Question:

If you were the CEO of this company, how would you respond to those who say people have little or no incentive to stay with the company because there is no opportunity for any advancement?

Article the question is based on:

Online retailer Zappos (an Amazon company) is known for its exceptional customer service, a strong culture based on 10 core values, and encouraging the individe lily of employees. Tony Hsieh, the late Zappos co sounder and former CEO. was well known for his mantra of "delivering WOW!" to the company's many satisfied customers and recognizing employees as a key component of the firm's overall success.

Typically recognized as one of Fortune's "100 Best Companies to Work For." Zappos recently made the news for other reasons. Several years ago. Hsich decided to implement a business strategy called holacracy, in which management jobs and titles were eliminated, and self-managed teams became the core of a flat organizational structure.

Created by software engineer Brian Robertson, holacracy replaces a typical vertical hierarchy with a series of self-managed work circles that operate with a certain amount of overlap when it comes to employees' roles. Each circle is led by people called "lead links," responsible for making sure the team gets its work done; however, these leads have little or no formal authority and cannot force employees to do anything they don't want to do.

Zappos* HR department was the first group to implement the new holacratic approach. But Hsich thought the implementation process was too slow, and the company was left operating with both the old management structure for some departments and new work teams in other parts of the organization. Hsieh decided to "rip the band-aid off" and accelerated the implementation of holacracy throughout the entire organization. In an elfort to eliminate the company's management hierar-chy. Hsieh declared there would be no more people managers, and certain departments within the organiza Mon (eg., merchandising, finance, technology, and mar keting) would be phased out and those jobs would transfer to roles in the appropriate work circles.

As part of the process, Hsich sent a lengthy e-mail to employees, explaining why he believed holacracy was important and how it would help spark innovation Recognizing that not everyone would thrive in this team almosphere, Hsich offered employees the opportunity 1 leave the company with a minimum of three months Of severance pay and paid health care benefits for aspecific period of time. For some Zappos veterans, the offer was even more generous: one month of pay for every year worked at the company. More than 30 percent of the company's 1.600 employees at the time took the offer or left on their own to seek employment elsewhere.

Then-CEO Hsieh hoped holacracy would help employees operate more like entrepreneurs and less like cogs in a bureaucratic structure. He also thought this new team approach could help create unlikely collaborations that could lead to more innovation and creativity in the organization.

The changeover was not without obstacles. In addition to losing experienced employees (including former managers), the new approach continues to cause confusion among employees who were comfortable seeking advice and direction from their supervisors-who are now gone or who are now co-workers in the flat organizational structure. In addition, former managers who took new roles at the company probably experienced pay cuts because their responsibilities as managers were eliminated. Some critics say there is little or no motivation for people to stay at Zappos if there is no opportunity for advancement up the corporate ladder.

Although he regretted not implementing holacracy sooner, Hsieh and management researchers said it's too early to tell whether the self-managed team's approach will be a success. (Holacracy's creator says it takes between 5 and 10 years before a company will know whether the new team approach will be successful.)

Hsieh believed that the company's core values and strong culture provided a solid foundation for such an exciting and bold move to self-managed teams. However, Zappos' employees don't seem convinced that the team experiment will lead to success. In addition to losing nearly one-third of its employees, Zappos has not earned a spot-on Fortune's "Best 100 Companies to Work For" list since 2015, where employees' positive evaluations of their company count heavily in the final rankings.