Zappos CEO Tony Hsieh likes experiments. Five years ago he shifted the management structure to a system that distributes decision-making throughout the organization. Now Hsieh is allegedly instituting a market-based system, where teams operate like independent small businesses with their own profit-and-loss statements.
How does this concept work? Basically, Zappos teams (or internal small businesses) are incentivized to develop new products and services for its customers. And all teams, even ones that are not profit-focused, must find their own ways to fund their expenses. In other words, they must earn the money they need to operate.
As a business owner, I know exactly what this looks like. No one is funding Jill Christensen International, LLC (although I’m open to donations if you are so inclined). I must earn the money I need to operate every day. And if I stop earning it, I stop operating, which would be a very undesirable outcome. Therefore, there is a fire under me every day, which causes me to be incredibly decisive, positive, resilient, nimble, customer focused, determined, and strategic.
If a market-based system sounds like a dicey way to operate a business, my point of view is “fear not,” as Zappos is owned by Amazon and miracle-spinner Jeff Bezos. I trust that if things are not working out, they’ll find a new way to operate – and fast – as Bezos does not let grass grow under his feet. He is constantly innovating, expanding, dreaming, and succeeding.
JILL, WHAT CAN I DO? From my experience, organizations have various levels of tolerance as it relates to taking calculated risks. Some want nothing to do with innovation, since their current model is working, and others are continually in search of newer, bigger, and better (like Amazon). Only you know where your organization is on the spectrum. If you think leaders are open to trying a new operating model, share this blog with them. Because I, for one, cannot think of two better organizations to emulate than Zappos and Amazon. They are crushing it in the marketplace.