A look at a few of the problems Zappos is having making Holacracy with within their organization. If I were to sum...

A look at a few of the problems Zappos is having making Holacracy with within their organization. If I were to sum…

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A look at a few of the problems Zappos is having making Holacracy with within their organization. If I were to sum it up on a few words, it would be too much of a focus on organizational process.

My critique of this article is that it unfairly ascribes the motivation for trying Holacracy as a desire to turn people into highly efficient software. That’s simply not true. The goal behind the management system is to develop a non-hierarchical approach to managing an organization.

I have been watching some of these experiments over the past few years, hoping that they would work. Years ago, I actually met with the founder/visionary behind Holacracy while he was visiting Seattle. I was running a similar experiment with my own organization at the time, and running into problems. The core of the difficulties? Too much energy was going into process, and it was bogging us down.

Hierarchy, it turns out, is a pretty efficient model for making decisions amongst a group of humans. It bothers me to say that, but it’s true. It does have all kinds of drawbacks though. Some of these can be overcome with culture and process innovations, but that requires a management team that fully acknowledges these pitfalls from the get go.

I personally am of the belief that as our software systems get better, we may actually be able to make non-hierarchical management structures work, as software takes up some of the complexity and awkwardness of managing the process. Until then, I’m not going to bash leaders like Tony Hsieh for trying to make stuff like this work. It’s a risky move, to be sure, but the intention behind it is laudable.



  1. I agree that the article puts too harsh a spin on Holacracy. I’ve pointed it out to Tom Thomison, Co-Founder of Holocracy One.

    However, Holacracy is a hierarchical system. It replaces a hierarchy of individual managers with a hierarchy of groups called Circles. That might be the reason that the people at Zappos are struggling with it.

    Fixed, power hierarchies are the problem: lack of engagement and absence of innovation are just two of their most covered symptoms.

    To be clear, hierarchies happen all around us, naturally. But they do so in response to a given environment. A static power hierarchy doesn’t—it actually gets in the way.

    For example, at Nearsoft, Inc we use dynamic Leadership Teams (LT) to deal with specific issues. Hiring, firing, assessments, salary adjustments, and even how annual bonuses are distributed are handled by dynamic LTs.

    Anybody who perceives a problem can organize an LT. They don’t need permission from a “higher” LT or from any individual. An LT forms, comes up with a decision, and then goes away.

    The key is that they are not static, nor permanent. Anybody can call for one and anybody can choose to participate. No permission needed.

    I call it a DIYcracy, a system of self-governance that continues to grow and morph as needed by us, our organization, and its ecosystem.

    It works and it is scalable. It has helped us grow to 250+ people and counting; our revenue has grown 40%/year on average. A static power hierarchy would have been a lot more costly to run and would have held us back overall.

    The people at Zappos will figure things out. Their heart is in the right place. Holacracy is just a phase, an exercise they’ll learn from.organize.in – Click here to proceed.

  2. Thanks, Matt Perez​.

    It’s been a few years since I dug into this, but I was under the impression that those circles were dynamic too, and shifted in response to changing conditions within the organization.

    I agree that that dynamism is the key.

    Thanks too for sharing your experience at Nearsoft. Sounds cool. I take it that it isn’t resulting in lots and lots of meetings? That was one of the issues we were running into when I tried implementing something like this.

  3. By the way, that link is giving me some really weird (bad) redirects…

  4. Gideon Rosenblatt No, no more meetings than “normal.” The system, such as it is, does not require everybody to vote on everything all the time.

    We all know what the co’s purpose is, it’s values, our business model, our strategy, and what our finances are (including salaries) so everybody knows in principle everything they’d need to know to make a decision for the company. it takes practice and mistakes happen but we learn from them and life goes on.

  5. That’s really cool, Matt Perez. Sounds like a great place to work. Got a meeting coming up right now, but I want to check more into what you’re up to.

  6. Sure, just let me know.

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