Homework answers / question archive / MACQUARIE UNIVERSITY INTERNATIONAL COLLEGE FORMAL EXAMINATION PERIOD: Part A – Case Study Read the case material provided below

MACQUARIE UNIVERSITY INTERNATIONAL COLLEGE FORMAL EXAMINATION PERIOD: Part A – Case Study Read the case material provided below

Management

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MACQUARIE UNIVERSITY INTERNATIONAL COLLEGE FORMAL EXAMINATION PERIOD:

Part A – Case Study

Read the case material provided below.

Using extended answer format, answer all questions in the booklet provided. Answer each question on a new page of the booklet and specify its number.

Case Study: Zappos

ZAPPOS HAS ALWAYS been a company that has taken risks and done things in a pretty non-conventional manner. Founded by Nick Swinmurn, with the backing of investors Tony Hsieh and Alfred Lin, they uncovered a blue ocean market in 1999, seeing the potential to sell shoes over the internet. With Hsieh coming on as co-CEO, their annual revenue increased from $1.6 million in 2000, to $184 million in 2004. They cracked the billion dollar mark in 2008 after also expanding their online offerings to include a more diverse range of items such as handbags, clothing and children’s products. In 2009 they were bought out by Amazon in a deal worth $1.2 billion. Hsieh still remained as CEO after the sale, and only agreed to the sale with the condition that Zappos remained an independent entity distinct from Amazon.

So what makes Zappos different from any other successful online startup? The last point outlined previously gives us some idea. Hsieh was not solely looking at Zappos as a ‘get rich quick’ enterprise. He was focused on the nature of the company culture and deeply interested in the human component of work. To him this was an essential platform of the organisation, enshrined in one of the company’s core values ‘... to create fun and a little weirdness’.

With this value in mind, Hsieh was influenced by Brian Robertson, who developed the concept of ‘holacracy’. In holacracy the notion of the traditional manager is removed. Managers and direct line of supervision are replaced by ‘lead links’ and ‘circles’, which work on top of or in conjunction with each other, and where even the most junior staff member can have the opportunity for impact. The foundation of holacracy is ultimately a move to self-management. This is the essence of the attraction Hsieh saw in holacracy - a chance to go back to, as he perceived it, the agile origins of the startup. As an organisation grows, it becomes slower, less adaptable and increasingly bureaucratic. Hsieh says, ‘I don’t think any manager is purposely thinking, “How can I become more bureaucratic?”’ Holacracy is meant to address this deficiency, which Hsieh believes ultimately leads to the death of any business. This is highlighted by Hsieh when he states:

‘. .. every time the size of a city doubles, innovation or productivity per resident increases by 15 per cent. But when companies get bigger, innovation or productivity per employee generally goes down. So we're trying to figure out how to structure Zappos more like a city, and less like a bureaucratic corporation. In a city, people and businesses are self-organising. We're trying to do the same thing by switching from a normal hierarchical structure to a system called Holacracy, which enables employees to act more like entrepreneurs and self-direct their work instead of reporting to a manager who tells them what to do.’

Many advocates of flatter organisational structures… would say that such a move is consistent with the benefits of flatter, more agile and organic structures. However, while we are not saying that self-organisation and self-management is not without its benefits, there have been some major concerns raised about Zappos’ implementation of holacracy (and its more recent iteration known as ‘Teal’) that relate back to the roles of a manager, and the very purpose of a manager.

When Hsieh first proposed in 2013 that the company would soon have zero managers there were some raised eyebrows, but not a huge reaction. After all, Zappos was renowned for forging its own path, and of doing things in a unique way. The company was ranked in the Top 10 Fortune companies to work for in 2012, and the fundamentals of the company seemed strong. However, a few years since the move to holacracy and the cracks have started to show. For the first time in eight years, Zappos did not make the list of Fortune’s Best Companies to Work For. When the results of the individual questions from the Fortune survey were broken down, staff were particularly negative about whether management had a clear view of where the organisation is going and how it was going to get there. The seismic shift in thinking to a self-management system, combined with a changed business strategy, has left staff confused and, as perceived by many of them, directionless. Hsieh offered employees a redundancy package if they didn’t want to work under the new system: almost 20 per cent took it up. Turnover of staff is now up to 29 per cent across a single year.

Why? How could a successful company, that clearly understands and cares about the human side of work and organisation, get it so wrong that almost a third of its staff wishes to leave? It could be as simple as the inherent need, both by organisations and people, for the role of a manager. If we look at Chapter 1 of the text, we see the role a manager plays, the critical function that it has of balancing efficiency and effectiveness to meet organisational goals. Zappos’ experience (at least at the time of writing) seems to suggest that people in organisations do crave self-expression and some degree of autonomy, but autonomy with a structure. Too much autonomy may actually create as many issues as does too much prescriptive restriction. Zappos seems to have undertaken a corporate experiment that has highlighted that an organisation still needs a line of authority and some degree of linear structure to function effectively.

It should be noted that Zappos is not the only company to attempt a form of self-management for its staff. Medium, an online publication company, briefly trialled the concept before reverting back to a more traditional management and organisational structure. Andy Doyle, from Medium, stated that while holacracy had a lot of positive components to it, there were concerns that it was too cumbersome and divisive when it came to whole-of-company strategy and decisions. Ultimately, he said, it was ‘getting in the way of work’. Medium’s experience seemed to reflect the modern company’s reality - we love empowerment and want ideas and innovation from all parts, but ultimately we need managers to seek consensus, and to make decisions if consensus is not forthcoming. It seems that the role of the manager, while adjusting to a contemporary context, is not going the way of the dinosaur just yet.

PART A - Case Study Questions

Using extended answer format, answer all questions in the booklet provided. Answer each question on a new page of the booklet and specify its number.

1. Describe the principle of ‘holacracy’ and how it works at ZAPPOS.

2. What are the strengths of the ‘flatter’ management structure practised by Tony Hsieh at ZAPPOS?

3. What are the weaknesses of this ‘flatter’ management structure?

4. Identify what you think are two (2) important takeaways from this case in relation to the challenges managers face?

PART B – Self-Reflection Questions

Answer the self-reflection questions in the booklet provided. Provide examples where possible to support your answers.

Using your interaction in the Subarctic Survival Simulation, the Rowboat Scenario and the weekly in-class group work, consider your personal group-work experiences in WMGM102, and discuss the following:

1. Discuss three personal weaknesses you have discovered from your teamwork experiences in WMGM102? Provide details from the activities.

2. Discuss two new skills you would like to improve or develop and how you could do so?