Zappos to employees: Get behind 'no bosses' approach

Zappos.com CEO Tony Hsieh is offering an exit strategy to any workers who aren't sold on the unconventional idea. Photo / Getty

No job titles. No traditional bosses. No conventional corporate hierarchy. It might sound nice, but would you really want to work there?

That's the question, essentially, that Zappos is asking its employees after experimenting with a radical approach to management. Called "holacracy," the new system replaces the conventional command-and-control workplace with a series of self-governed teams, known as "circles." The effort is supposed to speed decision-making, share authority and help the organisation become more innovative.

In a recent memo, which was first reported by Quartz on Thursday, Zappos CEO Tony Hsieh wrote that he is offering an exit strategy to any workers who aren't sold on the unconventional idea. If they are an employee in good standing and meet certain criteria, they can leave the online retailer and get at least three months' worth of severance.

In one sense, it's a way to help employees cope with radical change - while, in the process, filtering the employee pool of the least engaged folks. It's a fairly generous approach. When most companies roll out new strategies or new management tactics, after all, non-believers who voluntarily quit get little more than a handshake on their way out the door.

At Zappos, however, an exit prize is common. When Hsieh moved the company to Las Vegas from San Francisco in 2004, he offered to help pay for employees to move back if they decided Sin City wasn't for them. He also famously offers new workers $2000 to quit if they decide the company's zany culture isn't a fit. (About a year ago, Amazon CEO Jeff Bezos - who also owns The Washington Post - revealed he's been doing something similar, inspired by "the clever people at Zappos," which Amazon acquired in 2009.)

But Hsieh's memo is also a sign that not everyone is buying into the company's radical new approach. In the lengthy memo, which clocks in at more than 4,700 words, Hsieh writes that "we haven't made fast enough progress" toward the new approach and admits it's "not for everyone." As a result, Hsieh writes that he plans to "take a 'rip the bandaid' approach" to speed adoption, offering employees who aren't behind it a way out.

The memo also includes two articles, one of which attempts to bust common misperceptions about the concept of "self-management," a model where the usual functions of a boss are handed over to the organization at large. Also, in order to qualify for the severance, the memo detailed that employees are required to read a book called Reinventing Organizations, as well as watch a one hour and 40 minute YouTube video by the author - an apparent effort to make sure employees really get what Zappos is trying to achieve.

Hsieh's memo follows reports in the media that have critiqued the concept of "holacracy" as impersonal, dogmatic and comically hard to explain. Others have cited complaints by Zappos employees who are frustrated with the new system, which apparently includes protocol-driven meetings and a jargon so peculiar it can make other corporate lingo sound like poetry. (From Hsieh's memo: "Functions that were previously silo'ed will be embedded inside these business-centric circles instead," he writes. "This structure will require fewer roles that primarily manage expectations and drive alignment across legacy silos.")

John Bunch, who is helping to lead Zappos' transition to the new approach, said in an interview with The Washington Post that the language is often a challenge at first. "Yes, it can seem artificial and forced, and it can seem alien when you're learning it," he said. "But it's kind of like learning the rules of a new game you've never played before."

Bunch also said the move hasn't won everyone over: "There have been some people who've embraced those changes with open arms, and other people for whom maybe it [hasn't] resonated as strongly." While he says the turnover hasn't been "particularly high" yet due to the new approach, he would not share the company's forecasts for how many people it expects might accept the offer to leave. "We know that this is going to be painful, but we also have a lot of faith in the vision of where this is going to take our organization," Bunch said.

So what will happen to the supervisors at Zappos who don't take the offer, given that the company plans to effectively eliminate traditional managers as of April 30? Hsieh's memo says they will keep their salaries through the end of 2015 and will get guidance for reinventing themselves into new roles at the company. Bunch said he anticipates having no layoffs due to that change. "Our goal is certainly that everybody figures out how to contribute and how to help the organisation," he said.

If the whole idea sounds pretty out there, it is - but so are many of the ways Hsieh thinks about running the online retailer. (He's considered creating a Zappos airline, for one; he's also testing out a system for compensating his call center workers with an Uber-like surge pricing approach.) Hsieh, Bunch said, has always been a daring thinker and "is a very firm believer that this is the future of organisations."

If outsiders have a hard time grasping the concept or the language, Bunch adds, "to a certain extent we don't care. Whatever people outside the company think about this, we're only doing what we think is best for the organization and for the people within."