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Zappos Workforce Walks Out on CEO's Ultimatum

Self-Management Scheme Invites Walkoff

Zappos Known for Odd Corporate Culture

14% of Employees Walk Out with 3 Months Severance

After the report leaked, Zappos published the internal memo in full.

Published on May 15, 2015 By Aaron Phillips By Aaron Phillips

The Las Vegas Sun reported that a large chunk of the Zappos workforce walked out after being given an ultimatum by their CEO, Tony Hsieh. Zappos recently confirmed that the report was true, and that the employees were given severance packages after the disagreement. At the core of the issue was a new, off-the-wall management scheme that Hsieh is implementing.Hsieh's goal is to use a system called Holacracy in order to build up an internal workforce with no management.The thinking is that, if the company has hired the right people for the right positions, they'll be able to operate more efficiently without traditional managerial oversight. Instead, Holacracy relies on individuals to keep tabs on whether or not other employees are doing satisfactory work, and if they aren't to report them to HR. Holacracy is only the latest example of weird management put to work for Zappos, though.The company has long been known to have a culture which doesn't mesh with most of corporate America. In fact, before their 2009 acquisition by Amazon ( AMZN ), one of CEO Tony Hsieh's primary concerns was to preserve the Zappos culture, which he sees as one of the primary strengths of the company. For instance, their call center employees don't operate off of a script and are encouraged to talk with customers for as long as it takes to satisfy them.The root of Zappos corporate culture comes from their business model, which is based off of repeat business and word of mouth advertising, and 75% of Zappos transactions are with customers who are coming back for more. As a result of his past experimenting, Zappos was bought out by Amazon for billions, and the company consistently ranks in the top 100 best places to work.Regardless of their success in the past, this time around Hsieh didn't get results. A full 14% of Zappos employees walked out with severance, disappointed or uncomfortable with the implementation of Holacracy according to the memo. The 210 employees who walked were invited to download an eBook explaining their transition under Holacracy, meet privately with senior staff including Hsieh himself, and attend multiple meetings regarding the transition and what was expected of them. They decided to head for the door anyway.Zappos confirmed this report and made the entire memo public on their business-oriented, subscription-only Zappos Insights blog.