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Could Your Firm Succeed Without Managers

by Hal Levenson on Feb 19, 2014 5:23:26 AM

Some people love and need structure, others hate it. As online retailer Zappos implements a new business model it might be a good time to ask, “Could your firm succeed without managers?” Eliminating managers from their structure is the latest step by the innovative company to improve employee engagement, productivity and creativity. But many other companies find the idea ludicrous.

Since its creation, Zappos has been both extremely successful and – some would say – wildly creative about doing business and about the way it operates internally. For years, Zappos has been an exemplary company in many ways for business leaders and theorists. The company’s obsession with customer service has provided many lessons for corporate leaders. Yet it is difficult to believe that a company can function effectively and efficiently with no job titles, no managers, and no hierarchy.

Zappos is not the first company to try this kind of structure-less internal organization. It is used by Medium, the new company formed by Evan Williams (one of the co-founders of Twitter) and it is endorsed by David Allen, the time management expert.

This organizational approach is a “holacracy,” and it uses a series of overlapping “circles” rather than the typical business hierarchy. The circles are essentially autonomous and overlap with one or more other circles. The goal is to encourage employees to express ideas and concerns about organizational and other issues.

The holacracy structure was created by Brian Robertson, a management consultant. It was designed to organize the firm based on the work rather than the people who do the work – hence, the absence of job titles. Individuals are then assigned to roles that perform specific functions. Each person will typically be assigned to several roles. Each role carries responsibilities, expectations and accountabilities. Based on their roles, people are then assigned to one or more of the circles the company creates to accomplish specific tasks or goals.

Instead of managers, “lead links” assign or remove individuals to/from various circles. They do not, however, assign specific tasks or duties or fulfill typical “management” functions (monitoring work, managing work flow, assessing and evaluating work). People within each circle govern that circle, and make decisions about the tasks and functions of each role. Specific to Zappos is the ability of the broadest circles to assign tasks and functions to smaller circles.

Despite the removal of “managers,” corporate leaders watch employees. Under-performing employees tend to self-identify because they do not have a sufficient number of roles to stay busy. This indicates that either they lack a sufficient number of roles (or ability to perform multiple roles) or that they are not meeting performance expectations of circles to which they might have been assigned. These under-performers will come to the attention of a group tasked to oversee the firm’s culture and operational success.

Zappos is the largest firm, with about 1,500 on staff, to test this organizational structure. Other companies that have adopted the model are significantly smaller. There is widespread debate about the merits of this type of structure in any business organization. Because Zappos only announced the structural change in their year-end meeting, the business world must wait to see how it works.

Some leaders believe hierarchical structures are essential for operational effectiveness and efficiency in all businesses. Clearly, someone must have the authority to make urgent decisions – and urgent decisions are rarely achieved by committee. The goal of the holacratic system is to allow leaders to emerge naturally and to encourage more people to become invested in the success of the group and, ultimately, the company.

The question now comes to you: “Could your firm succeed without managers?” Does your firm succeed without managers? Is this a viable operational structure for any firm?

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