How some Zappos employees, now without a formal process for budgeting and raises, are struggling to adapt to Holacracy's lack of structure
A radical experiment at Zappos to end the office workplace as we know it — PHOTOGRAPHS BY GREGG SEGAL — TONY HSIEH, the CEO of Zappos …
Context & Ripple Effects
The severance wave came first: months into Zappos' transition to Holacracy, roughly 14% of employees accepted buyouts rather than work under the manager-free system, as covered in earlier reporting on the 14% who accepted severance and an inside look at how the manager-free structure actually operates day to day.
This piece adds a concrete friction point to that arc: with no managers, there is also no formal process for budgeting or raises, so compensation decisions lose their anchor. It lands a year before GitHub's own reckoning with bossless structure — GitHub later said it scrapped its bossless setup because it hindered execution at scale — making Zappos' experiment a test case the industry was already watching.
First-order effects
- Employees who stayed through the severance round now have to self-advocate for pay in circles instead of negotiating with a manager, and those without the skills or standing to do so fall behind on raises.
- Tony Hsieh's leadership team inherits a retention problem it partially paid to create: the same transition that triggered 14% departures is now generating ongoing dissatisfaction among the remaining workforce.
Second-order effects
- Recruiting against Amazon-era Zappos gets harder if word spreads internally that compensation has no clear path — the cost of Holacracy shows up not in headcount cuts but in which employees choose to leave next.
- GitHub's experience looms as a cautionary benchmark: if Zappos cannot solve pay and budgeting without managers, other companies weighing flat structures get evidence that the model strains exactly where money changes hands.
Third-order effects
- If the pattern holds across Zappos and GitHub, the structural lesson is that self-management experiments survive cultural buy-in but break down on formal resource-allocation mechanisms — suggesting future versions will need hybrid structures that keep peer-based governance while restoring explicit pay processes.
The trend: Bossless corporate structures are colliding with the unglamorous mechanics of pay and budgets, pushing companies toward hybrids that keep flat governance but reinstate managerial functions.