Zappos was formed in 1999 through the financial support of Tony Hsieh and Alfred Lin. The company was initiated out of frustration by a man for his inability to find shoe he liked. A store would have a shoe with an appropriate size but wrong color. Another one would have the required color but an inappropriate size. For this reason, he discovered the need to invest in the online shoe retail. Zappos was approached by Amazon in 2009 to merge and operate as a single company. Even though the majority of the directors were concerned with optimizing the profit share, Tony Hsieh wanted to uphold the Zappos corporate culture. The turning point was in 2012 when Tony Hsieh attended a seminar on conscious capitalism. One of the topics at the conference was management philosophy known as holacracy (Rebecca, 2018). This philosophy advocated for self-management approach rather than the conventional hierarchy style of management applied in the traditional business ventures. The concept reverberated with Tony Hsieh since he realized that the hierarchical strategy was not profitable.
In the process of changing the organizational culture, the CEO implemented a holacracy framework in the organization. With this structure, the hierarchical style was replaced with self-management style which, eliminated numerous positions of authority, liability within the organization and growth opportunity among workers. Even though the changes were meant to enhance innovation the company enjoyed during the earlier years, the top management and the employees struggled with the changes and had a feeling that the transformation was unfair and did not offer career growth opportunities.
The financial report is not published separately to that of Amazon since the merge in 2009, but there are significant changes that have occurred in key business operations like the closing of Kentucky warehouse to reduce operating costs. These initiatives would lead to increased profitability and continued success for Zappos as a single entity.
With that in context, there is a debate on the necessity to shift to holacracy and the urge to implement it so quickly. Even the inventor of the idea, Robertson, stated that it would take five to ten years to be fully implemented. The result was disruptive for the employees making then feel their education and efforts in the company was wasted with the new culture. It is recommended therefore to reevaluate the impact of this culture on workers before the change process. Through surveys or focus groups, Hsieh can utilize the feedbacks received plan a more focused implementation in key areas and initiate the change management process (Sageer, Rafat & Agarwal, 2012). Another recommendation is to explore alternative methods aimed at achieving the objective of enhancing innovation in the company. Other companies have provided initiatives like cash payment and profit sharing to formulate innovative solutions for improving efficiency.
The idea behind self-managed company where teamwork overtook titles and power with the holacracy structure came with rules (Kinicki & Fugate, 2016). Organization change like disruptive holacracy within a corporation with more than 1,500 workers within two years is almost unrealistic without a strategy. As indicated above, understanding the change effect is one aspect, but there is also the complication of the program being executed. The rules associated with holacracy complicated the change process to even those that accepted the new culture.
The recommendation linked to the complexity of holacracy and pace for implementation would be to simplify the program and eliminate the rules or introduce an entirely new solution. The big bang strategy utilized caused a lot of disruption in the organization and threatened the progress of the company.
Even though the approach was introduced to the HR department, there was insufficient time to learn the skill required in holacracy to train and coach the workers. At the same time, using HR department as an experimental group is hardly representative of other departments like operations and project management. The work is involving and create fatigue within the organization thereby making the implementation process more complicated.
This program may have been successful in case Hsieh would have used a single group that reaps significant benefits from self-management such as software development team. If a single group can successfully implement the new culture, it can be assimilated to others and leverage the knowledge to other teams to make changes easier.
After the holacracy was implemented, there was difficulty in measuring the success. This is because, after the merge, financial reports were not visible. Previously focused on customer excellence, the new culture highlighted more on the rules and guidelines, making employees spend more time on meetings and making limited progress.
It is the mandate of a leader to realize any failure in an organization and make changes that can correct the issue. The recommendation for Hsieh would be to steps and assess the outcome of holacracy in financial performance, employee motivation and customer service. Financial and strategy adjustment did more arm and opened the door for Amazon to enforce their management style.
There was a need to undertake an unbiased assessment of the outcome that would result from holacracy by an external third party. The employees will be interviewed to ensure there is complete privacy so that honest feedback can be given. At the same time, the consumers will be surveyed in relation to holacracy concept to acquire their feedback on the overall experience and see if there is a shift in the positive or negative direction. Innovation solution can be reviewed together with the financial information. Changes such as that at Zappos can have a significant effect on the performance and overall performance.
Kinicki, A., & Fugate, M. (2016). Organizational behavior: a practical, problem-solving approach. McGraw-Hill Education.
Rebecca, G. (2018). Zappos CEO Tony Hsieh: Adopt Holacracy Or Leave. Retrieved from https://www.fastcompany.com/3044417/zappos-ceo-tony-hsieh-adopt-holacracy-or-leave
Sageer, A., Rafat, S., & Agarwal, P. (2012). Identification of variables affecting employee satisfaction and their impact on the organization. IOSR Journal of business and management, 5(1), 32-39.
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Evaluation Essay on Zappos: Organizational Design, Effectiveness, and Innovation. (2022, Jun 13). Retrieved from https://proessays.net/essays/evaluation-essay-on-zappos-organizational-design-effectiveness-and-innovation
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