This interview excerpt discusses Zappos' move toward a flat/horizontal organizational design (holacracy) after Tony sold the company to Amazon. Speakers debate practical issues: inequitable equity distribution at sale, employees' loss of marketable titles and raises, whether workers can self-lead without formal hierarchy, and motivational mechanisms (bonuses, peer review). One consequence cited is over 200 employees leaving amid the change.
Questions this video answers
Over 200 employees are leaving.
The fact is that Tony sold his company to Amazon for a big sum of money, and when he did so, the equity of the company was not exactly distributed in a way that was pro rata towards the employees. So to switch this over now after he's had that big sellout and after he's had that big windfall can kind of be counterintuitive to most employees where they're saying, okay, fine, we're all at one flat level now, but where was my cut when you sold the company at Amazon?
Jeff, what is your objection to this idea that workers, employees can't be their own leaders here? I guess you're basically arguing that people need leaders and you need leadership and lines of reporting to make an organization work optimally. Yes.
Different kinds of organizations require different types of leadership, and I think certainly an ad agency who manages differently than a daycare center and both of those differently from a, a TV network or a hospital ER ward or a combat situation. Very different types of leadership styles. Some are more autocratic, some more consensual. But chaos is really never the right answer. And when people will talk about this kind of empowered organization, this holography or whatever they're calling it, it is. It is, you know, denying. What we know about human nature is that there's an order there, whether or not we want to allow it. If you study police, policemen on police forces, you look at fishermen, communities look like lateral communities or physicians. There's a hierarchy in there. It's a status hierarchy, even if we don't acknowledge it. It's like the. Remember the old Heisenberg principle in physics that sometimes it's our metrics, the metrics get confused with the phenomenon itself. There's an order there, whether or not he wants to acknowledge it, and he's just not in control of it. So it creates a lot of confusion over who's in charge of what. And of course, the biggest paradox at all, not to rush the issue, because I bet Matt and you agree on this, is that he's initiated it. I mean, it's a bit of a hypocrisy that thou shalt participate or else. How is that employee participation elect?
Matt, Let me, let me jump in and ask you, Matt. I mean, one of the points you made, and I think it's an interesting one, things that come to my mind, I wish Tony were here to talk about it. We invite him to come on, and we would love to hear from him who determines and how. Who gets a raise, number one. Number two, don't employees, Matt, Sometimes like the idea of having a hierarchy so that they can aspire to something or demonstrate growth on their resume to move on to the next job and make a little money.
Yeah, I mean, should they ever leave Zappos, you know, they're going to call a recruiter, and a recruiter is going to want to know what their title was at their current organization. And that title is going to be one of the marketable assets that they take to potential new employees. So if everybody has the same flat title of worker, then some of the employees might be taking 5, 10 years steps backwards because all of a sudden they're at a title that's far more junior than to the heights which they've strived to achieve in their career. So I think it's the transition. There are some employees out there that will want to work in a hole accracy, but the fact is that there are many employees there who did not sign up for this, and now they're being forced to adopt this, which is why you have over 200 employees that are leaving.
Jeff, how do you, how do you motivate, I mean, to that point, how do you motivate people absent a hierarchy?
Well, you know, you don't necessarily have to have vertical career ladders, although I do agree with Matt and you that it's important to have some career ladders for some sense of aspiration. But you can have lateral organizations, but recognize the status hierarchy, whether or not you're a physician or a school teacher or all kinds of lateral positions. But there's a hierarchy there. But there are other ways through bonuses and things. But the bonuses are determined by peers, so it creates a certain group think mentality. Nobody wants to be a rap bus, wants to violate a norm. You wind up with a lot of analysis, paralysis or onlookers that are kind of passive.
I think when you get. When you get to a point where you have managers, managing managers, that's where you've got too many managers, basically. Jeff, thank you very much. Matt Britton of mri, thank you as well.
