Zappos

Change Analysis

MGMT-4419

Kevin C, Julia P, Amanjot S

Table of Contents
Introduction 2
The Change – What and Why 2
The Impact and Import of the Change 4
Supporting Frameworks 5
Conclusion 7
Resources 8

Introduction
Zappos.com is an internationally successful online retailer born from one man’s frustration in finding the right pair of shoes. The company has come a long way from being a start-up funded with minimal investment and manpower, and which has grown to be an e-retail giant with 2014 profits of $54.5 million. Upon inception, as well as through original operation and merger with Amazon.com, the company utilized a formal organizational hierarchy; in recent years, however, they have chosen to adopt a more radical internal makeup called holacracy. Herein, an examination of the change, how and why it was made, its nature, and positioning concepts for the change will be discussed.
The Change – What and Why
Holacracy is defined by Zappos Insights as being a “comprehensive practice for structuring, governing, and running an organization;” furthermore, they anticipate that “it replaces today’s top-down predict-and-control paradigm with a new way of achieving control by distributing power. It is a new “operating system” that instills rapid evolution in the core processes of an organization“ (www.zapposinsights.com). Holacracy is a social technology management tool that has been adopted by both non-profit and for-profit companies throughout the world, including in countries such as Germany, Australia, New Zealand, United Kingdom, France, the United States of America, and more.
For Zappos, holacracy is reflected in CEO Tony Hsieh’s attempts to turn the e-commerce site into a sort of entrepreneurial utopia. Hsieh experiments with business and conventional civic organization, as he also recently relocated their corporate headquarters from the suburbs of Nevada to the old Las Vegas City Hall. According to Hseih’s commentaries, he wants to make Zappos function like an independent city, rather than as a traditional bureaucratic entity. Hseih’s reason for intent as operation like a city is that “research shows that every time the size of a city doubles innovation or productivity per resident increases by 15 percent. But when companies get bigger, innovation or productivity per employee generally goes down... in a city, people and businesses are self-organizing. We're trying to do the same...” (www.zapposinsights.com). Hseih reasons the change based on statistics that companies which were once on Fortune’s top list a half a century ago are no longer existent. He has also attempted to turn Zappo’s into a “lab,” where some plague of the large corporation would be confronted and ultimately “cured,” such as employees’ unwillingness to take risks, resistance to change, disenchantment, troubles with creativity, and the inability to surface problems and progress quickly. Hseih’s holacracy initiative seems to have believable and valid justification, and many start-ups of technical orientation have similarly decided to re-organize their managerial routines in like fashion.
The change to a holacratic organization at Zappos involves implementation of a radically unconventional “self-governing” operational system where managers and job titles are completely absent. Interestingly, the very tem “holacratic” is derived from the Greek language, where holon implies a whole as a compound of the even greater whole. Such a variation of holacracy is flatter, as there is more fair power distribution, per Groth (2014). As a result, a company with holacracy is made up of various circles, as is the case for Zappos, who has roughly 400 circles in their rollout. Additionally, an unlimited number of roles within these circles are implied, and there is no more possibility to hide under title, as the whole system is designed with radical transparency.
As Hsieh points out, holacracy is being used to make his 1,500 employees more