An Inside Perspective on the Changes at Zappos.com

Originally published on Medium  Sep 14, 2015

It’s come to my attention over the past few months that something might be going on at my company. From the sounds of things, it must be pretty serious — doomsdayish, even. My friends, family, professional contacts and even coffee shop strangers seem to “know” more about what’s happening at my place of work than I do. It’s becoming increasingly difficult to wear my name badge in public without getting asked what’s going on at work or what I think about my CEO. If you haven’t seen my bio, I work for Zappos.com and ever since our CEO sent this email to employees in March we’ve been catching more than our fair share of headlines.

At first, I was excited that the conversation about corporate structure was becoming mainstream. Soon, however, it became apparent that people didn’t really want to have a discussion around the future of organizations; they didn’t want to debate about the many possibilities of management structures; nor did they want to have some discourse about the evolution of corporations. Sure, there were those rare cases where someone was “optimistically curious,” and a couple people approached me as if I were a subject in an experiment (in the nicest way possible) because they were looking at implementing something similar at their own companies. The vast majority, though, seemed more interested in telling me how this would never work, or they were just looking for some juicy gossip from the inside. Here are some of the most common things I am asked/told and my shorthand responses to them:

Them: “No managers? But surely you must recognize that people like to be led. They need to be led. Not everyone can be the boss.”
Me: Managers are the only leaders in your company? I’d hate to work there.

Them: “I hear your CEO went off the deep end. He paid everyone to leave and moved into a trailer park, is that true?!?”
No.
Me: Wait, scratch that. He does live in a trailer park. One out of three!

Them: “Wait, if there are no bosses, how does any work get done?”
Me: Because we don’t hire people that only work “when the boss is looking.” Also, no, I won’t give you a referral here.

Them: “So does that mean no one ever gets fired? Or is it like a “voted off of the island” kind of thing?”
Me: Whaa — ? No. Just, no.

Them: “What does Amazon think about all of this?”
Me: I’m not sure. Let me ask all 150,000 Amazon employees what they think about our organization structure and I’ll get back to you in….a couple of years.

Them: “That’s dumb. I don’t get it.”
Me: Very informed. Please don’t ever vote.

I don’t really blame most of them, though (sans that last guy…I blame him hardcore). With scandalous headlines like, “A Holacracy of Dunces,” “Zappos: A Workplace Where No One And Everyone Is The Boss,” and “Zappos Stopped Managing Its Employees. They Don’t Seem Too Happy About It,” it’s hard to come to unbiased conclusions, especially when there are plenty of selectively diced quotes from “insiders” and employees. With everyone on the outside saying what the facts are and very few people on the inside speaking up, finding the line between truth and mere conjecture is increasingly difficult. When the first of the scandalous headlines listed above was shared in my network on Quibb, I felt that it was important that more people heard an “insider’s perspective” on the recent goings-on. So, here’s my attempt at painting a picture of current reality at Zappos, with regard to self-organization/Holacracy, management, the ‘pay-to-leave’ offer, and “Teal” (as this one is mentioned a lot in our CEO’s letter, but not much in the news) from my own personal perspective.

Tl;dr- I feel like I’ve got a pretty good sense of the organization over my wide variety of experiences and roles here, and I have some of the longest-standing Holacracy experience at the company as well.

A little about me, so you can understand where I’m coming from in this article: I’m a Product Manager at Zappos (I manage both internal- and external-facing products — six in total) and I’ve been with the company for just over 4.5 years. In that time I’ve worked on our Customer Loyalty Team (customer service) answering phones & emails, our Clothing Content team writing product descriptions, the Social Media team pulling double-duty as a Product Owner and Social Site Strategist, our Holacracy Implementation team (I was in the first class of trained and certified facilitators at Zappos) where I focus on meeting facilitation and mentoring, our YouTube Team where I lead overall strategy and Zappos.com channel content strategy, my product teams spanning personalization, customer identity, innovation platforms, email systems & others, and I’ve owned roles doing progression design, mentorship and more. 

Let’s start with Holacracy.

What I hear: Zappos went with Holacracy to go flat and remove hierarchy.
Reality: Zappos transitioned to Holacracy because it’s a system of self-organization, not because it would “flatten the org.” Holacracy itself is actually just an alternative form of hierarchy, but the main difference is that it’s a hierarchy of work and not people. Here’s an easy way to think about that: Let’s say you have a Sr. VP of Marketing on one hand, and a Regional Sales Manager on the other. Even though they are on different branches of the org chart, they’re working together on Project A (Marketing-focused) and Project B (Sales-focused). In most traditional orgs, the Sr. VP of Marketing will absolutely make the call on how Project A is run, and if she disagrees with the Regional Sales Manager’s decision on how to execute Project B, she can pull the “title trump card” and veto the Regional Sales Manager. In Holacracy, authority is related to a role (which is tied to work, whereas a title is tied more to the person), so if the Regional Sales Manager holds the role that has the authority to make the decision on how to run Project B, then the Sr. VP of Marketing has no grounds to try and veto the decision.

What I hear: Employees hate Holacracy.
Reality: Honestly, the jury is still out on this one — mostly because opinions are constantly shifting as experience grows across teams. Sentiment is fairly split, but I’d liken it to Democrats & Republicans in the news: Most of the company lies in the middle ground and merely leans toward one side or the other, but you only really hear from/about the extremists. As a facilitator, I hear a lot of feedback from both sides and get to observe an array of scenarios play out that support each perspective. From these observations, I’d say that on a given day, 80% of these issues are people-based, not system-based; that is to say that Holacracy is being blamed in many scenarios where there is a communication/trust/relationship breakdown at fault or someone is misusing the system (whether by intent or not). In any management system throughout history there have always been people who politick, side-step accountability and bend the rules in their favor. Since this shift, it just seems like this behavior is being forced out of the shadows at a higher rate than before. Holacracy is meant to organize the work, not the people filling the roles. People support is ideally addressed by a strong company culture.

Don’t get me wrong, I don’t think that Holacracy is the perfect operating system for our org — I’ve said that since the outset. This is mainly because it came from outside of Zappos, rather than being something organic developed from within the ranks. I think that many of us who see ourselves as advocates can objectively recognize gaps in efficiency and places where the system isn’t quite a perfect fit, but remain on-board because we agree with the “whys” more than the “hows,” and we see Holacracy as a step toward self-organization rather than an end-state. My personal sense is that the people who have taken the time to learn about the reasons behind all the intricacies of Holacracy (meeting rules, the GlassFrog platform, the seemingly endless jargon, etc.) usually lean towards the “on-board” side. It’s also important to note that someone’s outlook on Holacracy is usually interlocked with their first experience(s) with the system. If a leader, former manager or even just someone that you respect is outspoken against or negative towards the new system before you’ve had a chance to form an opinion, you will likely have a similar disposition at the outset. When you’re rooting for something to fail it’s easy to look for fallacies that support your viewpoint while looking at the past through rose-colored glasses. It’s a lot like breaking up with someone. There were probably a ton of rational reasons that the relationship needed to end, but that first time you felt loneliness set in, you romanticized the past and scrambled to convince yourself that it wasn’t that bad. Frankly, I think a lot of us cling to our familiar discomforts rather than embracing the possibility of new ones purely out of a need for certainty.

Let’s talk about the offer.

What I hear: 14% of employees quit because of Holacracy.
Reality: A couple of things here.

1. The offer that was extended was not just about adopting Holacracy. Those who read even the first few paragraphs of the email would have seen that the “rip the bandaid off” with Holacracy approach was actually just an attempt to accelerate a larger movement within the organization. For more details on the bigger vision, watch this video (It’s long but trust me, it’s a lot easier than reading the book).
2. In my personal experience, the vast majority of the people who left did so for a variety reasons, Holacracy being the least of them. What isn’t highly-publicized is that Zappos employees have been presented with a myriad of large-scale changes over the past few years — Holacracy & Teal are just the most recent. Any organization-level change is uncomfortable, if for no reason other than it is, by default, outside of our current comfort zone. To have a change that challenges peoples’ perceptions of progression, compensation, and priorities in conjunction with an expiring monetary incentive to try something possibly more inside one’s comfort zone is tough for anybody to walk away from, especially when it’s the final item in a list of recent personal & professional challenges. The articles I’ve seen also forget that a lot of people who left were spouses in a two-income household (many with dependents) getting over a half year’s pay to leave. In that scenario, it might actually be financially irresponsible to walk away from something so lucrative. For many, this was an opportunity to open a new business, travel the world, become debt-free or move back home to be closer to their families. Those headlines, however, just aren’t as gripping as, “CEO Loses Mind,” or “Zappos Implodes with No Managers.”

Let’s talk about Teal.

What I hear: What you guys are doing is so radical. Why take such a risk?
Reality: Eh…..Yes and no.
A little history: Before free shipping both ways and flexible return policies were an industry norm, Zappos was considered a trailblazer in that space. Before the trend of, “…and here’s our ping pong table!” caught on across corporate America, Zappos already had a culture of “happy employees = happy customers.” tl;dr- This isn’t our first rodeo.

Now, even though risk-taking is in our corporate DNA, I still don’t see this movement as that radical. There are tons of companies out there doing pieces of what author Frederic Laloux defines as “Teal” — some with even more employees than Zappos. The major difference is that Zappos is starting with the defined goal of Teal, whereas these other companies typically implemented their pieces out of instinct, necessity or royal edict from the CEO (OK, that last part was the same at Zappos). We’re just the only ones I’m aware of that are trying to pursue all of the elements simultaneously.

Another complication is that we’re an Amazon subsidiary. There has been no lack of speculation around how this change would be perceived by an owner that has made its name as a meritocracy and is so entrenched in a command & control mentality (oh, and it’s publicly traded, too — additional wrinkle). That pressure has been felt inside Zappos as well. An unspoken tension exists across much of the company around the apparent disconnect between where Zappos has stated we are going (purpose-driven, not profit-driven) and where Amazon firmly stands (profit/growth-driven, not necessarily purpose-driven). This is probably the largest “risk” that I see with a transition such as this.

Let’s Wrap This Up.

So, if I were to wrap this all up in a neat little bow, what I’d like to get across to people is that yes, while we’re trying something new and we’ve hit some sizable speed bumps so far (surely the first of several), many of us are confident that we can tackle these problems. It’s been great to see such interest in what’s been happening at our company, but there are so many great companies out there that deserve your attention and support for driving employee empowerment, transparency and self-organization (Buffer and @Medium come to mind). So please, spread the love!

Oh, and try to keep the negativity to yourself. Nobody needs that.