denning on the Forbes  website. An excellent discussion of the contradictions in the implementation of Holacracy given the difficult language of the constitution and the many, sometimes contradictory premises. One being the ability of the CEO to take back his power as a CEO Includes links to several other articles.

At Zappos, Banishing the Bosses Brings Confusion by Rachel Emma Silverman on the Wall Street Journal website. I wasn’t able to read this because I don’t have a subscription but it begins with a story from the personal experience of an employee at Zappos so it may be promising. (With all my software programs and online journals going to monthly subscriptions, my budget is blowing in the wind.)

Inclusion and Hierarchies: New Articles on Zappos

Three new articles discussing inclusion and hierarchies, and other issues raised by the Zappos adoption of Holacracy. These are real articles examining the pros and cons of the promises of Holacracy and sociocracy, not reactions or quotes from press releases.

1. Andrew Hill of The Financial Times: Zappos and the Collapse of Corporate Hierarchies.

2.  A response from Norman Pickavance of Blueprint for Better Business in Linton, N. Yorks, UK: The Four Levels of Decision-Making.

3. Sally Helgesen, author of The Web of Inclusion: Architecture for Building Great Organizations (2005 reprint of 1995 edition) on the Strategy+Business site: An Extreme Take on Restructuring: No Job Titles?

We desperately need professional, published accounts with full measurements of organizations that have adopted sociocracy. That’s what business people need before they pay attention. Scientifically acceptable measurements. Peer-reviewed and published. 

 

The Holes in Holacracy

An informed article by “Schumpeter” (no first name available), The Holes in Holacracy, included in the print edition as well as online. Schumpeter’s points are really about new branded methods failing.  They are gone in 10 years. (Sociocracy on which Holacracy is based has not failed in 40 years.)

EVERY so often a company emerges from the herd to be lauded as the embodiment of leading-edge management thinking. Think of Toyota and its lean manufacturing system, say, or GE and Six Sigma excellence. The latest candidate for apotheosis is Zappos, an online vendor of shoes and clothes (owned by Amazon), which believes that happy workers breed happy customers. Tony Hsieh, its boss, said last year that he will turn the firm into a “holacracy”, replacing its hierarchy with a more democratic system of overlapping, self-organising teams. Until Zappos embraced it, no big company had taken holacracy seriously. Indeed, not all of Zappos’ 1,500-strong workforce are convinced that it can work…

Tony Hsieh, CEO Zappos. Photo credit: Wikipedia.
Tony Hsieh, CEO Zappos. Photo credit: Wikipedia.

Will conquering Zappos help holacracy thrive in the brutally competitive market for management ideas? There is good reason to be skeptical. “Nine-tenths of the approximately 100 branded management ideas I’ve studied lost their popularity within a decade or so,” wrote Julian Birkinshaw of London Business School in the May issue of the Harvard Business Review. Among the latest cast-offs, it seems, is Google’s much-admired “20% time”, in which workers got a day a week to work on their own projects; the company is reported to be quietly sidelining it.

The Six Problems With Holacracy, and Others

William TinCup on the Fist Full of Talent website
William TinCup on the Fist Full of Talent website

My disclaimer… (1) I am NOT an expert in holacracy, (2) I love new stuff, and (3) I absolutely love people and concepts that challenge the status quo. That’s that.

Why am I discussing a commentary on Zappos adoption of holacracy that begins with that particular picture of the author and that particular quote from the author? Because the picture is fun and the comments are good. When he says he knows nothing he means nothing more than he has read at the Holacracy, “Holacracy” at Wikipedia, and the Medium websites. And then to watch this video of Brian Robertson explaining Holacracy. While this isn’t direct experience and Tincup hasn’t become a HolacracyOne graduate, that is pretty much all there is to know. I encourage you to read them too.

What Tincup does is present the confused response to the issues that Holacracy, sociocracy, dynamic governance, and other forms of circular organization will have to conquer before they will be accepted. Every governance method has to address these misunderstandings and prove itself capable of addressing, even democracy.

What happens when things go badly? To quote Tincup, The answer to all these questions is… a resounding… I don’t freaking know… and neither does anyone else. And that should terrify you.”

My response is “the same thing they do everyday.” Making decisions is hard even when things are going right—everyone has to make choices. The same people make decisions in “bad” times as in good times.

Who will and won’t thrive in Holacracy? “(1) people that have a problem with authority, (2) people that can consume ambiguity, and (3) independent thinkers and doers.”

This is nowhere indicated except in the headlines saying there will be no bosses. Circular organizations are very structured and in particular have feedback loops that guarantee that everyone stays on target, even the Board.

Holacracy has well-defined roles. Sociocracy has log books for each member of the organization with job descriptions; circle responsibilities; vision, mission, aim statements; organizational charts, notes of circle meetings, etc. Ackoff’s Circular Organization is well-charted and clear.

“A clever attempt to create homogeneity—likeness… and I’m not talking about white people. I mean people that are really similar to one another. They will argue that it’s an efficient system, a lean system, and it will be at the expense of diversity.”

No sure why this would be true except that people tend to hire people like themselves. If a central authority were hiring everyone would tend to be like them. Instead, the understanding that poor performance affects the outcome of everyone else’s work the more likely scenario is that the circle would understand that they need someone different from themselves to bring a broader perspective and complement, not duplicate, their own strengths. This leads to diversity, not homogeneity.

What happened to my values—our values? “They have been replaced by holacracy. That’s the value system. That’s the code. Kind of seems cultish, right?…Again for holacracy to have a fighting chance, you have to hire to it, fire to it, live it… each and every day. Bye bye values.”

There are times when any new method of any kind sounds like a cult, but to say that an organization has to abandon its values in order to reorganize is rather strange. The Vision, Mission, and Aim statements express the unique values of an organization. Those are unaffected by holacracy.

How will it scale? “At the end of the day, holacracy might be great for 20 programmers in Silicon Valley. But will it work in retail in Tampa? Will it thrive at a hospital in Duluth? Light manufacturing in South Texas?”

Circular organization methods similar to holacracy are currently work in hundreds of organizations and businesses around the world. Some are very large and others very small. Ackoff become famous when he implemented one at Anheuser Busch in the late 1970s, a rather large and complex organization. Sociocracy is being used in a large agricultural firm in Brazil. Semco, also in Brazil uses a similar system in several factories. Many organizations in Europe and the United States use sociocracy including small businesses, corporations, university departments, housing complexes, healthcare facilities, and schools. There are many companies using part or all of the principles and methods and they have been doing so for decades.

How do I manage my career? “Wait, the churched up version of that is a term called career pathing. Holacracy is about flatness What I do know is that we all—all as in every single one of us—think about the next thing. So, in an extremely flat organization… What the hell is next? Darkness floats about.”

Here I have to resort to my knowledge of sociocracy. Salaries are set by the market for particular skills. From hiring on they are determined by across the board increases and performance increases, just like other organizations. To remain competitive salaries also have to compete. There are many jobs within the organization. The janitors are unlikely to be paid the same salary as the software programmers. One can develop new skills, assume a higher level of responsibility, etc. In holacracy, these are defined as “roles” and each role has a job description that won’t be the same as another person’s. That all jobs are the same is not what “flat” means.

How will they manage bad apples? “How will they identify these rotten apples and, more importantly, get rid of said apples? Group think? Call a tribal council meeting? Sounds bureaucratic and slow. If you are thinking of adopting holacracy, dig in and ask tough questions regarding the treatment of bad apples.”

My experience it is that management rarely gets rid of bad apples and they are totally unreliable in their judgement of who is a bad apple. Management wants to avoid the issue as long as they aren’t drowning in low performance. Even then they are more likely to reorganize than get rid of people.

“Make no mistake about it, this is a new religion.… If you understand what holacracy is all about, then you are one of us. If you don’t then, re-join the cavemen and cavewomen.”

I agree that some of the literature and speeches on this do sound messianic but so does campaign literature, school brochures, promises for every new diet, mouthwash ads, etc. It’s enthusiasm for something the speaker has mastered or is selling plus a good deal of marketing. That doesn’t mean it doesn’t work.

It also doesn’t mean it’s based on blind faith. There is good research and demonstrated performance data on the principles and methods of sociocracy. Holacracy is much newer but to the extent that it has incorporated the principles and methods of sociocracy, and uses them appropriately, it is based on the same research and demonstrated performance.

Circular organizations have a clear performance path since the 1960s in businesses and decades old performance paths in community organizations.

Oh, and the marketing of holacracy is about to take over our HR worlds.

This is certainly true. Brian Robertson is an expert in marketing but that isn’t necessarily bad. If he has all his T’s crossed and his I’s dotted, he can take the pressure. He’s done a professional job of developing, teaching, and promoting his specific application of sociocracy and the concepts of a circular organization.

Consent

The issue that Tincup didn’t discuss is the guarantee of consent decision-making. This is essential if all members of the organization—not just the managers—have control over their working conditions. In sociocracy, each circle has a defined domain, or in holacracy a role. Within that domain, their area of responsibility, everyone must be equivalent. If a decision is being considered that will affect their ability to do their job, to fulfill their responsibility, they have the right to object. Their objection must be resolved before the proposal can be implemented.

This is a very important assurance when people are expected to take on the responsibility of self-organization. How can I do a good job if decisions are made that screw up my ability to do that job? I would rather have a manager responsible in that situation. I would become much more passive and resistant, as many or most workers are.

The original Tincup post is here:  Six Problems With Holacracy, and Other

WILLIAM TINCUP, SPHR, is the CEO of HR consultancy Tincup & Co and one of the country’s leading thinkers on social media application for human resources, an expert on adoption of and HR technology. He has been blogging about HR related issues since 2007. He’s a contributor to Fistful of Talent, HRTechEurope andHRExaminer and co-hosts a daily HR podcast called DriveThruHR. Tweet him@williamtincup and check him out on Facebook and LinkedIn. He serves on the Board of Advisors for InsynctiveCausecastWork4Labs,PeopleReport, Jurify, TrackMavenSocialEarsAppLearn, StrengthsInsight, The Workforce Institute,PeopleMatterSmartRecruitersAjax Workforce Marketing and is a 2013 Council Member for The Candidate Experience Awards. He also serves on the Board of Directors for Chequed and is a startup mentor for Acceleprise. Tincup is a graduate of the University of Alabama of Birmingham with a BA in Art History. He also earned a MA from the University of Arizona and a MBA from Case Western Reserve University.

Holacracy, Zappos, Forbes

George Anders

An article by George Anders on Zappos in Forbes appeared this week. Anders writes about “innovation, careers and unforgettable personalities” for Forbes Magazine and formerly for the Wall Street Journal, two of the most respected and long-lived business sources. I honestly never thought I would see Holacracy, Zappos, Forbes in the same sentence. Kudos to Brian.

This is one of the more sensible articles on the Zappos adoption of Holacracy, less sensationalistic though Anders characterizes Holacracy as “a New Age approach to leadership that involves no job titles, no formal bosses, and lots of overlapping work circles instead.” Any mention of “new age” is fairly sensationalistic and it is inaccurate that either sociocracy or Holacracy have no job titles and no formal bosses. And of course it was not the invention of “business guru” Brian Robertson, nor is Zappos, at 1,500 employees, “by far the biggest company” organize based on these principles.

What Robertson and Zappos have done is attract the attention of many strategy consultants, journalists, and business school professors. Partly this is because Zappos even before deciding to adopt Holacracy was known for innovative thinking on leadership, customer service, and human resources. It is not unexpected that Zappos would adopt a circular organization that respects its employees as it does its customers. The Zappos core values even before Holacracy were to:

The bulk of the article, however, is a summary of William Tincup’s post on the Fistful of Talent blog which raises six points that will challenge Zappos. The original Tincup article is here. I will be doing comments on that article tomorrow.

Posted 9 January 2014 at 12:34 on the Forbes Magazine website, accessed on  11 January 2014:

http://www.forbes.com/sites/georgeanders/2014/01/09/gurus-gone-wild-does-zappos-reorganization-make-any-sense/

Zappos Goes Democratic

An article by Jena McGregor In her column, “On Leadership,” appeared in the Washington Post today on Brian Robertson’s contract with Zappo’s, “Zappos Says Goodbye to Bosses.” Zappos is owned by Amazon but runs independently and has long been known for its unusual employee-responsive culture.

The unusual approach is called a “holacracy.” Developed by a former software entrepreneur, the idea is to replace the traditional corporate chain of command with a series of overlapping, self-governing “circles.” In theory, this gives employees more of a voice in the way the company is run.

John Bunch, Zappos “As we scaled, we noticed that the bureaucracy we were all used to was getting in the way of adaptability,” says Zappos’s John Bunch, who is leading the transition.

The article is not particularly clear in explaining holacracy and doesn’t make the connection to sociocracy or other egalitarian organizational methods like Ackoff’s circular organization or  Semler’s round pyramid. McGregor is also confusing when explaining the change from “managers” to “lead-links.” Holacracy’s lead-links are described very much like managers. No mention of policy setting by all members of the circle to guide the actions of the lead-link.

The article reports that “Twitter cofounder Evan Williams uses it at his new company, Medium, and time management guru David Allen uses it run his firm — but Zappos is by far the largest company to adopt the idea.”

Robertson began his first company, Ternary Software in Exton PA, in 2001 based on the unique model of forming partnerships with many of the companies for which it developed software. This gave Ternary a vested interest in the performance of the software they designed and allowed promising but still developing companies to access to quality software. In 2006 and 2007, Robertson published two articles on his use of sociocracy at Ternary: “The Sociocratic Method,” in the 2006 strategy+business issue of Booz Allen Hamilton’s internal newsletter,  and in 2007 in the Wall Street Journal, “Can a Company Be Run as a Democracy?”.