Did you see the news that Zappos announced it is abolishing bosses? Zappos refers to their “new” approach as holacracy, and it’s already being heralded as tech’s latest new management craze. In summary, holacracy is management by committee with an emphasis on innovation—even the CEO formally relinquishes authority by agreeing to a constitution and reorganizing everyone into decentralized teams that choose their own roles and goals.
The objective of holacracy is to unleash the potential of every employee to behave like a Chief. While I am a huge fan of Zappos CEO Tony Hsieh, in my view this organization design is not new, nor is it required to unlock employee potential. Here’s why.
Holacracy is Not New
I recall a sales review I did almost 20 years ago as a Regional Vice President at Unisys Corporation. During a forecasting session, a sales representative told me he had no idea when a computer sale would close because his customer made all decisions by committee. That’s when I first learned about a company named W.L. Gore.
The sales rep told me that founders Bill and Vieve Gore started W. L. Gore & Associates in 1958. The company initially served the electronic products market. The company’s 1969 discovery of a versatile new polymer led to the development of many new applications in medical, fabric, and industrial markets.
What distinguished Gore from its start in 1958 was its innovative management structure. Specifically, it has never utilized traditional managers, titles, or budgets, and it has always been very wary about economies of scale. Amazingly, their CEO has never been appointed by the board, but instead has been chosen by peers. The Gore culture expects every associate to act as a Chief. As a result, what has Gore accomplished?
Today, Gore is one of the 200 largest privately held U.S. companies with 10,000 employees (called associates) and more than $3 billion in revenue. In 2014, Gore retained its position as a member of the U.S. “100 Best Companies to Work For” list, as one of the few earning this distinction every year since the ranking was initiated in 1984. Gore has been granted more than 2,000 patents worldwide in a wide range of fields, including electronics and polymer processing, and has had more than 35 million of its medical devices implanted, saving and improving the quality of lives worldwide.
If it’s so successful, should every company move to holacracy?
Holacracy is Not Necessary
In my experience, neither Zappos’ holacracy nor Gore’s committee structure is required to enable companies to create a culture of Chiefs, in which individual potential is unlocked. I have personally worked in a wide range of companies and company structures that delivered great results with cultures that enabled every associate to act as a Chief. For example, an internet startup facing a market crash grew revenue from $1M to $11M in just a year, and a multinational tripled its revenue growth rate from 5 to 15%, growing to $5B while facing intense market competition. In each case, both employee and customer satisfaction reached new levels.
The keys to success can be found in Jim Heskett’s and John Kotter’s book Corporate Culture and Performance. First published more than 20 years ago, it provides great insights on how any leader in any company can build a culture of Chiefs.
Heskett and Kotter offer specific, research-based advice on how to create performance-enhancing, change-adaptive cultures where Chiefs lead at all levels. They focus on actions (discipline, support, and creativity) and attributes (insight and values) that unlock employee potential, drive innovation, and lead to sustained success:
10 Specific Ways to Build a Culture of Chiefs in Any Company
- Establish a vision for the organization that emphasizes consistent tactical adjustments
- Communicate consistently and broadly
- Display an “outsiders” propensity to embrace change and new ideas
- Reinforce the importance of innovation
- Build and maintain an “insiders” credibility
- Institute a balanced focus on the success of customers, employees, and shareholders
- Establish leadership or the ability to produce change as an important focus at all levels
- Decentralize decision making where possible
- Promote carefully, and demote when necessary
- Operate as a servant leader
The bottom line: success comes from an engaged employee group in which individuals at every level are empowered to act as Chiefs. This culture can be created in any organization with the right attention and intention.