To go where few companies have gone before — a land without managers

Can a company function without bosses?  
As you’ve no doubt heard, online shoe retailer Zappos — or at least Zappos’ CEO Tony Hsieh — thinks so. The company’s been dabbling in a structure called Holacracy (more on that in a second) that encourages personal creativity. But to this point, it’s still had a traditional management setup.
As of April 30, that all changes. Hsieh recently sent out a memo decreeing that as of April 30, there will be no more managers at Zappos. And everybody who disagrees with the move can quit and get a fairly nice severance package.
Here’s a definition of Holacracy, straight off the website:

Holacracy is a distributed authority system – a set of  rules that bake empowerment into the core of the organization. Unlike conventional top-down or progressive bottom-up approaches, it integrates the benefits of both without relying on parental heroic leaders. Everyone becomes a leader of their roles and a follower of others’, processing tensions with real authority and real responsibility, through dynamic governance and transparent operations.

Sounds good to us.
But Hsieh is unhappy with the melding of this New Age approach and the old-fogey management structure. In his memo to employees, Hsieh said, “Having one foot in one world while having the other foot in the other world has slowed down our transformation towards self-management and self-organization.”
So as of April 30, the old management structure will be no more.

A shift in hue

Another bit of explanation is needed here. Richard Feloni, writing on Business Insider, explains Zappos’ current system:

In the new Zappos lexicon, the company has been a “Green” organization, one that encourages employee freedom but functions with a traditional hierarchy. Hsieh wants to transition it to a “Teal” organization that doesn’t need managers to grow and fix internal problems.

How’s that going to work? In his memo, Hsieh says:

After many conversations and a lot of feedback about where we are today versus our desired state of self-organization, self-management, increased autonomy, and increased efficiency, we are going to take a “rip the bandaid” approach to accelerate progress towards becoming a Teal organization. …
Our main objective is not just to do Holacracy well, but to make Zappos a fully self-organized, self-managed organization by combining a variety of different tools and processes.

Not a fit for everybody

Hsieh acknowledged that the new regime wouldn’t be a great fit for everybody, so he’s offering nonbelievers a severance package. On a company-wide scale, each employee will be offered at least 3 months severance (and up to 3 months of COBRA reimbursement for benefits) if he/she feels that self-management, self-organization, and (other company programs) are not the right fit. (For employees that have been with Zappos for 4 or more years, the offer will be 1 month for every year worked at Zappos, along with up to 3 months of COBRA reimbursement for benefits.)
There are some conditions, however. Each departing employee (who want the package) must:

Once all the non-believers are gone, will this Teal plan work? It’s a big gamble — one Hsieh acknowledges:
“This is a new, exciting, and bold move for Zappos. Like all the bold steps we’ve done in the past, it feels a little scary, but it also feels like exactly the type of thing that only a company such as Zappos would dare to attempt at this scale,” he wrote. “… I can’t wait to see how we reinvent ourselves, and I can’t wait to see what unfolds next.”