Practical insights for compliance and ethics professionals and commentary on the intersection of compliance and culture.

Zappos and the ethics of change management

Zappos is a leading online retailer and presents an interesting ethics case as it copes with the challenges of remaining competitive. A remaining pioneer of the dot-com boom and now a subsidiary of Amazon, Zappos has thrived and innovated under the leadership of Tony Hsieh, known not only for the selection of products it offers, but also for its customer services standards and social media engagement.

Like all enduring enterprises, Zappos faces the challenge of reinventing itself to strive for longevity and sustainability. Paradoxically, one way leaders try to retain relevance and stay appealing to both customers and employees is to embrace change. The thinking often goes that fixing things before they are broken is better than turning up one day and realizing suddenly nothing works. This self-inflicted evolution can lead to positive growth and a more forward-facing structure that is built for the future, but it can also be destructive to a corporate culture that people rely on for consistency and security. In these times of change, ethical considerations taking a backseat to a lean business model is not a sustainable approach.

The 2008 financial crisis has seemingly convinced an entire generation of leaders that business has entered new, uncharted territory and leaders must continually attempt novel structural disruptions to their organizations as a response. Established companies seek to retain their footing or get a leg up on their competitors, both for customers and for employees, by reimagining management in unusual and often highly-conceptualized ways. This took shape at Zappos in 2015 via a new management structure called Holacracy. This abstract system eliminates managers and much of the corporate hierarchy in favour of esoteric, philosophical concepts and flat, self-directed leadership.

These modern visions of management seek to enfranchise the individual. However, if not carefully implemented, they can have the opposite effect. Instead, they create a leadership vacuum and a change process where no one is in charge because everyone is, at least in theory, empowered. The efforts of Zappos to reinvent itself as a flatter, evolved organization with far-out corporate-speak structures, ambitious manifestos, and abstract solutions to common sources of modern employee dissatisfaction are interesting to study but challenging to implement. At their worst, they can lead to employee disengagement and a company that proceeds rudderless, having been stripped of its long-tenured employees via voluntary leave packages and its conventions through generic, buzzword-driven processes that have no intrinsic meaning or applicability to the specific needs of that business.

Change management is a delicate process which must be grounded in a sensitivity for the humans experiencing the change and concretely connected to real considerations like individual development, pay, and productivity. Making choices about the direction of a business which affect people’s livelihoods directly cannot be done ethically if it is done experimentally. Prepared, careful communication and incremental change with absolute transparency and clarity, especially toward the way people will work and be trained and paid, is imperative to maintain integrity.

For a comprehensive look at the radical corporate reorganization efforts at Zappos and their effects on employees, Roger D. Hodge’s 2015 story for New Republic is a great read.