For several months, Zappos and its CEO, Tony Hsieh, attempted to move the company into a holacracy, a form of decentralization or self-management in an organization. In the first quarter of 2015, he notified the company's employees that they are entitled to 3-month severance pay if this change would not work for them. A month after sending the notice, 14% of the employees have stopped reporting for work, which included technical staff. This highly put at risk the plan of its parent company (Amazon) to move into a new online platform.
Noah Askin and Gianpiero Petriglieri
Harvard Business Review (IN1249-PDF-ENG)
August 26, 2016
Case questions answered:
- Evaluate the holacracy change program at Zappos. Use Kotter’s change framework to analyze the difficulties Tony Hsieh is experiencing.
- The culture of Zappos is often credited with contributing to the company’s success. Given your understanding of organizational culture, do you think this attribution is correct?
- Zappos employees are renowned for being highly motivated. Why do you think they are so motivated?
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Tony Hsieh at Zappos: Structure, Culture and Radical Change Case Answers
1. Evaluate the holacracy change program at Zappos. Use Kotter’s change framework to analyze the difficulties Tony Hsieh is experiencing.
Holocracy is an organizational governance framework, and its main principles are self-management and self-organization. Holocracy is a hierarchy of work and not employees/people.
As this method is not suitable for every employee, the change management process plays a significant role in the smooth transition to this alternative form of hierarchy.
Tony Hsieh felt that the transition was going slowly, but he did not realize that transformation is a process that demands time (Figure 1). As he was pressured to accelerate the process, he either skipped stages or did not complete them properly.
Figure 1: Kotter’s change framework
Tony Hsieh did not raise the urgency for change. This first stage is crucial because leadership has to convince at least 75% of the management team of the opportunity. Tony did not manage to convince of the need for change.
Moreover, Tony did not create/build a powerful coalition with people who share the same vision. This stage is also important, as this group is regarded to be the people that will lead the change effort (followers) and properly communicate the vision and new strategies.
Tony Hsieh did not manage to achieve a minimum critical mass, so it was difficult to see much progress in Phase 3 and beyond. This is evidenced by his concept/vision, which was mainly communicated by book, mail, and online talks.
Successful implementation of each stage requires the…
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