Last month I wrote about how Haier fosters innovation in large part by eliminating middle management and having a very flat organization. For those who may have thought Haier was an outlier or that this was a uniquely Chinese situation, it was recently reported that Zappos (the online shoe store owned by Amazon) is employing a similar structure.
The system, known as Holacracy, removes all job titles and managers in a corporate structure, leaving nearly every employee on equal footing. Zappos will create approximately 400 “circles” made up of a group of employees that will be tasked with projects. The group must work together, without a formal control structure, to do their jobs.
The term Holacracy is derived from the Greek word holon, which means “a whole that’s part of a greater whole.” Instead of a top-down hierarchy, there’s a flatter “holarchy” that distributes power more evenly. Rather than doing away with leadership, Holacracy actually distributes leadership to everyone. The focus though is on the work, not the individuals. It is easy to draw parallels between this philosophy and that of Haier, as Chinese culture traditionally supports the greater whole.
The success of Haier and this move by Zappos point to a greater organization shift, one less focused on politics and people and more focused on getting the most done efficiently. It is only a matter of time until this philosophy makes its way to tech and gaming companies and the early adopters are likely to see huge advantages in productivity and employee retention.
The Business of Social Games and Casino 
I believe the battle cry “eliminate middle management” and create a “flat organzation” is emphasizing a method over a goal.
The goal, in my opinion, is eliminating reporting structures where a person’s success is determined solely by how well they please someone else in the corporate heirachy. Instead, a person’s success within the organization should be tied primarily to the success of the products they work on, and secondary to how well they work with others within the organization.
The reason why middle management makes such an easy target is that in many organizations a middle manager’s performance is ultimately based on how well they please a superior, regardless of how well products do in the marketplace. Dilbert’s pointy-haired boss is the classic example of useless middle management.
However, if the pointy-haired boss and his hapless flunkies (including poor Dilbert) were given the authority AND responsibility for making a product successful, including given their own marketing, sales, and customer support staff, the boss’ desire for survival would be directly aligned to making sure products were successful. This means making sure all the people making, selling and supporting the product can do their best.
Note that the solution isn’t eliminating middle management. Instead, it’s reorganizing the company to be focused on successful products. Such a reorganization would eliminate some middle management, since VPs of marketing, sales and customer support would be useful only insofar as they contributed measurably to better marketing, sales and customer support of many product teams. For example, preventing bone-headed marketing plans, stopping illegal sales methods, or evading customer support disasters is one way former VPs can still earn their keep.
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