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Tony Hsieh, CEO of online shoe retailer Zappos and a former venture capitalist, recently invited his employees to leave his company if they feel they cannot mesh with the companys new organizational philosophy, Holacracy, which he had introduced the previous year. With a historically different culture and exceptionally good customer relations, Zappos was once listed among Fortunes top 100 companies to work for – but that was then, and this is now.
Hsiehs memo said, As of 4/30/15, in order to eliminate the legacy management hierarchy, there will effectively be no more people managers. In addition, we will begin the process of breaking down our legacy siloed structure/circles of merchandising, finance, tech, marketing and other functions and create self-organizing and self-managing business-centric circles instead by starting to fund this new model with the appropriate resources needed to flourish.
But when asked to explain his new organization in more detail to Investors Business Daily, he responded Its hard to explain Holacracy succinctly. (Really? If the CEO cant explain it, is it likely that his people will be able to make it work?) Amazing. This sounds like the beginning of a notable business-model disaster.
Consultant Brian Robertson, a computer programmer with limited management experience, wrote a detailed Holocracy Constitution a few years ago and co-founded HolacracyOne to promote the idea. He had become intrigued with the thoughts of Ken Wilbur, who lectures and writes about mysticism, philosophy and psychology. If you want to know more about Holocracys complex rules and procedures, they can be found at http://holacracy
.org/constitution. But what you read there may blow your mind.
This web site explains that Holocracy is a distributed authority system which eliminates traditional management and turns employees into leaders and followers at the same time. Instead of the usual managers, Holacratic organizations have overlapping circles. CEO Hsieh added in the Investors Business Daily interview that there are also sub-circles with sub-purposes to contribute to the greater purpose. There are no job titles, and workers attend governance meetings to find out what they are expected to do. And, of course, Zappos has purchased GlassFrog, a Brian Robertson software program, to keep track and organize everything.
Steve Denning, who writes for Forbes, points out that the Holacracy Constitution never mentions customers or a marketplace feedback mechanism. He says that it is focused inwardly, with extremely detailed procedures, and that the new hierarchy is even more strongly hierarchal than the old management system.
Rebecca Greenfield writes in Fast Company that HolacracyOnes services cost between $50,000 and $500,000 to help companies make the transition, and that seats at its seminars sell for as much as $4,000. (An answer to a consultants money-making dream!)
Most people understand that there are consultants who think up buzz words to sell books and seminars about unproven or ancient concepts. They usually claim a new wrinkle to introduce a fad which fades away when another management discovery appears on the horizon. Thats their business, I suppose, but this is verging on the ridiculous.
Jack Goodhue, management coach, may becontacted by e-mail at

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