A holocracy is a system for managing a company where

holocracy is a system for managing a company where there are no assigned roles and employees have the flexibility to take on various tasks and move between teams freely. The organizational structure of a holocracy is rather flat, with there being little hierarchy.

As Zappos made its push toward holocracy, Hsieh decided to ramp up the efforts to an even higher level:  Teal.  Hsieh sent out a 4,700 word e-mail to all employees entitled “Reinventing Zappos:  The Road to Teal.”  Teal, supposed to be the next stage of development after holocracy, is characterized as ‘A new kind of organization designed to enable ‘whole’ individuals (not narrow professional selves) to self-organize and self-manage to achieve an organic organizational purpose.”  In the memo, Hsieh essentially told the remaining employees to get on board or get out.  Hsieh was not happy with the progress that had been made up to that point and wrote, “in order to eliminate the legacy management hierarchy, there will be effectively no more people managers.”  John Bunch, the employee in charge of the move to teal says, “Teal is the goal; holocracy is the system”.

Hsieh even went as far as to offer the equivalent of three months’ worth of salary to employees who would quit the organization if they didn’t feel they could fit in.  Over 200 employees (14 percent) took him up on the offer-a massive number of people given Zappos’s normal turnover rate of 1 percent annually.  Clearly, not everyone felt comfortable in an organization with no clear leadership structure and very little to no legitimate power.  One departed employee called holocracy “a social experiment that created chaos and uncertainty.”  Others felt like “more employees are feeling like favoritism and management issues are becoming a bigger problem.”  CEO Tony Hsieh remains undaunted.  Hsieh says, “The one thing I’m absolutely sure of is that the future is about self-management.”

The move has not been bad for everyone.  Less experienced individuals with less expertise have felt energized by their ability to speak up and have a voice.  One employee whose prior boss blocked a job transfer stated that as soon as he figured holocracy out, “I was like, ‘Actually, my boss can’t tell me that.”  Jake McCrea, who teaches new hires about Zappos culture, states, “holocracy is like a sport or a new language.  You can read about it, you can hear people tell you about it, you won’t understand it until you start using it.  “Even through all the issues, Hsieh stated, “I’ve been surprised at how hard it is to let go of the psychological baggage.  In retrospect, I would have probably ripped off the Band-Aid sooner.”

In this writing assignment you are being asked to answer the challenge questions below using 300-400 words (maximum).  You can submit this in Canvas in PDF format.  Treat this writing assignment as a business work product, ensuring that you proof your work, use citations when necessary and be sure to address every aspect of the challenge question.  A basic grading guide is included in the course syllabus under the heading ‘Class Assignments’.

Challenge Questions:

  1. Can an organization run effectively without leaders having some form of organizational power?
  2. What types of power were exercised in this scenario and by whom? Was it effective and what were the consequences of the power used?
  3. Do you think leadership skills would be more or less important at Zappos under holocracy? How so?


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