How Zappos Converts New Hires to Its Bizarre Office Culture

Holacracy prompted more than 200 employees to quit. Now the shoe retailer is figuring out ways to get new hires to stick around

Photo by Link Humans via Flickr

DeVonTae Browne didn't know anything about the management discipline of Holacracy before showing up at orientation for his new job in customer service at Zappos. "I wasn't entirely sure what it meant," he admits. Three weeks into the online shoe retailer's monthlong on-boarding slog, Browne is a convert to the avant garde management strategy. "I’m pretty much buying whatever someone is selling, as far as Holacracy goes," Browne says. "I’m definitely all-in."

Holacracy replaces the traditional top-down office hierarchy with an alternative-org chart of circles within circles within circles. Employees no longer take job titles; instead they inhabit roles that create autonomy over their work. It's not anarchy: A series of highly structured "governance" and "tactical" meetings help define who does what. More than 300 organizations have at least dabbled in Holacracy over the last decade, including part of the Washington State government and the company of productivity guru David Allen, but Zappos is the largest and most famous business to embrace the philosophy completely.

The transition over the last year and a half has by, many accounts, been rocky. Not everyone at the Amazon-owned shoe retailer shares Zappos Chief Executive Officer Tony Hsieh's enthusiasm for giving up hard-earned positions on the corporate ladder. Many employees left rather than join the new order, urged along by severance pay, equal to three months' salary, available to anyone who didn't feel at home in the system. Fourteen percent of the Zappos workforce took the deal, and even those who stuck around have expressed skepticism about what Holacracy means for their jobs. Hsieh has reportedly extended an even more attractive buyout, known as the SuperCloud Offer, to a smaller cohort of workers, who now have until the end of the year to make a decision.

More than 200 employees have tasted the life of Holacracy and opted out. But what about Zappos newcomers making the decision to opt in?

Hsieh, founder and chief executive of Zappos.
Hsieh, founder and chief executive of Zappos.
Photographer: Noah Berger/Bloomberg

Orientation at Zappos has always been a weighty and time-consuming affair. The company originally designed a two-week indoctrination into its famously "fun" office culture that has since evolved to a four-week undertaking. After the first week, Zappos offers a buyout of one month's salary to new employees who don't feel the vibe. Anyone who shows up late for the daily 7 a.m. start is fired on the spot. New employees must pass a final exam by answering at least 90 percent of questions correctly—or they're out of the job. The standard orientation includes mandatory two-week telephone training, even for jobs without a customer-service component. "The reason that we have such an intensive on-boarding program is it's important that they understand the culture to understand their real jobs," says Megan Petrini, a new-hire trainer at Zappos. 

Holacracy education, which Zappos added to orientation this month, takes place over a three-day period grafted on to this already long process. The first official discussion of Holacracy, a three-hour lecture that comes in the second week of orientation, is almost certainly not the first time new hires will have heard about the philosophy. Words with holacratic significance—tension, circle, lead link—permeate orientation from day one, and allusions start as early as the job interview.

Hayden Balow first heard about Holacracy while interviewing for the job as a people operations analyst—Zappos-speak for human resources. "I heard mixed reactions," he recalls. "Certain people were excited about it, and other people were more hesitant. I wasn't really surprised, but I was excited to learn about it." In the end, he says, Balow felt drawn to the distinctive office culture when he was deciding to accept the job offer.

Welcome to Holacracy! 
Welcome to Holacracy! 
Source: Zappos

Holacracy class serves as an introduction to a complex system with strict rules and a bizarre lexicon. People often come in with "misconceptions" that cause "confusion," says Jake McCrea, who teaches the introductory class. "Some people are weirded out," adds Petrini.

The class highlights benefits such as less emphasis on authority and a focus on giving everyone the power to make changes. "Our unique way of doing things will empower you in ways you’ve never dreamed possible," reads one orientation handout. After a quick history of hierarchy, McCrea introduces the basic concepts of Holacracy: tension processing, tactical meetings and governance meetings, circles, and roles. A Zappos-made video simulation shows these meetings in action. The class ends with a quiz and a question-and-answer period.

The newly indoctrinated tend to leave with mixed feelings. "There are some people who are very confused, but they’re excited and they’re optimistic about it," says McCrea. "There are some people who aren't so optimistic and they’re skeptics." 

Browne, the 24-year-old customer service hire, falls into the excited and optimistic category. "I think it’s a great and wonderful idea," he says. "I’ve worked enough working jobs to where it was the corporate structure. You follow this person’s ideas and goals. I hated that." Balow, the human resources hire, is hopeful, if a little wary of the learning curve. "I definitely wouldn't be able to jump into a Holacracy meeting right away," he says.

Zappos changed its orientation this month to address those kinds of lingering doubts. Before it added the three-day Holacracy class, new employees would go directly into real meetings without first practicing. It led to a lot of confusion. "Holacracy is like a sport or a new language," says McCrea. "You can read about it, you can hear people tell you about it. You won't understand it until you start using it."

A Zappos package moves down a conveyor belt at a UPS facility.
A Zappos package moves down a conveyor belt at a UPS facility.
Photographer: Luke Sharrett/Bloomberg

That ethos is at the center of Holacracy's many training routines for practitioners. The Holacracy Way is to learn by doing, and a full organizational transition is a years-long process. HolacracyOne, an umbrella group for the management philosophy, offers various training sessions for organizations, all of which cost money. When companies adopt the management system, for example, often a paid consultant from the HolacracyOne mothership leads a launch week, with a mixture of lectures and workshop-based learning. 

Medium, the online-publishing startup led by Twitter co-founder Ev Williams, relied heavily on HolacracyOne for companywide training in 2012. Consultants came for a launch week and worked with Medium throughout the first few months of implementation. After three years under the system, employees within the organization have been designated Holacracy ambassadors and take the advanced courses offered by HolacracyOne. Medium, which isn't growing at the pace of Zappos, has also struggled with how to introduce new employees the complex system. At one point each rookie spent at least an hour with Jason Stirman, Medium's in-house Holacracy guru, to learn the ways of autonomous work. Mostly, the new hires learn by observing and participating in meetings.

For its new hire orientation, meanwhile, Zappos coopted HolacracyOne's facilitator training because "the act of learning how to facilitate both of those meetings gives you a strong foundation of how those meetings work," explains Christa Foley, a senior manager at Zappos Insights. It works like a game. Employees in orientation are split up into teams and assigned to run fake businesses using the principles of Holacracy. Previous classes have managed mock food trucks; trainees now run a faux version of Zappos Insights, a department whose mission is  "to help share the Zappos Culture with the world," per the corporate website.

"What we found was: As close or comfortable with the business model you can get, the better," says Foley.

Members of each made-up company get preprinted cards with roles, such as marketing or head of customer service. A day of training covers a pretend year in the life of the company. Issues pop up that the team has to deal with by using tactical and governance meetings. New hires are taught how to run the unconventional meetings that are the core of holacratic practice. "The act of learning how to facilitate both of those meetings gives you a strong foundation of how those meetings work," Foley says.

During the days of food truck training, for example, the groups might have had to think of a new product. How does a company do that holacratically? A tactical meeting. The person playing head of marketing might have tensions with the cook, who has decided on a new special without telling the whole team. The marketing guy brings up a particular problem, the group "processes" it, and the facilitator ensures that the meeting moves along at a reasonable pace. 

Tactical meetings, the Holacracy version of the weekly team gatherings we all hate, tend to win over employees with their efficiency. Over the course of three days, each person in each group has to practice acting as the facilitator of a tactical meeting two or three times. For this month's class of 67 new employees, that means between 134 and 201 total meetings—hence the three day long experience. 

Holacracy might not be a turn-off, but the seemingly interminable orientation activities are. In general, Balow is glad to have undergone the additional training. "I'm glad that it’s not something we’re walking into blind. I’m curious to see how it all works in practice," he says. Still, he wishes the program could run a couple weeks shorter. "For me," he says, "it does seem a little bit long." 

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