When online shoe-store powerhouse Zappos announced it was converting to a flat, fluid organisational structure, it told its staff they could have three-months’ severance pay if they didn’t want to relinquish their manager titles. About 14 per cent quit.
Depending on your level of self-confidence, working for a company where there’s no hierarchy could sound like a breakthrough or a recipe for anarchic disaster.
Some might be excited about the idea of fewer managers, especially those who were technically strong but wreak havoc on the lives of their underlings because of their lack of people skills. (And what smart person truly thrives when treated as an underling anyway?)
Others might wonder what’s the point where there’s no ladder – or greasy pole – to climb? And does anyone get anything useful done?
Lisa Rubinstein, management consultant and leadership coach at Axis Neuroperformance, tells AFR Weekend it wasn’t particularly surprising Zappos lost a significant chunk of its team.
“When you change a business structure you threaten people’s status and that is one of the prime drivers of the brain,” Rubinstein says. “Finding out you could lose it [your status] can trigger immense stress.”
But a radical change to business structures is leaking out of Silicon Valley and spreading through the global technology industry and beyond. It even has a snappy new name: holacracy.
The tenets of holacracy are simple: authority and decision-making rests with the team that is actually doing the work, not with the boss. The teams are united by a strong vision set by a lean executive that steps out of as many decisions as possible. Employees, the theory goes, spend their work hours getting work done instead of seeking management approval for every small change in direction. It means that sometimes a chief executive won’t be sure of the decisions made by their staff. It also means that one day you might be in charge of what someone else does and the next day they’re in charge of you.
A utopian fantasy of naive Silicon Valley-style upstarts? Well, Zappos is no idealistic minnow. It achieved such phenomenal growth that Amazon acquired it for more than $US850 million in 2012. With its devolved organisational structure it’s growing strongly after overcoming initial teething problems.
A company experimenting with the same idea is Sydney design software start-up Canva, which has pursued a fluid and freewheeling structure since it launched in 2012.
Now 70-people strong, its founder and chief executive Melanie Perkins says eschewing the traditional company hierarchy and bureaucracies has been fundamental to achieving the company’s audacious vision to make gorgeous graphic design accessible to everyone, rather only those with the time, money and hours of training to use the incumbent complex prestige software such as the Adobe suite.
“There are a lot of assumptions about how companies need to be to work that just aren’t true,” Perkins, 28, says.
“Internal competition just diverts precious energy away from the stuff that matters.”
To enable Perkins and co-founders Cliff Obrecht and Cameron Adams to step out of overseeing every project, the executive realised they had to develop a series of regular team events and a vocabulary to describe how the company as a whole worked.
These include a “stand-up” meeting on Friday where each team has a couple of minutes to update the group on what they’re working on and how it’s going.
There are also specific skill-set catch-ups, such as all the designers or developers meeting throughout the week to solve problems together.
Trust the teams
But unlike more traditional meetings, Perkins and her leadership team don’t need to see early sketches and plans of new features – they trust the teams will solve issues and innovate on the idea.
The approach is working: more than more than 4.5 million people all over the world use the software each month.
The team has also raised $13 million in venture funding and recently launched a subscription product, Canva for Work, to increase its uptake in businesses.
But with so many customers and complex software to maintain and develop, how does the company get anything done with such a relaxed structure?
“It’s about having a clear and exciting vision, and then creating the space and shape for people to make it happen themselves,” Perkins says.
“It is going to need to grow as we do and part of that is me removing myself from as many bottlenecks as possible.”
This approach could strike terror into the heart of many a successful law firm or management consulting company that has expanded through rigorous grooming of staff to raise them in the image of their partners. Every client letter, every piece of advice is supposed to be “signed off” by the person higher up the food chain – at least that’s the way it’s supposed to work. It’s command and control, fortified by annual performance reviews, plus a phalanx of human resources managers.
Light on the ground
One consequence of the more fluid structure is human resources managers are light on the ground – Canva has none, although it has just hired a full-time recruiter – and job descriptions have a shelf-life for only a few weeks after they’re used to hire the right person.
Adam Ryan, SEEK’s founding manager who launched his own tech business Think Procurement in 2012, says hiring is one of his most important tasks as chief executive of his holacratic organisation.
“At the beginning we had a more traditional approach but over time we found that if we had the right people the best thing I could do was get out of their way,” Ryan says.
“But it’s certainly not a utopia. You need to be very diligent with who you recruit and the culture you develop, and a big part of that is accepting debate.”
Hundreds of interviews and 30 team members later, not every recruit has been a good fit.
“It is about conformity, so it sticks out when someone doesn’t join in. It becomes obvious very quickly, whereas in traditional hierarchies it has to get relayed up through multiple managers before even a conversation can happen.”
Ryan laughs off the suggestions that this conformity makes being fired from his organisational structure a little like the “tribe has spoken” from reality TV’s Survivor.
Internal values statements
To avoid their collaborative cultures turning toxic, Ryan and Perkins have developed internal values statements, networks of meetings and worked to clarify some of the key points even the most fluid structures need.
The word “processes” can make managers beam, while those beneath them shudder. Most processes are about control and authority, which the holacratic organisation requires its leaders to share with others.
“It’s not about who owns what areas. It’s about recognising a company is really an ecosystem, a set of dependencies, and the leaders need to know they’re servants of the team, not the other way round,” Ryan says.
Perkins describes the sign-off process of her organisation as “decision trees”: each branch growing away from the trunk of the executive when it comes to requiring final approval, instead of making the decision among their smaller team or even on their own.
Divesting the perks of leadership is perhaps unsurprising in the technology industry, where most leaders speak of their company’s plans as part of a bigger – and occasionally almost messianic – plan to change the world. Perkins and Ryan have fashioned their own style of leading based on some of the ideas, but hundreds of companies from places such as Iceland and New Zealand have signed up to an official holacratic structure. And it’s not just tech companies trying it.
In Israel, the team behind the country’s leading cultural event of the year operates on a similar model.
The Jerusalem Season of Culture’s executive director, Naomi Bloch Fortis, wouldn’t call it holacracy, because it evolved naturally since she launched the festival in 2010.
Annual unfurling of her team
She describes the annual unfurling of her team and the program they create with swirling hand gestures that speak to her earlier career as a professional dancer.
“We don’t want to produce an ordinary event, so why would we have an ordinary team structure?” Bloch Fortis told AFR Weekend in Jerusalem.
Instead, her team of 30 form into units of two to five people to complete projects as diverse as co-ordinating the thousands of performers and guests who descend upon the ancient city at the end of summer to managing the website and brochures.
Bloch Fortis still sets the direction of the company and the festival by appointing and coaching the team leaders, who build their teams based on the skills they require.
“Sometimes I get assigned by someone to their team, and I go and work for them how I’m needed to,” Bloch Fortis says.
While her executive team has final sign-off on each event, she says allowing a range of different people to shape each aspect of the festival delivers an event as richly varied as the city it showcases.
And such a devolved organisational structure could, its fans argue, help any business become as dynamic and fluid as the markets in which it operates. Whether your model is holacracy or hierarchy, there will always be a need for leaders. It’s just that sometimes they’ll lead from the bottom.
“Leadership, and leadership thinking, is critical for all businesses no matter how they’re built,” Rubinstein says.
“To get anything worthwhile done, you need that kind of thinking and champions to get anywhere valuable. But those champions do not need to be managers. If you can encourage that visionary leadership across the company, it can be a very powerful thing.”
Fairfax Media Australia
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