At Zappos, Pushing Shoes and a Vision

At Zappos, Pushing Shoes and a Vision Photo Tony Hsieh, chief executive of Zappos, at the trailer park in Las Vegas that he both owns and calls home. Credit Brad Swonetz for The New York Times On a sizzling June morning in Las Vegas, 10 Zappos.com employees sat in an air-conditioned conference room decorated with “Star Wars” memorabilia and a mural of Darth Vader. They had gathered for a weekly meeting to discuss new internal software, the sort of routine get-together that keeps corporate America humming. But like all meetings these days at Zappos, the online merchant best known for its shoes, this one followed a strict format determined by a radical self- management system called Holacracy. The goal of Holacracy is to create a dynamic workplace where everyone has a voice and bureaucracy doesn’t stifle innovation. At Zappos, this means traditional corporate hierarchy is gone. Managers no longer exist. The company’s 1,500 employees define their own jobs. Anyone can set the agenda for a meeting. To prevent anarchy, processes are strictly enforced. At the June meeting, a trained facilitator, in this case a young bearded man wearing a blue baseball hat, followed the Holacratic method by asking attendees to “get here, get present, get now,” and encouraged everyone in the room to briefly check in. Photo A shopping area made out of shipping containers is part of an effort to enliven downtown Las Vegas. Credit Brad Swonetz for The New York Times “I’m a little sleepy,” said a wiry man. “It’s warm out,” was the next reply. “I’m also sleepy.” “I’m doing a Zumbathon for three hours this afternoon,” one woman said. “My hands smell like oranges, so I’m a little distracted by that,” said Danielle Kelly, a former call center worker who is helping bring self-management to Zappos. “Also, I’m in this room for five straight hours of meetings.” Next up was Tony Hsieh, 41, who has run Zappos for 16 years and is the person who insisted that the company adopt Holacracy. “I feel Danielle is being overdramatic,” he deadpanned. “But I prefer her being overdramatic to passive- aggressive.” Mr. Hsieh (pronounced Shay) is a minor celebrity in the technology industry. A son of Taiwanese immigrants and a graduate of Harvard, he sold his first company, LinkExchange, to Microsoft for $265 million. He then invested in Zappos, became its chief executive and sold it to Amazon for $1.2 billion in 2009. Since then, Mr. Hsieh has managed to preserve Zappos’s reputation as a fun place to work. The youthful work force is heavily tattooed; the dress code is aggressively casual. Desks are cluttered with giant stuffed animals, and sound- emitting sculptures designed by the Blue Man Group line the walls. “Create fun and a little weirdness” is written in the Zappos corporate charter. But as Zappos grew, innovation slowed. The staff expanded, more managers joined the ranks, and the freewheeling culture lost momentum. “We had gone from being a fast speedboat to a cruise ship,” one longtime employee said. The boss felt it too. “A lot of people in the organization, including myself, felt like there were more and more layers of bureaucracy,” Mr. Hsieh said. Photo A trailer park in Las Vegas. In addition to introducing a self-management system at his company, Mr. Hsieh is spending $350 million to revitalize the city’s downtown. Credit Brad Swonetz for The New York Times Mr. Hsieh knew his company needed a fix. But at Zappos, conventional team- building exercises would not suffice. He needed to get weird. After learning about Holacracy in 2012, he decided it was just the thing for Zappos. At the same time, Mr. Hsieh embarked on another lofty project: an attempt to revitalize downtown Las Vegas, a dilapidated area miles from the Strip. He has invested $350 million of his money in real estate, redevelopment, small businesses and venture capital funds. A former casino became a hangout for Zappos employees, stocked with board games instead of slot machines. A vacant lot is now a trailer park crammed with shiny silver Airstreams that are rented out to visiting computer coders. He moved into one trailer a few months ago and keeps a pet alpaca there. He calls the community Llamalopolis. It is the anti-Vegas. Either one of these undertakings could be a full-time job for an idealistic multimillionaire. But Mr. Hsieh has fully immersed himself in both the transformation of his company and adopted city. “A lot of companies talk about work-life balance,” Mr. Hsieh said. “We’re more about work-life integration. At the end of the day, it’s life.” These days, Mr. Hsieh has one other job as well: quelling the doubters. Neither of his paradigm-changing projects has proceeded smoothly. Two years into Holacracy, Zappos is no workplace utopia. Downtown Las Vegas has some new shops and restaurants, but problems like homelessness and unemployment persist. Mr. Hsieh has already proved he can build and run successful companies. He translated that experience into a second career as a business visionary, the author of the book “Delivering Happiness” and a motivational speaker. But now, while betting his fortune and reputation on his most ambitious visions to date, Mr. Hsieh’s hot hand appears to be at risk of going cold. In 2012, Mr. Hsieh traveled to Austin, Tex., to give the keynote speech at the Conscious Capitalism C.E.O. Summit, a gathering of progressive executives. There, he heard a presentation that was strange enough to get his attention. On the stage was Brian Robertson, who invented Holacracy at his start-up, Ternary Software. Mr. Robertson, a computer programmer with no training in human resources, let alone occupational psychology, seems an unlikely candidate to lead a workplace revolution. At Ternary, Mr. Robertson innovated his practices on the fly, testing his approach to self-management . The end result was what he refers to as an “operating system” for organizations. Photo The offices of Zappos are meant to encourage “fun and a little weirdness.” Credit Brad Swonetz for The New York Times After peppering Mr. Robertson with questions, Mr. Hsieh was convinced. Zappos would go Holacratic. The transformation began in 2013 in certain departments, but only in recent months has the entire company taken the plunge. Nothing about Holacracy is easy to understand. In place of a traditional organizational chart are concentric circles of responsibility. Employees get to choose which circles they belong to and what projects they work on. The jargon is relentless. At meetings, “tensions” are resolved. People don’t have one job; they have multiple “roles.” “Lead links” are designated to communicate between circles. Everyone must use the Holacracy software, called Glass Frog. Such self-management remains the exception in the workplace today, yet its advocates constitute a small but growing movement. Holacracy has other adherents, including the David Allen Company, a consultancy, and Medium, the blogging platform started by the Twitter co-founder Evan Williams, though none of the other users are as large as Zappos. “I feel like I’m in control without being controlling all the time,” said Ruben Timmerman, who adopted Holacracy at Springest, a 25-person online education company he founded in Amsterdam. “The team is more efficient and more creative because of the sharing, and also more accountable. It has definitely helped us.” At Zappos, Mr. Hsieh seems to regard Holacracy as a way to revive the close- knit community feeling that made the company so special 10 years ago, when it was just a few hundred people taking on the giants of e-commerce. “Once you have that level of friendship, there’s higher levels of trust,” he said. “Communication is better; you can send emails without fear of being misinterpreted; people do favors for one another.” If only it were so simple. Holacracy has been met with everything from cautious embrace to outright revulsion at Zappos, but little unequivocal enthusiasm. “There’s no putting rose-colored glasses on it,” said John Bunch, who is leading the Holacracy push throughout Zappos. “We’re just taking baby steps.” “It is really painful and slow at first,” said Christa Foley, a 10-year Zappos veteran. Even Josh Pedro, who is in charge of managing Zappos’s public relations, doesn’t sugarcoat the situation. “It was a weird transition,” he confessed. Photo The offices of Zappos. Credit Brad Swonetz for The New York Times Ms. Kelly, the former call center worker, applauded Holacracy for giving even the lowest-paid workers a voice. “A person who just takes phone calls can propose something for the entire company,” she said. “It’s empowering everybody to have the same voice.” But she said that the procedural formality of Holacracy, the ever-expanding number of circles and the endless meetings were a drain on productivity. “It’s taking time away from getting the actual work done,” she said. This was the same day as the software meeting, and as if still in disbelief, she said once again, “I have five hours of meetings today.” Nonetheless, Zappos is pushing ahead with Holacracy. Later in the day, Mr. Hsieh was back in the “Star Wars” conference room with a different group of employees. For the animating force behind a billion-dollar company, Mr. Hsieh is disarmingly understated. He wears a uniform of a black Zappos T-shirts and jeans, and speaks to colleagues in a soft monotone. He works for just $36,000 a year, forgoing a big salary or stock options in exchange for the autonomy to run Zappos however he sees fit.

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