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Flap over Zappos holacracy puts spotlight on 'bossless' workplace

In this Q&A, Rod Collins of Optimity Advisors sheds light on holacracy, a relatively new management style recently adopted by Zappos.

Zappos.com is known for pushing the management envelope. Earlier this month, the shoe and clothing online retailer was back in headlines due to employee fallout over, it would seem, holacracy. The management style rids the business of supervisors and bosses in favor of self-management. Holacracy has been touted as agile and transparent, a model that taps the collective intelligence of the workforce rather than a handful of leaders at the top of the food chain.

Zappos isn't the only "bossless" organization out there. W.L. Gore & Associates Inc. (the makers of Gore-Tex), The Morning Star Co. and Wikipedia are all examples of bossless organizations in one form or another, according to Rod Collins, the director of innovation at the consulting firm Optimity Advisors.

Collins knows a thing or two about flattening an organization. As the former chief operating executive of Blue Cross Blue Shield Federal Employee Program, the largest privately underwritten health insurance account in the world, he was brought in to turn around the almost two decades of low performance and low growth the account had experienced. He and the leadership team did this, in part, by saying goodbye to hierarchical management and hello to a consensus-driven model.

SearchCIO caught up with Collins, who will be a keynote speaker at Agile New England's Agile for Executives event next month, to talk about what it means in practical terms to go bossless. In the first installment of this two-part Q&A, Collins talks about how CIOs can flatten their IT organization.

Zappos made headlines recently over its move to become a holacratic company. What is holacracy?

Rod CollinsRod Collins

Rod Collins: Holacracy is a methodology for how a company without supervisors can work. Zappos is probably largest firm to embrace holacracy, which is a very well thought out methodology. This didn't happen overnight. Zappos contracted a holacracy group because they were moving from a world in which they had supervisors to one in which they didn't. And so they took the year 2014 to train people on what you do when you have no bosses.

I'm familiar with people who practice holacracy and train companies in it. The methodology has two fundamental mechanisms: The first is called the tactical meeting. This is where people get together and go over issues related to running their day-to-day business. The second is called the governance meeting. This is where more strategic decisions may be made.

You talk about collaborative or peer-to-peer networks in your research. How is that different from holacracy?

Collins: There are lots of names coming about: Holacracy is one. I call it wiki management. Steve Denning calls it radical management. It's known in the software development world as Agile management. They are all forms of peer-to-peer networks. Some of them have supervisors, and some of them don't. So, it isn't necessary that they eliminate supervisors, but it is necessary that the supervisors don't have the sovereign authority that they do in top-down hierarchies.

In these organizations, everyone gets to evaluate everyone else in a way that affects compensation in some way, shape or form. So, there is what I call a wider band of accountability, which is what I think makes them so highly effective. In a top-down hierarchy, evaluations go one way: The boss evaluates the subordinate. The subordinate rarely gets to evaluate the boss in a way that affects their compensation.

It's not clear yet whether Zappos will be successful in its move to a self-management model. Besides your experience at Blue Cross Blue Shield FEP, are you aware of other of successful bossless businesses? And are they using the holacracy model?

Collins: Gore & Associates started out bossless from birth in 1958. Usually when I do keynote speaking, it stuns people to know that this company has been around for more than 50 years, that it's highly successful, and has made a profit every year it's been in the market. It's one of, I believe, four companies that has the distinction of being on Fortune's list of the best companies to work for every year since the list has been created. And they made it one more time in the recent list. But they have devised their own mechanics of how to operate. And so they don't use holacracy.

Morning Star is also without bosses, and they've developed their own mechanisms. Their primary mechanism is something called a colleague letter of understanding. They produce tomatoes, and they have 400 permanent full-time employees and 2,000 temporary workers during harvest season, and this self-organization applies to all 2,400 workers.

At the appropriate time each year, they craft colleague letters of understanding where they spell out what they're all going to deliver to each other. They come up with metrics, which are calculated twice a month. They're very public and transparent so that people can see how they're delivering, and it gives a mechanism where peers can hold each other accountable.

Morning Star has also been bossless since its inception, so they didn't need to make a conversion. But their two foundational principles are: No human being should have the ability to coerce another human being and that all people in the company must honor their commitments. They've designed their whole system around those two foundational principles.

What about an example where going bossless didn't work?

Collins: Google did attempt to go bossless, as I understand it from the literature, when they reached somewhere around 400 to 500 people. But they got pushback from an unusual place -- from the workers. When Larry Page and Sergey Brin inquired why, the people said, 'We want mentors, and we want referees.'

What happened next is an example of collective intelligence: Page and Brin decided, if this is what the people want, how do we come up with a win-win solution? And so they restored the supervisors, but they also put in place two dynamics to make sure micromanagement couldn't happen, which is what they were really concerned about. They did not want to turn the company into a top-down hierarchy as it grew.

The two things they put in place are large supervisor-to-employee ratios, in some instances as high as 60 to 1, but it could be as low as 15 to 1. It's a large enough number that you can't micromanage people. And then, of course, they put in place the dynamic of the 20% time to make sure people have time to work on whatever they want without even having to tell a supervisor what they're working on. This dynamic is used to make sure no one has the authority to kill a good idea or keep a bad idea alive.

Let us know what you think of the story; email Nicole Laskowski, senior news writer, or find her on Twitter @TT_Nicole.

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