Exercising Strategy: Zappos Faces Competitive Challenges

Zappos Faces Competitive Challenges

Michael Robertson

Davenport University

HRMG 700

Professor: Dr. DiMatteo-Gibson

        Zappos is an Amazon.com owned online shoe and clothing store that is based in Las Vegas, Nevada.  Their CEO Tony Hsieh has recently transitioned the organization into what he calls “Holacracy”.  Holacracy is “a manager-free operating structure that is composed, in theory, of equally privileged employees working in task-specific circles, often overlapping.” (Felonie 2015).  Hsieh began experimenting with this idea in 2013, but by 2015 only 85% of Zappos’ employees have made the transition to the new system.  “Having one foot in one world while having the other foot in the other world has slowed down our transformation towards self-management and self-organization,"(Felonie 2015).  This is an admittedly slow process for Zappos so, in order to speed things up, Hsieh has made the ultimatum that if his employees do not adopt the new system by April of 2015 that they can have a 3-month severance package but must leave.  14% or 210 employees of the company took Hsieh up on his offer and left. 

It seems that the new “Holacracy” approach has divided the company.  Although, the method in which they hoped to spawn more of an entrepreneur mentality seems to have sparked mixed feelings.  Hsieh hoped that this would spark a sense of creativity and boost production but employees seem to find the new system confusing, requiring them to spend more time in meetings and less time doing what they should be.

I believe the company has a strong organizational structure, as demonstrated by its many awards for workplace culture and practices “including being recognized as the 86th Best Company to Work for in Fortune magazine’s 2014 ranking of the 100 Best Companies to Work for.” (Noe 2015).  The problem that Zappos is experiencing lies within the lack of management.  “Poor management skills [or lack thereof] carry long-lasting effects and may infect an entire organization.  The results of toxic, misguided leadership reach far and wide.” (Lavoie 2016).   There are essentially 3 problems when dealing with poor management or in this case no management.  Lack of recognition, running bad meetings and creating negative environments. 

Lack of recognition is a huge factor when dealing with employee satisfaction, “when employees are not recognized for their accomplishments or are only criticized for their shortcomings, they don’t feel valued and work in a state of fear of making a mistake.” (Lavoie 2016).  Simply put, when people are not recognized they are not motivated.  Without constant constructive feedback, employees do not know what to improve upon as far as their weaknesses and reinforce the things they are doing right.