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Prize winner
Published by: INSEAD
Originally published in: 2016
Version: 03.2018
Revision date: 09-Apr-2018
Length: 19 pages
Data source: Published sources

Abstract

After 18 months of attempting to transition the company to holacracy, Tony Hsieh, Zappos' celebrity CEO, decided it was time to make the change happen. In March 2015, he sent an email to all Zappos employees offering them 3 months' severance pay if they felt that self-management was not for them. One month later, 14% of the workforce had quit, including 20% of the tech department, potentially putting at risk a complex transition to a new on-line platform mandated by parent company Amazon. The case recounts how Tony Hsieh financed, championed, and ultimately became CEO of on-line shoe retailer Zappos. A passionate entrepreneur who made millions at a young age, Hsieh was known for his penthouse parties, for what he referred to as his 'tribe'. He brought the same sense of community to Zappos, which he moved from San Francisco to Las Vegas where employees could 'be like family'. Despite the company's unabashedly weird culture, it had the lowest employee turnover rate in the industry. Widely admired for its outstanding customer service, Zappos was repeatedly listed among Fortune's 'Best Places To Work'. When in 2009 Amazon acquired Zappos for USD1.2 billion, it promised to preserve its management and culture. But Hsieh's decision to implement holacracy - a form of organizational self-management that replaces job titles and hierarchy with 'circles' that employees step in and out of according to their preferences and skills - was less popular than hoped. Hence his 'rip the Band-Aid' approach, to ensure that only employees committed to the change remained at the company.

Teaching and learning

This item is suitable for postgraduate and executive education courses.

Time period

The events covered by this case took place in 2013-2015.

Geographical setting

Region:
World/global

Featured company

Zappos
Industry:
Retail; Technology; e-Commerce

Featured protagonist

  • Tony Hsieh (male), CEO

About

Abstract

After 18 months of attempting to transition the company to holacracy, Tony Hsieh, Zappos' celebrity CEO, decided it was time to make the change happen. In March 2015, he sent an email to all Zappos employees offering them 3 months' severance pay if they felt that self-management was not for them. One month later, 14% of the workforce had quit, including 20% of the tech department, potentially putting at risk a complex transition to a new on-line platform mandated by parent company Amazon. The case recounts how Tony Hsieh financed, championed, and ultimately became CEO of on-line shoe retailer Zappos. A passionate entrepreneur who made millions at a young age, Hsieh was known for his penthouse parties, for what he referred to as his 'tribe'. He brought the same sense of community to Zappos, which he moved from San Francisco to Las Vegas where employees could 'be like family'. Despite the company's unabashedly weird culture, it had the lowest employee turnover rate in the industry. Widely admired for its outstanding customer service, Zappos was repeatedly listed among Fortune's 'Best Places To Work'. When in 2009 Amazon acquired Zappos for USD1.2 billion, it promised to preserve its management and culture. But Hsieh's decision to implement holacracy - a form of organizational self-management that replaces job titles and hierarchy with 'circles' that employees step in and out of according to their preferences and skills - was less popular than hoped. Hence his 'rip the Band-Aid' approach, to ensure that only employees committed to the change remained at the company.

Teaching and learning

This item is suitable for postgraduate and executive education courses.

Settings

Time period

The events covered by this case took place in 2013-2015.

Geographical setting

Region:
World/global

Featured company

Zappos
Industry:
Retail; Technology; e-Commerce

Featured protagonist

  • Tony Hsieh (male), CEO

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