Holacracy, Zappos, Spotify, and All Things Self Management

I sat back anxiously as I sent the article describing Holacracy, to my father. To understand my anxiety, you have to know a little bit about my father’s background. My father spent 35 years with Hobart, 25 of those years in a form of management. As a young boy, I remember visiting my father at the office and witnessing with my own eyes his commanding presence and the tight-knit relationships he had with each of his employees. In my mind, he was the captain of the ship, and he was going to drive his team, his branch, his company to success. To me, my father exemplified the command and control model; I braced for his head to explode as he was reading the article.hammer-and-nails

As soon as he finished the article, he turned to me and said, “I completely agree.” Needless to say, it was MY head that exploded upon hearing that from him. He explained that over the years in a leadership position he found that command and control, or as he described it ‘Hammer and Nail’, only produces short term results. Let me expand his metaphor:

“Managers are misguided in thinking that they are a ‘hammer’ and the employees are the ‘nails’. A hammer drives a nail downward onto a surface; what happens when the head of the nail reaches the surface? It can’t go any further! The same applies for people. If managers continuously pound away at their employees then there is no room to grow; they only have one direction. Leaders, not managers, quickly realize that their purpose is to lift their employees and encourage them to grow. Leaders serve as the mentors/guides for their employee’s professional growth. He/she recognizes that the people make the difference.”

Set aside all the different agile frameworks, acronyms, sales pitches, etc. and examine what we’re trying to accomplish. At the heart of it all, we’re encouraging self organization of the teams. If team members are heavily constrained in what they can do, they simply won’t move in the direction of self organization and become highly dependent on managers.

Does it work?

It’s challenging not to get excited when you read about these leadership strategies. The success stories of companies like Spotify and Zappos, fuel the fervor and build the cases for other organizations seeking to make the leap. It cannot be denied that these models are on to something, and their success is no mere coincidence. They have proven that the top-down approach doesn’t stand alone in successful leadership methods. At the very minimum they have proven what many traditional organizations wrote off as impossible.

The Challenges

Adopting this view of leaders over managers comes at a cost. Steve Denning- one of the major leaders behind the Creative Economy movement, described some of the resistance at Zappos in his Forbes article (May 2015):

Not everything has gone according to plan. Critics of Holacracy—traditional managers who basically want Holacracy to fail— have seized on the fact that CEO Tony Hsieh said recently that his company had not “made fast enough progress towards self-management.” They were delighted to hear that when employees were offered several months’ severance pay to leave if they didn’t embrace what was happening, 14% opted to leave–a huge increase on the normal 1% attrition rate.”



Tony Hseih, CEO at Zappos

Larger, established organizations have a very hard time making the transition. Unlike other social movements in a large organization, grassroots momentum is not enough. The key to an organizational transformation is middle management. I’m zeroing in on middle management because they are the ‘interface’ between the executive hierarchy and employees. Middle managers feel threatened by these ideas- they fear that they will become obsolete. Driven by these fears they will outright shut their employees down and sometimes go as far as undermining their own leadership’s desire to change. When faced with possible dissension, Tony Hseih, CEO at Zappos, threw down the gauntlet in his now famous ultimatum to his employees: “Adopt Holacracy or Leave”. In this memo, Tony meticulously counters all the misconceptions and misinformation regarding self management. His ‘all or nothing’ stance might be a bit extreme, but none can argue about his conviction to self management.

chaos_vs_bureaucracySmaller companies or startups have less challenges because they don’t have the bureaucracy nor the history of traditional management engrained into their DNA. Self organization is built into their identity from the beginning. As Henrik Kniberg explains in the Spotify Engineering Culture Part 2 of 2, Spotify struggles with the balancing their base- culture- with Agile values to avoid chaos and bureaucracy; if given a choice, he says that they lean towards chaos ‘because it is better than being stuck in bureaucracy.’

Closing Comments

In nature, evolution is inevitable. Anything that cannot adapt eventually becomes obsolete through natural selection. Ask Kodak about their decision to stick to standard film over digital media or any brick and mortar video store why they didn’t create a digital or streaming service. The next form of organizational evolution is occurring right before our eyes. Companies like Zappos and Spotify are challenging the status quo. Holacracy and other forms of self management may not be the branded ideas that we end up with in 10 to 20 years, but they have been the catalyst for this new form of leadership. This movement could bring a new era for businesses globally- a self organized workforce and as my father explained that morning, ‘Leadership that liberates ideas through empowerment, support, and encouragement.’