LAS VEGAS — On Tony Hsieh’s desk, next to a jumble of trinkets and three Coke Zeros, is a stack of books topped by “Rocket: Eight Lessons to Secure Infinite Growth.”
Aside from the title, with its pitch to the executive suite, you would never guess this was the CEO’s work spot, flanked as it is by the same low cubicle partitions as any other desk at Zappos.
Zappos disrupted the retail industry 15 years ago when it launched as an e-commerce platform for selling shoes, focusing its strategy on customer service in the form of friendly call centers as well as free shipping and returns.
Hsieh this year projected that profits would nearly double in 2015, to $97 million. But there’s another reason people are studying the company these days: Its nearly 1,500 employees are operating without any managers.
Hsieh decided about a year ago to get rid of all bosses. And as the holiday crunch begins, many are watching how that decision is holding up under the strain of the retail industry’s most important and demanding season.
No one reports to anyone anymore. Instead, employees self-manage and belong to decision-making circles that keep the company operating. It’s called a “holacracy.”
Much has been made of Hsieh’s organizational daring. And many wonder: Is this experiment to create a supervisor-free workplace really working? But a more fundamental question might be: Why is he doing this?
That copy of “Rocket” might be a clue.
Hsieh sees self-management as a strategy, not an experiment. He says the restructuring is ultimately in service of an expansion into new industries. The long-term goal, he says, is to move Zappos beyond shoes or clothing or even e-commerce.
Blowing up the internal bureaucracy is the first step.
“I guess in some ways it’s analogous to Virgin, where they started out in music and now they do airlines and a hundred other businesses,” Hsieh said.
But where Virgin is “about being hip and cool,” he says, Zappos would keep its hallmark — customer service — at the crux of its new ventures.
Although Hsieh might see customer service as the thread binding any new ventures, Scott Galloway, a branding expert and a professor at New York University’s Stern School of Business, says that focus is unlikely to help Zappos transition to industries so far afield.
“It’s lazy and naive to think that your brand could carry the day,” Galloway said. “This is an execution question.”
A more realistic expansion, Galloway offered, would be something such as call centers or e-commerce platforms that Zappos could sell to other businesses. Even at Virgin, he said, far more ideas have failed than succeeded.
Hsieh sees bureaucratic structure as the big hurdle to any company’s ability to transform itself and stay relevant as the market shifts. If he could create an organization with the freedom to morph continually to fit new missions, Hsieh posits, then he might have found a way to broaden the industries it can play in as well.
In lieu of bosses and a hierarchical management structure, Zappos comprises about 500 “circles,” each essentially a working group or committee of several employees.
Hsieh says the circles could ultimately represent new business lines or startups within Zappos.
The dismantling of management by supervisors, according to Hsieh, is a way to “really just have everyone at Zappos act like an entrepreneur.”
By smashing the corporate ladder, he is hoping to keep and attract a specific kind of worker — the kind who is disruptive and bold and who would otherwise leave to realize his or her own great new idea.
“I would hope that, in the future, employees see Zappos as really a less risky way than just the pure entrepreneurial route to follow their passions,” Hsieh said.
Since the management structure changed at Zappos, 14 percent of its 1,500 employees have taken buyouts rather than stick around. That has prompted a number of observers to question whether Hsieh’s approach to creating a happy workplace has backfired.
Hsieh says he knows that “not everyone is comfortable with all this blank canvas.” And he’s not trying to make every worker happy; he’s trying to make the type of employees he wants happy.
