Zappos scrapped its managers for 'holacracy' — and a chunk of staff walked out

Zappos, the online shoe retailer owned by Amazon, was famous for its distinctive, employee-friendly culture under CEO Tony Hsieh. In 2013, Hsieh made a radical bet: he began replacing Zappos's traditional management hierarchy with 'holacracy,' a system of self-managing teams with no bosses, intended to make the company more agile and entrepreneurial.

The experiment was divisive. Holacracy replaced managers with overlapping 'circles' and detailed governance rules; some employees found it liberating, but many found it confusing and bureaucratic — critics called it 'administrivia' that funneled decisions through layers of circles. In 2015, Hsieh sent an email offering a severance package to any employee who did not want to stay under the new system.

About 14% of Zappos's staff took the offer and left — a deliberate attempt, the company said, to keep only people who believed in holacracy. The episode made Zappos a case study in radical organizational change: a bold experiment in self-management that energized some and alienated others, and that raised hard questions about whether you can impose a culture by asking people to accept it or walk away. (Medium tried holacracy too, and abandoned it in 2016.)