Zappos CEO Hsieh talks holacracy, opening up its dynamic org chart to public

Speaking at the Wharton People Analytics Conference, Zappos CEO Tony Hsieh talked about his hierarchy free management approach and how org chart transparency could be instructional.

Tony Hsieh, CEO at Zappos, said the company could ultimately open up its dynamic org chart to the public so business schools and external communities can offer suggestions and help it iterate.

Hsieh added that such a move would enable outsiders to say "let's peep into Zappos today." The move would bolster Zappos radical transparency goal and potentially build a community that could provide insights and suggestions. For instance, a student at a fashion institute could provide merchandising tips.

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Wharton management professor Adam Grant interviews Zappos CEO Tony Hsieh.

Wharton

"We could build a community to move our core values forward," said Hsieh.

Speaking at the Wharton People Analytics Conference in Philadelphia, Hsieh noted the idea of an open and transparent real-time org chart. Welcome to Zappos blend of "holacracy," a management concept that rids companies of hierarchies in favor of self-organizing circles of skills.

The holacracy concept is either brilliant, crazy, a route to disaster or some combination of all of the above. There's a holacracy organization and Zappos has some external training for companies that are interested in adopting it. Press reports on Zappos management shift have focused on turnover, failure and some successes.

Hsieh was asked if holacracy was an experiment, but the CEO rebuffed the idea. Sure, Zappos experiments, but the reality is that the company is more about iterating on the concept of holacracy than declaring it a failure at some future date. Hsieh argues that companies should be more like cities in that they are resilient and have a self-organizing structure. After all, a mayor doesn't tell people where to live and there's a supply chain that gets food in without centralization.

"The default future for companies is death and you can choose to ignore the data or not. Self organization works," said Hsieh. "Holacracy is a platform. There were complaints that it didn't work, but what people misunderstand is that it is a platform. It's like if someone handed you a platform with no apps on it. What we're doing now is the hard work of building the apps. You keep iterating on it. A lot of companies don't have the resource or size to build apps."

For Hsieh, the holacracy concept has proven over time that it has stood the test of time and scaled. "I care about longevity and scaling," he said.

Back to this open org chart concept, Hsieh said that companies generally have three---an official one, an unofficial one and a network diagram that shows how work really gets done. "Holacracy's goal is to merge those three," said Hsieh. "The org chart changes 50 times of day at Zappos."

For instance, Zappos has 1,600 employees and 500 circles. In reality, folks fill multiple roles at the company. Hsieh said that every human in the company is a sensor. A marketing person sees something different than the IT admin or the customer service rep.

While few large enterprises are going to follow Hsieh's holacracy idea, opening Zappos org chart to public inspection could be quite the public service. There are a few vendors pitching people graphs that watch how relationships form in companies and provide analytics for sales, compliance and HR. The concept of people analytics is nascent, but has potential and it's possible that Hsieh is just ahead of the curve. Either way a real-time view of a holacracy org chart would beat a case study.