Zappos Problem Solving Discussion Questions Read Problem solving application case, page 628-630 of the text, Zappos CEO Asks Employees to Commit to Teal or Leave. and answer the three Discussion Questions that follow the reading. In your submission please use headings that correspond to the questions.
Answer these Discussion Questions:
Define the problem: Remember that the problem is the gap between the desired and the current state. State the problem as the gap and be sure to consider all 3 levels and if one is more important focus on it for parts 2 & 3.
Identify the causes of the problem: Use the procedure in step #2 to determine the cause and explain why?
Make your recommendation for solving the problem: Use the procedure in step #3 for a recommendation and implementation plan.
Provide a title page with your name and date.
Your content should include 600 words, and use a double-spaced Times New Roman font.
You should include headings, topic sentences, and the inclusion of the weekly learning.
You can complete this assignment using the text material, however if you use an outside source, please cite it using APA format. 628
PART 3 Organizational Processes
Zappos CEO Asks Employees to Commit to
Teal, or Leave
A BIT OF HISTORY
Zappos had modest beginnings. In 1999, shoesite.com was started by Nick Swinmurn to
capture online shoe sales. Swinmurn reached out to Tony Hsieh (pro nounced “shay”)
and Alfred Lin, who were running Venture Frogs, a kind of venture capital group, for advice and funding. Shoesite soon changed its name to Zappos, a riff on zapatos, the
Spanish word for shoes, but abstract enough to let the company offer products other than
In 2000 Hsieh joined Swinmurn as co-CEO and then became sole CEO. Quietly
charismatic, Hsieh gives quote-worthy interviews and for over a decade has served as the
company’s public face and voice. (Swinmurn left in 2006.)
Zappos has achieved great financial success. Revenue jumped from $1.6 million in 2000
to over $1 billion by 2008. This success led Amazon.com to purchase the company for
$1.2 billion in 2009. And today? While Amazon does not separate Zappos rev- enues in
its annual report, the division’s sales are as sumed to continue at well over $1 billion
annually. Hsieh told Jennifer Reingold, a Fortune reporter, that the company had
achieved its highest operating profit ever in 2015.119
TONY HSIEH’S VISION FOR THE COMPANY
Hsieh has long cared about employee welfare, as evidenced by his book titled Delivering
Happiness. He asserts that employee satisfaction is essential for business success. Today,
his goal is to turn Zappos into a “teal” company: teal represents a company
“characterized by selfmanagement, bringing one’s ‘whole’ self to work, and having a
purpose beyond making money,” according to Fortune. To get there, Hsieh implemented
an organizational structure he calls a holacracy.
MOVING TO HOLACRACY
Zappos historically favored an informal and flatter organization structure that probably
best fits the horizontal form of organizational design discussed
in this chapter. The company preferred this design because it felt bureaucracy and
hierarchy might dampen the creativity and employee engagement needed to provide great
customer service, a primary corporate goal. Although this design aided Zappos
throughout its growing years, in 2013 Hsieh came to believe that Zappos’s organizational
structure was limiting what employees had to offer. It was time for a change.
Hsieh told The Wall Street Journal, “Employees have so much more to offer. They’re a
full human be ing that has all these skills that, if they’re given the right context to
collaborate with each other and be creative and help move the company forward, they
will do that.”120
In a holacracy, the traditional hierarchical structure and reporting relationships are
replaced by selfman agement. There are no job titles and no managers. “It removes
power from a management hierarchy and distributes it across teams that have a clear set
of roles, responsibilities, and expectations. Instead of being assigned to a particular job
position or descrip- tion, roles of employees are defined around the work. These roles are
constantly being updated and em- ployees fill several roles. Additionally, employees
work within a team in which authority is equally dis tributed among its members,”
according to manage- ment blogger.121
These teams represent a hierarchy of work circles. A writer for Fortune noted that each
team has a dif ferent purpose, and the circles “operate next to, and on top of, each other.
. . . Lead links are the nominal managers—but they have little formal authority and can’t
force employees to do anything they don’t want to do.”122
A writer from Forbes described the structure as a hierarchy of circles that operate
according to detailed procedures outlined in the Holacracy Constitution. “Each higher
circle tells its lower circle (or circles) what its purpose is and what is expected of it. It can
do any- thing to the lower circle—change it, re-staff it, abolish it—if it doesn’t perform
according to the higher circle’s expectations. The word customer or a reference to any
feedback mechanism from the customer doesn’t appear even once in the Holacracy
arrangements are purely inwardlooking and vertical,” according to Forbes.123 As of 2015, more than 30
customer service, social media, Holacracy implementation, and others.124
The Holacracy Constitution was developed by Brian Robertson, the software executive who pro- posed
This docu- ment contains a language unique to this form of structure and detailed procedures for running
and expressing “ten sions.” A tension is an employee concern or problem about something happening a
to resolve tensions. Employees are ex- pected to use the language and procedural guidelines in the const
Hsieh notes this process makes everything explicit. In other words, holacracy creates bureaucracy and hi
there’s actually a lot more structure and we have governance meetings. Each circle has its own governan
countabilities and change purpose statements and so on,” he said.125
Employees are allowed to move from circle to cir- cle if they believe their talents can be used more ef- f
unhappy in their current circle.
THE OUTCOMES OF HOLACRACY AT ZAPPOS
In attempt to optimize P-O fit, in 2015 Hsieh offered employees three months of severance pay if they d
structure. About 14 per cent of Zappos’s 1,500 employees took the deal. This is huge when you conside
turnover rate has been about 1 percent.126 Hsieh isn’t overly concerned and even provided this positive sp
that 86 percent of employees chose to walk away from the ‘easy money’ and stay with the company.” Za
Fortune reporter Reingold concluded that hol- acracy creates winners and losers. On the positive side, it
more oppor- tunities for less senior employees because experi- ence and expertise were de-emphasized i
introverts in that they now are expected to speak up in meetings. It also helped dissatisfied employees su
customer service representative who wanted to transfer to the company’s culture team. His boss had bloc
holacracy, he was no longer allowed to do this. So Noel moved to the Fungineering circle, an events-pla
On the downside, the new structure is vague about how people receive performance evaluations and pay
promotional oppor- tunities because there are no managerial job tracks. Employees told The Wall Street
been confusing and time-consuming, espe- cially at first, sometimes requiring five extra hours of meetin
from their former bosses organize themselves into ‘circles’ and learn the vocabulary of holacracy.”128
Hsieh wrote a 4,300word memo to employees in 2015 called, “Reinventing Zappos: The Road to Teal.”
people to commit to a holacracy culture and 14 percent of the employees quit.) He then asked everyone
nice severance package). He felt that nonbelievers needed to go. According to Fortune, “In the end, 18 p
buyouts, and another 11 percent left without a package.”129 All told, about 29 percent of Zappos em- plo
instituting a holacracy culture in pursuit of becoming teal.
Many remaining employees feel it’s time to refocus on organizational culture. It was suggested that circl
every governance meet- ing. The company has also revised its recruiting pro- cess to assess whether app
philosophy of teal.
In 2016, Zappos did not make Fortune’s list of Best Places to Work for the first time in eight years. Its s
APPLY THE 3-STEP PROBLEM- SOLVING APPROACH TO OB
Step 1: Define the problem.
A. Look first at the Outcomes box of the Organizing Framework in Figure 15.8 to help identify the impo
Remember that a problem is a gap between a desired and a current state. State your problem as a gap, an
three levels. If more than one desired outcome is not being accomplished, decide which one is most imp
B. Cases have protagonists (key players), and problems are generally viewed from a particular protagon
perspective of Zappos employees.
Organizational Design, Effectiveness, and Innovation CHAPTER 15 629
that the university “almost operates like a hedge fund that conducts classes.”133
The idea of challenging universities’ taxexempt sta tus is starting to spread. Not only is
Congress looking into it, but also lawmakers in New Haven, Connecticut, have proposed
legislation to tax Yale University’s $25.6 billion endowment.134
The question for you to address is not the legality of the tax-exempt status of colleges and
universities. The issue is whether these institutions would provide en- hanced value to the
communities in which they are lo- cated if they paid taxes on both investment income and
If You Were a Jurist Evaluating the Tax- Exempt Status of
Princeton and Yale, How Would You Vote?
1. I would continue to give universities tax-exempt status on both endowments and
Universities most likely spend the tax-exempt money on scholarships, buildings, and
funding research. All these expenditures provide value to society, suggesting that
universities are good citizens.
2. I would vote for tax-exempt status on investment income for the same reasons noted
above, but not property taxes. Everyone else has to pay property taxes, and if colleges
and universities paid them too, the funds would directly help the members of the
surrounding community by reducing their tax burden. This is good citizenship.
3. I would both revoke the tax-exempt status of investment income and collect property
taxes. Being a good corporate citizen necessitates that these institutions pay taxes like
businesses and individuals do.
4. Invent other options.
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