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Teal Fail

When I met Tony Hsieh, one of the first things he wanted me to know was that it wasn’t his idea to have me come speak to his company.

It was April 2015, just weeks after Hsieh had issued an ultimatum to his company of more than 1400 employees: get on board with Holacracy or get out. 1400 people suddenly had to decide, in just 30 days, if Zappos would continue to be the right workplace for them. 

In an effort to help employees understand what was in store, a group inside Zappos—not Hsieh—asked me to come in, interview some folks, and then give an hour-long “Teal Talk.”

Let me back up and explain two things.

1. Holacracy is a way of organizing a company and its teams via an accompanying software tool called Glassfrog. The system was birthed inside a software firm (which no longer exists) and it mandates very strict adherence to its dogma. Adopting Holacracy is not at all easy, and the system itself was not designed to be a simple evolution of how most people work today. It’s a big, complicated leap that no company the size of Zappos had ever attempted.

2. “Going Teal” refers to the book ‘Reinventing Organizations’ by Frederic Laloux, which argues that human organizations experience degrees of evolution, ever marching toward a utopian existence of trust and consciousness. It’s a model of sociology that’s been applied to commercial institutions with a handful of cherry-picked case studies. It’s an optimistic read, but it is in no way a blueprint for how to run a company. 

Back at Zappos, I showed up for what felt like a wake. There’s no description for what people were feeling other than the sort of grief one experiences after suffering a loss. During my interviews, multiple people cried. For most, Zappos had been this ideal workplace where employees were put first, and then suddenly that care and generosity had been withdrawn. I met a group at a local bar the night before my talk and one employee aggressively confronted me, as he thought I was another consultant coming in to sell yet another model to Zappos. Once his coworkers talked him down, it was clear that he was being forced—without appropriate guidance—to make a decision that ultimately would impact his wife and child. He, like so many others at Zappos, was visibly shaken by the ultimatum. 

I gave my talk, mostly trying to empathize with a culture struck with unprecedented, self-imposed uncertainty, and then I left. 

Over the next month, via email, I advocated to Hseih that he allow his teams to develop their own ways of working, rather than strictly adhering to Holacracy. I offered a plan to empower teams, and included direct feedback that Zappos employees had given me about the move to Teal and Holacracy.

Hseih wasn’t interested in my input or the input I offered from his people. I gave up and moved on. My personal take was that Zappos was experiencing a classic cognitive bias: escalation of commitment. Instead of responding to evidence that his decision was in fact harming the company and the business, Hsieh doubled down on the commitment to Holacracy and Teal.

Over time, information has trickled out about the number of employees who have taken Hsieh up on his offer. 7% overall, then 14%, then 18% (up to 38% in a single department). These were just the employees who took the severance package—there were other employees leaving without taking the offer (either out of principle or eligibility) including key officers within the company. Total attrition for 2015 was reported at 30%. The attrition rate, plus the cost of 18% of the company taking a severance package (of up to three months of salary), has to amount to a dramatic blow to the business.

In the press, Hsieh (and his COO Arun Rajan) chalked up these losses as a natural, even beneficial, part of the process. And the press, largely, has bought it. In 2015, Zappos was again listed in the top 100 places to work by Fortune. Meanwhile, a major project (SuperCloud) is behind schedule, and no one publicly knows if Zappos is meeting its ambitious revenue goals set by Amazon.

For a long time now, I’ve felt like the little boy in "The Emperor's New Clothes," but others are finally realizing that, while Holacracy and Reinventing Organizations are compelling ideas, they are patently unsafe for existing businesses to adopt. 

In fact, since meeting with Zappos, I’ve met with two other firms that have adopted Holacracy and are now struggling with the reality of its complication, rigidity, and lack of clear return on investment. Both had already spent hundreds of thousands of dollars in coaching and implementation services, and because of that investment, were afraid to dismantle or even question the rules of what they had purchased. 

Cutting-edge management fads are causing great companies to bleed out. The distance between the theoretical conversation and the reality of work is just too far. The average employee is already overworked and undertrained; asking them to learn the management equivalent of Dungeons and Dragons on top of their workload is foolish, if not inhumane. 

It’s not "ambitious" to issue an ultimatum. It’s not "brave" to put the livelihood of your people in jeopardy by introducing change that’s not justified or informed by your market or customer. All of us should be committed to human agency, to reintroducing choice back into the workplace experience, but those introductions have to be both safe for the business, and designed for the literacy and context of the workers themselves.


The Week in Work
No more feedback sandwiches: Link

Designate a Facilitator and a Scribe to make your next meeting run smoother: 

Adore Me gives employees a bonus check when they quit—up to $10,000: Link

In the United Airlines merger, "You have an elitist culture problem": Link


This is an email sent by Bud Caddell, founding member of NOBL Collective

NOBL brings an unparalleled network to empower the creativity and capability required for constant change. Our teams embed and advise to re-align teams, refocus products, and re-imagine work for the 21st century.

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