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Organizing M2C

Most Fortune 500 companies operate based on traditional structures whereby employees are deployed to different positions within the organizational hierarchy. A case in point is the bureaucratic structure, which is characterized by centralized decision-making, formalized routines and procedures, and grouping of tasks based on functional departments (Havinal 38). In a bureaucratic organization, jobs are clearly defined, planning processes are standardized, and each organizational procedure is analyzed regularly to promote efficiency.

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In recent times, however, a number of new firms have started deviating from such traditional organizational structures. For example, Zappos Shoes, a highly successful online shoe retailing company, operates based on a non-traditional approach its CEO Tony Hsieh refers to as Holacracy. In a holacracy, all hierarchies and job titles are eliminated. This is a radical departure from the traditional approach to the structuring of organizations. The aim of this paper is to identify the risks and challenges associated with the implementation of holacracy at Zappos. The paper also assesses Zappos’ prospects of success with holacracy. Finally, the paper examines the advantages and disadvantages of holacracy over more traditional structures such as the hierarchical structure.

In holacracy, companies are required to come up with a constitution that outlines the goals and how they intend to achieve them. This may be a challenging task for these companies. Moreover, each employee is required to belong in circles or teams that best fit in with their abilities. During circle meetings, a number of challenges may arise. For example, circle members may have varied opinion on how to execute a strategy. Moreover, if an employee belongs to two circles that are holding meetings at the same time, he may miss out on developments in one of them. Another major challenge is that in a flat organization, it becomes harder to allocate responsibility and manage performance particularly when something has gone wrong (Frean 2). Additionally, Zappos faces the risk of disorienting all employees in its efforts to scale up the model as the firm continues to grow. So far, Zappos is the largest company to have tested the model, meaning that it faces a risky situation characterized by absence of precedents to learn from.

Zappos also faces the challenge of overcoming confusion over what holacracy really entails (Cook 1). For example, it has often been misconceived as being without structure when it is in face highly structured. Moreover, just like in traditional management practice where individuals abused their job titles leading to bureaucracy and inefficiency, workers at Zappos can easily creep back into a similar situation by abusing the authority and autonomy vested in their circles and teams. Fortunately, Holacracy provides highly detailed instructions for handling issues of hiring, compensation, and hiring. Despite the description, it is hard for any company to manage these things, meaning that Zappos will still encounter problems similar to the ones being faced by firms operating using the traditional model of management.

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            Holacracy is highly likely to succeed at Zappos. This is because it based on clear, explicit principles and rules. Moreover, it is part of a movement that seeks to shape corporate America by embracing a start-up culture that thrives on principles of self-organization and collaboration. Not everything has gone according to plan at Zappos though. In 2014, 14 percent of the company’s employees opted to leave instead of adopting the new management model (Denning 3). This high attrition rate may be attributed to a lack of understanding of how holacracy operates. It is a classic case of employees’ resistance to positive change. For the most part, the challenges Zappos is experiencing arise because of confusion over the meaning of holacracy and not because of the validity of its philosophical underpinnings.

            Holacracy is advantageous in numerous ways. For example, unlike in the traditional model of management, employees need not wait for the boss to tell them what to do. Instead, they simply identify an innovative idea and articulate it to members of various circles. If the members of various circles embrace the idea, they will give their views, by which time the process of implementing it will have commenced. In traditional structures, bureaucracy and inefficiency makes it impossible for employees to collaborate freely. Holacracy offers unique benefits such as strong collaboration among teams and employee commitment. It enables firms to break down barriers and to foster a strong sense of communication and inclusion. Another benefit of holacracy is that it enables departments to function as circles and groups of people working to achieve a defined goal rather than as hierarchies operating at the whims of bosses. It enables employees to divert their attention from job titles and positions and instead to focus on the goals of the company and how their day-to-day tasks can contribute to overall organizational success.

            Moreover, the model gives employees an opportunity to follow their passion outside the role that may have been defined for them by the traditional hierarchical structures. This means that they get an opportunity to mold their careers in a way that fits in with their optimal contribution to the success of their organization. At Zappos, for example, it has become easier for employees to acquire new skills by working in other departments. Thus, they feel that they are constantly growing their skills and achieving their full potential instead of stagnating at their roles as stipulated in hierarchical or matrix organizations.

Nevertheless, like in any other model of management, holacracy has its share of disadvantages. One of them is that the model is difficult to define, meaning that organizations must get down to implementing it to understand what it really entails. Thus, it is not surprising that at Zappos, employees are being given an opportunity to introduce structural changes to their own teams and jobs to ensure that the model succeeds. Holacracy does not provide hard-and-fast rules on how new roles should fit into the overall structure. It is upon individual firms to figure that out based on their current level of growth and organizational complexity. Consequently, employees have to go through the stressful experience of defining their job on a day-to-day basis.

The structure highlighted in background materials that I think would be the best match for Zappos is the innovative structure. This type of structure creates room for cutting-edge leadership, and is ideal for new companies headed by leaders who are highly committed to innovation (Havinal 12).  CEO Tony Hsieh is an innovative leader who is fully committed to the adoption of a decentralized structure that gives employees an opportunity to make their own judgment with a view to achieve efficiency. The innovative structure is a perfect match for Zappos particularly because the company operates in the innovative world of e-commerce and its innovative leader is ready to address its potential drawbacks such as uncertainty over authority and leadership conflict.

Works Cited

Cook, Dan. “Ready for holacracy? Zappos says it is”. BenefitsPro, January 7, 2014. Online.

Denning, Steve. “Is Holacracy Succeeding At Zappos?” Forbes, May 23, 2015. Online.

Frean, Alexandra. “How holacracy killed the hierarchy in companies going flat-out for success.” The Times, January 6, 2014. Online.

Havinal, Veerabhadrappa. Management and Entrepreneurship. London: Routledge, 2009. Print.