Self management is a workplace philosophy being embraced by US businesses in growing numbers, with the goal of becoming more resilient, innovative and responsive to customer needs.
Holacracy, as this model is known, replaces top-down management hierarchies with flatter ‘circles’, in which employees make their own decisions about how best to their job.
Leading the way in this ‘boss-less, non-hierarchical governance movement is online shoe retailer Zappos.com whose CEO Tony Hsieh is confident that the transition will ultimately empower employees ‘to act more like entrepreneurs’.
And that made me curious. Retro-fitting a 1,500 employee organisation like Zappos with a self-management model is a major undertaking. But for entrepreneurs growing fledgling businesses hiring people who can self manage as well as they do has to be a no-brainer.
Hsieh himself was once one of those entrepreneurs, so I asked him what he thought.
He said: “There have been studies that show great entrepreneurs over-index for three personality traits; being comfortable with ambiguity; a strong sense of curiosity, and emotional intelligence. Those are the same traits of the employees who we think will thrive under self-management, self-organisation, and Holacracy.”
The fact is that startups need people who can self organise because in most cases the business founder has neither the time nor the skills to motivate. But will it work in any type of startup?
“It works best for businesses that need to deal with rapid change and ongoing feedback,” says Hsieh. “For businesses that don't experience a lot of change in the industry, customers, or competitors, then the traditional command-and-control structure and paradigm might work better. I don't know if there are that many businesses that would fall in that category, however.”
In assessing the pros and cons of a self management model, it’s important to identify the key business benefits.
“I think everyone who has worked at a large corporation knows that under the traditional hierarchical command-and-control management model, the bigger the organization is, the more bureaucracy there is, and the slower things tend to move,” says Hsieh.
“Self-organization is about moving faster, being more responsive and adaptable, and enabling employees' talents and passions to shine. The Internet is for the most part self-organized, which is what enabled it to grow, explode, and evolve so quickly.”
He then draws an interesting analogy. Every time a city doubles in size, innovation or productivity per resident increases by 15%. But with companies, the opposite happens. As they grow, innovation or productivity per employee generally falls.
“Cities are another great example of, mostly, self-organization,” he says. “Part of what we're trying to do at Zappos is figure out how to organize ourselves more like a city and less like a typical bureaucratic corporation. The biggest challenge is just the mindset change in living and working in a new paradigm. Learning the new paradigm isn't the hard part. The hard part is ‘unlearning’ the old one.”
For all the business benefits a self managed workplace can bring, there are drawbacks. It’s been widely reported that 14% of employees at Zappos opted out of Holacracy and left the company. Which could be a concern for entrepreneurs aspiring to emulate what they are doing. But Hsieh is a glass half full type of CEO, and prefers to focus on the fact that 86% of employees didn't take the offer to leave.
In fact Zappos didn't have a specific percentage of employees that they expected to accept or reject the offer.
“The more interesting number to look at will be the total turnover, including employees who took the offer, at the end of 2015 and compare it with our staff turnover numbers from previous years,” he says.
Another big concern about a manager-less workplace is how it will deal effectively with staff conflicts. At Zappos the solution is 1:1 conflict resolution.
“1:1 open and honest conversations are the first step of our conflict resolution process, which is still evolving,” says Hsieh. “In my experience, that will generally address most issues if both parties are being open and honest.”
Wishful thinking? I don’t think so. A few years ago I interviewed Ricardo Semler, CEO of Brazil's most famous company Semco. On taking over from his father he famously demolished the majority of management tiers and flattened the company’s structure. He got rid of fixed working hours, job descriptions, permanent positions, and the HR function. There was not even a five-year business plan, and all of this was aimed at increasing individual autonomy and empowerment.
Peer-to-peer conflict resolutions at Semco worked perfectly well, he told me. There is a lot to be said for staking your trust in people who have the self discipline to perform.
Holacracy teething problems aside, Hsieh has had some pleasant surprises.
He says: “I've been really surprised by some of the employees who have stepped up and taken on roles that might have taken them years to work their way up to under the prior structure. Holacracy allows for and encourages a lot of movement and experimentation, and it's been amazing seeing employees who I didn't even know existed a few months ago take on what would traditionally be considered senior leadership roles and thriving in those new roles.”
Zappos is now two years into what could potentially be a five-year process, and Hsieh is feeling good about their ability to beat that timeline significantly.
But if he were an entrepreneur just starting up, how would he do it?
“There are a lot of nuances and interesting challenges to figure out with self-management, self-organization, and Holacracy,” he says. “Rather than try to figure everything out yourself, I’d advise new startups to learn from Zappos and other companies that are on similar paths.
“Luckily, transparency usually goes hand-in-hand with self-management and self-organization, so we've found that most companies are happy to share their learnings and philosophies. We're even looking as adding self-organization and self-management as classes offered through Zappos Insights and hosting a conference in 2016 focused on these topics to share what we’ve learned.”
