On Zappos, Holocracy, and The Exercise of Leadership


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Tony Hsieh Has Opened Himself For Criticism By Embracing Holocracy

Let’s start this conversation with the following statement by Michael Lowenstein in his recent post on holocracy at Zappos:

In unilaterally moving his company to an arguably more utopian style of operations, an initiative some have felt is open to question … observers feel that Tony Hsieh has put his highly successful enterprise at some risk, and maybe more than he’d like to believe. What is the real price, to employees and customers, of such a massive culture change?

Clearly Michael Lowenstein and some other commentators do not approve of Tony Hsieh (CEO, Zappos) taking this course of action. Which is why emotionally loaded words are used: unilateral, utopian, risk.. And fear (of this change) is evoked rather than possibility. Let’s leave aside the question of whether holocracy is or is not right / workable in Zappos, whether it will work or not work. Why? Because there is no logical predetermined answer to these questions. The realm of human affairs is open-ended, not determinate, and human beings play a powerful role in influencing-shaping that which occurs. Instead, lets grapple with the questions of leadership.

Is human-centred leadership simply about giving folks what they want?

Is human-centred leadership simply about listening to the voice of the employee (and the customer) and doing that which these folks are calling for? Is human-leadership simply being responsive to the needs of the folks one is leading? It occurs to me that this is the common-simplistic understanding of human-centred leadership. And it is incorrect.

I say that the root of human-centred leadership is to articulate, stand for, and embody a new conception of what it is to be a human-being! It occurs to me that the dominant form of leadership, management and organisation design reduces human-beings to machinery, resources, pawns in the game of business; The creativity, enthusiasm, flexibility, intelligence, and responsiveness of the human-being is sacrificed at the altar of control. It occurs to me that sociocracy (and the acceptable American version, Holocracy) opens up, unconcealed, and calls forth a new conception of human_being in the workplace: human_being as a cooperative being; human_being as a social-communal being; human_being as self-directed being; human-being as a fully rounded being – thinker, carer, doer…. It occurs to me that sociocracy (and Holocracy) open up the possibility of dignity and nobility into the conception of what it is to be a human being in the workplace. And into society.

Leadership As Willingness To Speak Up, Disclose, and Stand For New Worlds of Possibility

How is it that the new is brought into being? Is it by leaving it to administrators in their many disguises (including the disguise of manager) to come up with the new? I say No! Administrators simply administer that which is. At best they administer somewhat better and tinker here and there with that which is. So who is the cause of bring the new into being? Leader: the folks who stand up, articulate a new possibility, and embody this possibility in the way they show and travel in the world.

Let’s listen to the speaking of Ronald A. Heifetz and Marty Linsky in their book Leadership On The Line:

Each day brings you opportunities to raise important questions, speak to higher values, and surface unresolved conflicts. Every day, you have a chance to make a difference in the lives of people around you.

As many have noticed our age is calling out for leaders and the exercise of leadership. There is not only opportunity but also the need to make an impact, influence change, cause a better world.. Yet there are so few leaders and whilst the exercise of leadership is open to us all, few of us exercise leadership. Why is it that just about everyone wants to be seen as a leadership and just about nobody exercises leadership?

Leading Is Risky Business!

Let’s listen again to Heifetz and Linsky (bolding mine):

….every day you must decide whether to put your contribution out there, or keep it to yourself to avoid upsetting anyone, and get through another day. You are right to be cautious. Prudence is virtue. You disturb people when you take unpopular initiatives in your community, put provocative ideas on the table in your organisation, question the gap between colleagues’ values and behaviour….. You risk people’s ire and make yourself vulnerable. Exercising leadership can get you into trouble.

To lead is to live dangerously because when leadership counts, when you lead people through difficult change, you challenge what people hold dear – their daily habits, tools, loyalties, and ways of thinking – with nothing more to offer perhaps than a possibility. Moreover, leadership often means exceeding the authority you are given to tackle the challenge at hand. People push back when you disturb the personal and institutional equilibrium they know. And people resist in all kinds of creative and unexpected ways that can get you taken out of the game…

However gentle your style, however careful your strategy, however sure you may be that you are on the right track, leading is risky business.

Final Thoughts On Leading

I find it interesting that the folks who speak Customer lament about the lack of movement towards customer-centricity. And the finger always points at the lack of courage / unwillingness of the Tops to effect change: to put at risk the fruits of business as usual and make the significant, even drastic, changes that are involved in an organisation showing up and operating as a customer-centric. Yet, it is these very folks who are quick to step up and criticise Tony Hsieh for exercising leadership and effecting major change in the organisational design of Zappos.

Why this criticism of Tony Hsieh and of Holocracy from self-proclaimed gurus, management scientist, consultants, and the media? Ask yourself who loses out if Holocracy is embraced fully within Zappos and is made to work. Ask yourself who loses out if it does turn out that traditional management and organisational design turns out not be necessary – indeed a deficient form or organisation. Is it not all the folks that make a living from catering to this traditional way of leading-managing-organising an enterprise? If the knowledge and will to plan-organise-effect change is proven to lie with the folks in the business then what role is their for those who pander to the needs of managers? Further, think what happens if sociocracy (or one version of it Holocracy) turns out to be effective in business. Think about the implications for the way we organise all institutions and society itself. Does it not put the power and privilege of the elites at risk?

I leave you with these words of wisdom from Heifetz and Linsky (bolding mine):

Asking an entire community to change its ways …… is dangerous…..

People do not resist change, per se. People resist loss….. You appear dangerous to people when you question their values, beliefs, or habits of a lifetime. You place yourself on the line when you tell people what they need to hear rather than what they want to hear. Although you may see with clarity and passion a promising future of progress and pain, people will see with equal passion the losses you are asking them to sustain….

The hope of leadership lies in the capacity to deliver disturbing news and raise difficult questions in a way that people can absorb, prodding them to take up the message rather than ignore it or kill the messenger……

Thus, leadership requires disturbing people – but at a rate they can absorb.

I dedicate this conversation to all who exercise leadership and in doing so they put themselves on the line. That includes but is not limited to Tony Hsieh.

Maz Iqbal
Experienced management consultant and customer strategist who has been grappling with 'customer-centric business' since early 1999.


  1. As you know I have great respect for the ability of leaders to shape and guide enterprise cultures to offer greater stakeholder value – http://customerthink.com/the-power-of-servant-leadership-to-build-and-sustain-stakeholder-value/ The title of my blog post was “Holacracy and 15% Employee Departures at Zappos: What Does This Mean for Legendary Enterprise Culture and Customers?” The theme had much less to do with Tony Hsieh’s leadership style than with whether due consideration or study was given to how holacracy could impact customer experience..

    I’m quite familiar with the leadership perspectives of Heifetz and Linsky, and many others as well; but I fully stand behind what I wrote. If you take exception to the “emotionally loaded words” used to describe Hsieh’s cultural move, please recognize that holacracy has already had huge emotional consequences for Zappos employees – those who have stayed and those who left – and could, potentially, for customers as well. As Saint Bernard of Clairvaugh famously wrote almost ten centuries ago, and as could as easily be applied here: “The road to Hell is paved with good intentions.”

  2. Hello Michael,
    First and foremost, I thank you for making the time to share that which you have shared by commenting.

    Allow me to respond to the points that you have raised:

    Yes, I agree that you raised the question about the impact of Holocracy on the Customer Experience. Do not agree that it was simply a question. In my reading it occurs to me that you had already made a judgement – a definitive judgement that customer (and employee) needs/interest/impact had not been taken into account. What you did not provide was any evidence that this is the case. Specifically, I do not remember you mentioning whether you had talked with Tony Hsieh, raised the question of impact, and what answer he gave. Neither did you mention talking with any other significant insider at Zappos.

    Do I have an issue with you taking the position that you take in your post? No. I stand for a world where every single person has the right and is given the opportunity to share his voice, speak that which s/he is called to speak.

    Do I take exception to you using emotionally loaded words? No. Being a flesh and blood human being, you emote, I emote: we are affected by that which occurs. And my sense is that your emotional disposition is that of being against the imposition of Holocracy at Zappos. That is fine. I am merely making explicit that which is implicit. I am clear that behind ALL objectivity lies subjectivity.

    Finally, I invite you to consider that I could have used a number of folks (and articles) as jumping off point for my speaking. I chose you simply because you are a fellow author / speaker here at CustomerThink. Put differently, I am not having a go at you. I simply used your assertion as a jumping off point to talk about Holocracy and Human-Centred Leadership. Why? You made a good jumping off point.

    I wish you the very best.


  3. I have mixed feelings about the Holacracy experiment at Zappos.

    On the one hand, I applaud Tony Hsieh’s courage in taking the leap to a new operating model for the organization. In the same way that I supported Ron Johnson’s attempt to radically change JC Penney. That ended in Johnson being fired and a return back to the old ways.

    Zappos was not in trouble like JC Penney. Does that mean stop innovating? No. But innovating in a big company with peoples lives at stake is different that a startup with nothing to lose. If Hsieh had implemented Holacracy earlier, then it would have a better chance of success. Now the organization will have to go through a painful change process that may distract them from … oh yeah, the people paying the bills.

    Yes, the customer seems to be missing. So I ask myself, after Holacracy is implemented, what will this new/better world look like? Will customers see a difference? If they do, then fine. If not, then what was the point?

    I’ll admit that I was trained, like 99% of people, in a world of hierarchies. Everyone complains about them, but they are well understood and bring order to work lives. In the same way that we know how a web site should work, if someone tries to implement a completely new way to access the Internet, it’s frustrating to users.

    Holacracy at Zappos is a case study in why big companies don’t innovate like small companies. Simply put: they have more to lose.

    Summing up, I don’t see the point of Holacracy at Zappos. It’s a huge risk for an organization that was already performing at a high level. In the end, I don’t think it will work, and Hsieh will leave to conduct his experiment elsewhere, probably a startup.

  4. Bob’s points are virtually identical to mine. I haven’t spoken to Tony Hsieh about his reasoning for the move to holacracy; however, he has given scores of interviews and written extensively about his motivation to change the management (more precisely, “non-management”) model. Nowhere has there been – at least so far as I can determine – any reference to the potential impact on customers and the customer experience.

    Further agree with Bob: If there’s no impact on customers, or if the impact is positive, then way to go Tony. Score one for Napoleon. If negative, then reasonable questions are: a) what’s the point and b) why wasn’t the potential impact on customer experience more thoroughly examined.


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