The archive · Work & Ways of Doing · Operational decision · 2013–2016
Zappos' Holacracy drops managers and titles for self-governing circles
In late 2013 Zappos replaced managers and job titles with Holacracy, a written constitution of roles and circles; 18% of staff chose to leave.
Zappos
What it had to solve
By 2013 Zappos had grown past 1,500 employees, and CEO Tony Hsieh believed size was quietly adding bureaucracy and eroding the company's start-up feel. He wanted a way to stay fast and flat without managers routing every decision.
How it works
In late 2013, Zappos CEO Tony Hsieh told the 1,500-person company that it would abandon traditional managers and job titles for holacracy, a self-management system created and trademarked by software developer Brian Robertson. Instead of bosses and direct reports, work is organized into 'circles' that hold 'roles' — defined purposes, accountabilities and domains — and employees are encouraged to fill several roles, acting more like entrepreneurs than subordinates.
Hsieh's stated reason was growth: 'As companies get bigger, you become slower moving; there's more bureaucracy,' he said. He hoped the move would preserve a start-up feel and had every employee read Frederic Laloux's 'Reinventing Organizations' as preparation. By 2015, feeling adoption was going too slowly, he sent a nearly 5,000-word memo offering severance packages of three months or more to any employee in good standing who didn't want the system, with an April 30 deadline.
The result was a media firestorm: 18 percent of employees chose to leave, while 82 percent stayed. Zappos became the largest company to attempt self-management, and its experiment — a written, open-source 'constitution' that codifies who may decide what — turned holacracy into a global management conversation that other companies, including Medium, tried and publicly abandoned.
Why it lands
- Codifying decision rights in written roles and circles makes authority explicit and independent of titles, so anyone can lead without permission.
- Letting people hold multiple roles across teams turns employees into entrepreneurs, which was exactly the start-up feel Hsieh wanted to keep as Zappos grew.
- A structured governance process lets any employee propose changes to the organization, replacing slow top-down approval with team-level adaptation.
- Offering a generous exit package kept adoption voluntary and consistent with Zappos' stated value of treating employees with respect.
What it did
Zappos became the largest company to adopt self-management, igniting a worldwide debate about bossless organizations: 82% of employees stayed, Medium tried and then publicly abandoned the same system, and management scholars began studying whether codified self-management can scale.
What you can take
Removing managers is only half the idea — replace them with explicit roles, processes and decision rights; and expect the transition itself to cost time and people, whatever the merits.
Since then
Zappos stayed with holacracy: in September 2016 Hsieh told CNBC he would have made the move earlier. The experiment stayed divisive — Medium adopted and then publicly abandoned the system, calling it 'a small but persistent tax on our effectiveness' — and Zappos fell off Fortune's 100 Best Companies to Work For list for the first time in eight years. The Holacracy Constitution remains an open-source document, and its circles-and-roles vocabulary still shapes self-management practice beyond Zappos.
Sources
- Zappos CEO Tony Hsieh on getting rid of managers: What I wish I'd done differently
- Zappos to employees on 'no bosses' policy: 'Take it or leave it'
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