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IntroductionLogo of Zappos.com
Zappos is a US based shoe and clothing company with headquarters in Las Vegas. The company does its business through online. The company started 15 year ago in 1999 by Nick Swinmurn as an online shoe company, but slowly expanded its business to clothing as well. The company was bought by Amazon in the year 2009. The growth rate of Zappos had been very fast and their main motive to serve their customers to the best of their capability made them bring lot of changes to their organization structure. The company was the first to realize the importance of online shopping. The main vision of the company is to be the best online store to provide the best service to the customers. The company thinks that the only disadvantage of online service is the time taken to complete the transaction which is overcome by the quick door to door delivery by Zappos.com. This report will focus on the organizational structureand culture at Zappos and how it changed with passage of time to bring flexibility in their approach to meet ever changing customer request. The report will also discuss the leadership styles followed in Zappos and how various organization and behaviour theories are implemented by the HR of Zappos into their practice within the organization. The report will also focus on the unique division of company into what they call circles and how it is helpful for the company to deliver high level of service.
a) Discuss the advantages and disadvantages to Zappos
- If they maintain a traditional hierarchical structure
Hierarchical structure is one where there are many layers in an organization. The people at one layer are controlled by the people present at immediate higher level while they control the people present at immediate lower level. Thus, hierarchical structure is considered to be an organized structure and is used by most of the companies as it used to initiate smooth functioning of the company. Some of the advantages Zappos would have faced if it would have continued with the classical hierarchical structure are:
- Decision making would be quick as it would be in the hands of highly skilled and experienced managers sitting at the top of the hierarchy.
- Smooth operations as all the designations are well defined with each person knowing their position in the company.
- Time-based promotions keeps things simple as each employee is aware of the time when he or she will get promotions so there is less stress.
However, some of the disadvantage Zappos would have to face if it would have continued with hierarchical structure are:
- Slow flow of information because of multiple layer. Since, a company like Zappos whose main focus is to provide quick service to customers, delay was one of the biggest obstacle in their approach.
- Hierarchical structure stops the people present at lower level to participate in decision making and hence de-motivate people from working hard.
- Hierarchical structure means following of manager’s decision and does not give opportunity to employee to showcase his skills and thus personal development is not possible.
- Communication is the biggest problem as people have to look at the designation of the person before contacting him or her.
- If they adopt a flatter structure
Flatter organizations means when there are comparatively less number or no number of layers in an organization i.e. everyone is considered equal. Though, most of the flatter organizations still have two three layers of hierarchy, Zappos has introduced a new concept of no bosses and titles which is known as Holacracy (Groth, 2013). Holacracy is a new concept of organizational behaviour which considers each employee at same level. A company following holacracy is performance driven company with no space for weak or lazy. Communication is best in flat organizations as people feel free to talk with anyone, which builds trust and healthy relationship among employees. People are given responsibility to participate and give their suggestions related to company’s decision, hence people feel a sense of belongingness and responsibility. The main feature of adopting Holacracy is change. Holacracy promotes innovation, new ideas and flexible approach to tackle customer’s ever changing requests and high competition. However, it is important that Zappos should understand that this type of organizational structure may be difficult to manage when the size of the company increases. Zappos with a small population of 1500 can make full use of Holacracy to make sure efficient and quick service to its customers, however, with increasing size of the company, Zappos will have to introduce certain levels to have better control over the functioning of the company.
b) Explain how the new organisational structure and culture may impact on both employee and organisational performance.
The core values of Zappos are (Dager, 2011):
- To deliver WOW service to its employees: The company believe to do something unconventional and innovative which is not expected and will make people utter the word WOW. The interaction can be with colleagues, vendors, and partners or with customer.
- Accept the change and driven by change: Zappos not only is prepared for change but it encourages change. The flat organizational structure helps the company to adopt a flexible approach which can modify its strategy as per the changes initiated by the customers. Hierarchical structure cannot adapt quickly and hence continuous changes are not possible in hierarchical structure. But the structure of Zappos supports and complements the culture at Zappos to boost company’s performance.
- To be creative, fun loving, weird and adventurous during work: Zappos does not believe in conventional corporate life and supports weirdness and fun at office. Since there is not hierarchy, people can feel free to do all kind of weird stuff they want to do so that they can enjoy, be enthusiastic and interested at office hours. The company believes that being creative and lead to new and innovative ideas which can be better for company’s performance.
- To be enthusiastic about work and learning: The structure of Zappos helps the employees to develop their skills and realize those hidden qualities which were not known to him. On the contrary, in a hierarchical structure, personal development is slow as most of the employees follows the instructions of their supervisors or managers, however at Zappos employees are given the liberty to apply their ideas and take decisions related to company.
- To develop open and healthy relationship with colleagues and managers: Communication helps to build trust and develop relationship with each other. At Zappos, communication is much easier because of Holacracy type of structure. As a result, teams work together to attain synergy and deliver high quality service which boost company’s performance.
- To be passionate about each and everything that is done inside office: All the employees at Zappos had visions and dreams and bear a positive but realistic attitude towards work. The company does not believe in time- based promotions rather believe in hard-work and work with passion to deliver high performance for the company.
- Be respectful and polite: The Company, though believe in being weird and fun loving, the company make sure that they are respectful and humble towards everyone as the company understand that for long term existence and sustainability it is important to have good character.
Compare and contrast the leadership and management styles of Zappos with its parent company Amazon.
One of the biggest difference between Zappos and Amazon’s leadership style is that in Amazon, the leaders keep things secret from not only public but also from its employees. On the other hand, at Zappos the key is transparency. Being an employee driven company, Zappos, the company is open to all about its functioning and decisions and even uses social networking sites like Twitter to disclose their decisions (Pentina, 2012). Amazon, on the other hand, is very private which reflects on its service, as the company is highly successful on the website, however, when dealing with customers on phone, the company fails on many occasions. Tony Hsieh, the CEO of Zappos, was even open to the employees during the collaboration with Amazon and was greatly supported by the employees at Zappos. Thus, it can be seen that the company holds a democratic style of leadership which supports equal participation of employees in making important decisions for the company (Denning, 2012).
Amazon, on the other hand, holds a relatively hierarchical structure, mostly because of the vast population of the company. The company does not involve employees and follow autocratic type of leadership style where the decision making is done by the senior and expert managers sitting at the top of the hierarchy.
No titles: Zappos new organizational behaviour, Holacracy means that there will be no manager, no titles within the company which means that there will be no leader. This kind of structure is also known as super flat organizational structure. The company who is driven by change believes that any kind of control by higher authority is a hindrance in their approach towards quick and efficient decision making to tackle the external changes (Dager, 2014). However, the distinction will be on the basis of roles and activities assigned to person. Old and experiences people will have more roles to execute compared to new employees. Tony Hsieh believes that there should not be any hiding of employees inside titles and still not perform. The employees will be rewarded only on the basis of performance and not on time spent with the organization. The company took the step to adopt Holacracy structure to maintain radical transparency. The company will still have people who will be known as Lead-links, who will assign different roles to different employees but will not supervise them or assist them in decision making. The power to take decisions will be in the hands of employees and teams or circles with which they are associated.Figure 2: Difference between Traditional Structure and Holacracy model
However, it is important to understand that the new Holacracy organizational model adopted by Zappos is very new and has not been implemented by many organizations. The other company to adopt this model is Twitter which has a small population of less than 100 employees. 1500 employees is a big number to apply such model. The biggest disadvantage is that without supervision and control new employees might find it difficult to work. Research have proven that better control and proper organization results in better performance as people feel secure. Holacracy model, if not succeed, will backfire and can also result in abnormal results for the company.
According to Tony, the leadership followed at Zappos is known as freedom-centred leadership which is driven by innovation, distribution of power to everyone and encourages and support talent rather than titles and seniority.
a) Examine how Zappos leadership style may affect the motivation of their employees during the organisational re-structuring
Zappos leadership style as mentioned has been termed as freedom-centred leadership style. According to Hertzberg motivational theory, there are two type of factors. The first type of factors also known as hygiene factors are payments, hikes, bonuses, etc. whose absence demotivate employees but whose presence doesn’t play any significance role. The second factor also known as motivational factors like sharing decision-making power, giving more responsibility, recognition, etc. which motivates the employees to work hard.
It can be seen that following Hertzberg’s dual factor theory, the company changed its structure and made sure that each employee is given complete freedom in making decision for the company (Medinilla, 2012).
Some of the important features of leadership style and its impact on motivation are:
- Status: Holacracy model and flat organizational structure brings every employee on same ground and thus each employee enjoys same status. This brings a feeling of pride and motivates the employees as he or she feels more responsible towards the company.
- Challenging work: Zappos “no managers” leadership style make sure that the company believes in survival of the fittest. The company’s approach not only gives power into the hand of employees but without guidance, it make sure that each day the employee has to apply himself to work in challenging environment. Stimulating work make sure that employee is interested in the work and is highly motivated to work hard (Fanning, B.).
- Personal growth: The growth is in the hands of employees in Zappos. Time- based promotions are not encouraged at Zappos, but the employees are given rewards for their performance. Thus, growth at Zappos is not time dependent but depends on the capability, skills, knowledge and hard work of the employee.
- Advancement: Zappos is driven by change and encourages change. Thus, the employees are also motivated to work with the change and advancement is one of the basic feature at Zappos. The employees at Zappos are enthusiastic about the use of latest technology at work place and are keen to learn new technology so as to improve their personal skills and deliver high output for the company as well.
Thus, it can be seen that, during the change in organizational structure of Zappos from traditional hierarchical structure to no-title, no-manager structure, the company has done well to keep its employees motivated and the culture of the company complemented the change to bring high level performance for the company.
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b) Critically discuss the alternative approaches Zappos can use to motivate their staff.
As mentioned in the previous sections that the Holacracy model adopted by Zappos is highly risky and can create chaos and confusion in the functioning of the company, if things not go well for Zappos. The company consists of 1500 employees and the company is still growing. It is better that the company should have one or two level of hierarchy which can control the functioning of the employees. The company should look to have 1st level managers i.e. supervisors and general managers like the branch managers, etc. Some of the main reason for such an approach will be:
- According to McGregor’s theory of X and Y, if Zappos turns out to be an organizations of category X, which consists of lazy employees who are not willing to work and needs manager to control their functioning, it will become important for Zappos to create managers or higher authority which can control the actions of the employees (McGregor, 1960).
- The company also require supervisors who could guide the new employees through conducting training programs and also guiding them during initial phase of their life at Zappos.
- A relatively hierarchical approach make sure that the organization is well-organized. The flow of information is well defined and smooth.
- The current leadership style puts lot of burden on the employees which is more like delegative leadership style. The new and inexperience employees may not be able to take decisions which can lead to negative results for the company.
A relatively hierarchical approach will make sure that employees are well controlled and supervised while still having power to take decisions and thus it will not bring much difference in the motivational level of the employees.
With increase in the number of employees, the company should continue to increase the level of hierarchy and return to traditional approach for better functioning and keep its employees motivated.
c) Evaluate the benefits of motivation to both Zappos and its employees
Benefits of motivation on Zappos and its employees:
- Motivation is important among employee as it keeps the environment within the organization challenging and competitive. Lack of motivation will result in loss of interest and less efficiency. Motivation make sure that the employee applies themselves to produce the desire output.
- According to Vroom’s expectancy theory, motivation plays an important role as it makes employee to put more effort. More effort results in better performance for the company which ultimately results in better rewards for the employees. Better rewards, again motivate the employee to perform even better (Van Eerde, 1996).
- Motivation in terms of increasing power to take company’s decisions generate a sense of pride and responsibility among employees. Employees feel more important and associated with the company, as a result, the employees stays within the organization for more number of years.
- Motivation also helps in understanding the importance of team and working together as a team to attain synergy. Synergy means that the overall productivity of each employee in a team working individually is less than the overall productivity of the team when each employee of the team works with same effort.
a) Explain the behaviours and dynamics of groups, including the factors that may inhibit effective group formation and teamwork
The approach followed at Zappos to form circles has the following management areas:
- Board Circle
- Management Circle
- Operations Circle
- Sales Circle
- Team Circle
- Circle related to growth of the company
- Reputational Circle
- Project Management Circle
- Cultural Circle and
- Governance Circle
Some of these circles are depicted in the following diagram:Figure 3: Circle Structure in Zappos
Some of the benefits of having dynamic groups like circle at Zappos are discussed below (Jones, 2012):
- Firstly, the roles are clearly defined and distributed among each employee in a circle and each one is accounted for the role. Unlike, traditional structure, the main advantage is that some roles such as ancillary activities are lost however, in case of holacracy these ancillary activities are taken care off.
- Secondly, team structure are well organized because the circles are formed on the basis of roles and not person. The three tier structure of taking business activities i.e. operational, tactical and strategically decision can be made with much more ease. The role based circles can meet to discuss the status of project and future tactics of the project. Any new requirement can be dealt by proper coordination within the circle as all the roles are covered inside the circle. On the contrary, in hierarchical structure, the new requirement had to undergo different groups from , marketingto legal departments thus delaying the whole procedure and increasing the overheads.
- Thirdly, since roles in Holacracy structure are delegative in nature, thus they are distributed based on the willingness of the employee and are not dependent on title of a person. Thus, employees work with much more enthusiasm and the competition level of the circle increases to deliver better performance.
- Finally, the approach is better for customers as their request can be addressed within the circle as all the employees assigned to various roles are present within the circle. There is no procedure of escalation of request to higher authorities which can be time taking and frustrating for customers. The new way is quick and efficient in resolving customer related queries and issues.
However, there are some disadvantage of having such structure:
- Diversification: Since there is no proper management and control, there can be conflicts among the employees present in same circle because of difference in opinion and interest which mostly arises because of diversified population.
Thus, it can be seen that Zappos is change driven company. The company is among the few organizations to adopt Holacracy business model and have been a success in the last couple of year after its implementation. However, the leadership style followed by Zappos is analysed and suggestions are given to improve and change the style with passage of time when the company will grow in number. The company’s new style of forming teams or circles based on roles and not titles is also something new and unique. The major advantage and disadvantage related to formation of circles were discussed and suggestions were given to improve it. In the last part, the impact of technology and how it helped Zappos to be the company they are today is discussed.