Business

How Zappos is getting rid of managers to retain a flat startup culture

Above: Zappos chief executive Tony Hsieh

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At Zappos, employees ring cowbells, cover the walls with art, and stroll into the chief executive’s cubicle to pitch an idea.

The zany Zappos culture isn’t for everyone. At the most recent “all hands” meeting at the brand-spanking-new offices in Las Vegas, one female employee walked into a case of tarantulas to win a $250 gift card. The evening’s festivities kicked off with a performance of The Lion King and a late-night bash in downtown Vegas.

I recently paid a visit to CEO Tony Hsieh at the Zappos headquarters. During that trip, I chatted with Hsieh about his ongoing efforts to create a flat corporate structure at Zappos, and banish hierarchy. He told me that on a regular basis, the executive team will serve lunch to employees to get to know them better.

According to an article in Quartz, Hsieh is going one step further with an ambitious plan to get rid of managers altogether.

In November at the all hands meeting, he announced that the 1,500-employee company would be restructuring into what is known as a “Holacracy.” That means a flat structure, with no job titles and no managers.

Hsieh reportedly told the crowd of employees that “Darwin said that it’s not the fastest or strongest that survive. It’s the ones most adaptive to change.”

The Zappos ‘squishy’ culture

Zappos employees are asked for humble brags, a motivational exercise.

Above: Zappos employees have a place for their humble-brags.

Hsieh’s goal is to ensure that Zappos can stay true to its startup roots. To prevent bureaucracy, the company produced a 500-page “culture book,” and it hired a “culture coach” in its early years.

“See, culture is squishy … people say, ‘We’ll let dogs come in, and we’ll put beanbag chairs in the office, bring in foosball tables.’ But that’s just window dressing. The culture is what you do and how you do it. It encompasses everything,” culture coach David Vik explained in a recent interview with VentureBeat.

This is virtually the opposite approach taken by Jeff Bezos, the chief executive of Zappos parent company Amazon. The online retailer’s approach is famously “gladiator-like” and encourages fierce competition among employees.

Hsieh’s goal to avoid any kind of bureaucracy won’t be easy. The company is hiring like crazy, and it recently crossed a billion dollars in annual sales. Most companies rely on management structures to maintain that pace of growth.

Hsieh will likely encounter resistance if he goes ahead with plans to curtail management.

The company’s most experienced employees may choose not to stay and take manager-level jobs elsewhere. Some people crave the title and the respect that comes with a high-level position; others need to feel that they’re ascending a ladder. Inc cites research to show that people actually like hierarchy, which is “conceptually cleaner” and less confusing than a flat structure.

Some employees might not work as hard without the potential for a promotion or management position.

That said, many of the startups I’ve encountered in my own “culture series” for VentureBeat are taking a novel, even experimental, approach to management. The objective for most startups is to stay innovative — and not to avoid bruising egos. Indeed, Zappos may lose some high-ranking employees, but it may be worth it to avoid the bureaucracy that some claim crippled companies like Microsoft.

As reported by Vanity Fair‘s Kurt Eichenwald, Microsoft’s top-down approach — “stack ranking” — stifled overall innovation and killed an early 1998 tablet, e-reader deal, and a pre-Facebook social network.

Most startups will take some drastic measures to avoid such bureaucracy. For instance, San Francisco-based Github encourages employees to live and work anywhere in the world, and Airbnb encourages workers to test the product through regular travel. In 2014, we’re likely to see more examples of companies adopting and embracing flat structures.

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More information:

Zappos, a subsidiary of Amazon.com, is a leader in online apparel and footwear sales by striving to provide shoppers the best possible service and selection. We carry millions of products from over 1000 footwear and apparel brands. Est... read more »

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