The Business Case for Talent Management: Zappos.com and Holocracy
The dynamics inherent in contemporary business operations foster an ongoing need for creating a competitive advantage, and harnessing the talent required to actualize the organization’s objectives (Silzer & Dowell, 2010). Most business leaders understand the importance of integrating talent management with business strategy, human resource (HR) strategy, and the culture of the organization (Silzer & Dowell, 2010), although this may be much harder to do in practice.
Peer-reviewed literature on talent management has yet to solidify a single operational definition for talent management, which can encompass the culture, operations, and processes of a given firm in the design and implementation of current and future business objectives through the attraction, development, positioning, and retention of talent (Silzer & Dowell, 2010).
In the business world, several benefits are said to exist with firms that invest in a culture high in trust, including improved financial performance and decreased turnover, above and beyond firms that do not implement the same investment in workplace culture (Great Place to Work Institute, 2015).
The following takes a look at an online company, Zappos.com, to investigate the implementation of a new governing structure called Holocracy, and how the company is maintaining their spots in the Fortune 100 and 100 Best Companies to Work For (Fortune, 2015) through their philosophies and tactics for managing talent.
Holocracy and the 10 Core Values of Zappos.com
Zappos.com is an online store founded in 1999, operating since 2009 as a subsidiary of Amazon.com, Inc. (Bloomberg Business, 2015), who reportedly maintains the company with a “hands-off policy” (Fortune, 2015). The subsidiary continues to show an increase in profit margins for the past seven years ranking #35 this year on the Fortune 100 list, with over 1,400 employees averaging over $80,000 per year for salaried workers, including paid time off for holidays, vacation, and sickness, offering eight, twelve, and five days respectively (Fortune, 2015).
In 2014, Zappos.com transitioned its traditional organizational structure into a Holocracy (Denning, 2014), a comprehensive management paradigm that radically changes organizational structure, managerial decision-making, and distribution of power (HolacracyOne, 2015).
Holocracy uses circles of power empowered by openness, and democratic procedures dictated through a comprehensive Holocracy Constitution (Denning, 2014; HolacracyOne, 2015). This inward-looking process is said to work well for Zappos.com, a company renown for its obsessive focus on the customer value proposition (Denning, 2014), with a tagline, “powered by service” (Zapoos.com, 2015), which can be witnessed in the firm’s ten core values aligned with all business strategies, branding, and culture (Zappos Insights, 2015) extrapolated upon in Table 1, after which three of these values will be examined to show how Zappos.com is practicing this touted alignment.
Table 1
The 10 Core Values of Zappos.com (taken from Zappos Insights, 2015)
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Value Subcomponents
Deliver WOW Through Service Differentiation, innovation, emotional impact, going beyond expectations, word-of-mouth valance
Embrace and Drive Change Preparation for constant change, not accepting the status quo, bottom-up change
Create Fun and a Little Weirdness Unconventionality, humor, no extremism, interesting actions, consistency, authenticity, diversity
Be Adventurous, Creative, and Open-Minded Daring but not reckless, taking risks, following gut instincts, creativity, adventure, freedom
Pursue Growth and Learning Challenging stretch goals, unlocking potential, problem solving, expertise, adaptation
Build Open and Honest Relationships with Trusting and faithful relationships with all
Communication stakeholders, compassion, communication, loyalty, embracing diversity
Build a Positive Team and Family Spirit Diversity in ideas, friendly and exciting atmosphere, leading by example, collaboration, eliminating negativity, positive interaction
Do More with Less Continuous improvement, operational excellence, sense of urgency, mistakes as learning opportunities, exceeding high standards
Be Passionate and Determined Perseverance, vision, excitement, inspiring others, optimism, realistic attitudes, sense of urgency
Be Humble Respectful of others, doing things from the heart, not being selfish, celebrating individuality, no arrogance, moral character, a quiet confidence
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Aligning Corporate Values to Talent Management Processes
The success of a talent management system hinges on being integrated with, and supported by, a strategic business plan and becoming the cultural mindset of the firm (Silzer & Dowell, 2010).
Zappos.com takes its fifth core value, “pursue growth and learning,” and aligns this with their mission to develop future industry leaders, thus fostering a Pipeline Department tasked with developing leaders from within the organization, dictated by the given department’s progression plan and business needs (Zappos Insights, 2015b).
The seventh core value, “build a positive team and family spirit,” is aligned to a Goals Department, where coaching opportunities and workshops are offered to both employees and their family members, including a recognition celebration for all who reach their goals (Zappos Insights, 2015b).
The ninth core value, “be passionate and determined,” is aligned to the firm’s Onboarding process, where all new hires receive the same four weeks of training regardless of position or function, with a combination of technical and cultural training, and a graduation ceremony held upon completion (Zappos Insights, 2015b).
These examples provide evidence for Zappos.com’s pervasive mindset in integrating its talent management procedures throughout all corporate strategies, its culture, operations, and HR planning initiatives, perhaps giving the organization a firm grasp on gaining strategic competitive advantage (Silzer & Dowell, 2010).
Lessons Learned
The 100 Best Companies to Work For program has accumulated over 30 years of research pointing to firms on the list nearly doubling positive employee response, a 12-fold increase in profits, annualized stock returns increasing up to three times, significantly lowering turnover, and overall performance three times that of the general marketplace (Great Place to Work Institute, 2015).
This points to the notion that a highly robust workplace culture can create distinctive and tangible returns on investment (Great Place to Work Institute, 2015), something Zappos.com has been able to accomplish for several years by systematically focusing and integrating their talent management system into the very fabric of their strategies, operations, and culture (Fortune, 2015; Zappos Insights, 2015a; 2015b).
With the recent reorganization into a Holocracy, Zappos.com can be said to continuously seek out ways of encouraging and enabling their workforce to practice and internalize their ten core values and mission statement, in an effort to balance out their concentrated focus on delivering value to the customer while empowering employees to become self-directed in their work (Fortune, 2015; Denning, 2014).
Arguably, these results speak for themselves, creating evidentiary and logical justifications for organizations seeking out their own balance in creating comprehensively aligned talent management systems that deliver value to the customer and offer the firm a true competitive advantage.
References
Bloomberg Business (2015). Company overview of Zappos.com, Inc. [Online website.]. Retrieved from http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=92838
Denning, S. (2014, Jan. 15). Making sense of Zappos and Holocracy. Forbes.com. Retrieved from http://www.forbes.com/sites/stevedenning/2014/01/15/making-sense-of-zappos-and-holacracy/
Fortune (2015). 100 best companies to work for: Zappos.com. [Online website.]. Retrieved from http://fortune.com/best-companies/zappos-com-86/
Great Place to Work Institute (2015). What are the benefits? [Online website.]. Retrieved from http://www.greatplacetowork.com/our-approach/what-are-the-benefits-great-workplaces
HolocracyOne, LLC (2015). Holocracy: How it works. [Online website.]. Retrieved from http://holacracy.org/how-it-works
Silzer, R. & Dowell, B.E. (2010). Strategy-driven talent management: A leadership imperative. San Francisco: Jossey-Bass.
Zappos.com (2015). About Zappos culture. [Online website.]. Retrieved from http://www.zappos.com/d/about-zappos-culture
Zappos Insights (2015a). The Zappos family core values: Core value document [Downloadable PDF.]. Retrieved from http://www.zapposinsights.com/about/core-values
Zappos Insights (2015b). Zappos department fact sheets [Downloadable PDFs.]. Retrieved from http://www.zapposinsights.com/about/fact-sheets
