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Structural Differences in the Same Industry

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Harvard and McDonald's operate in very different industries, but you will sometimes find very different structures among enterprises operating in a similar business environment. Take Amazon and Zappos.

Both companies are online retailers who ship a variety of goods to customers across America. Both are successful and known for their customer service. We have noted that Amazon gets it done with a tight structure that relies on sophisticated technology, precise measurement, close supervision, and zealous focus on customers, often to the exclusion of employees' satisfaction and welfare.

Contrast this with the Zappos structure, erected on a “culture of happiness” rather than a “culture of metrics.” Tony Hsieh, Zappos' long‐time CEO (now deceased), was just as focused on the customer as Amazon CEO Jeff Bezos (now retired), but he chose a very different structure to get there. Structurally, Amazon and Zappos are mirror images of one another. Amazon steers customers toward interaction with its website rather than its employees. Zappos wants highly motivated, happy employees, immersed in an environment of “weirdness and fun,” who will create a personal, emotional contact with customers.

Zappos' fulfillment operations take place in two large warehouses in Kentucky, where goods are received and merchandise is shelved, picked, packed, and shipped. Work is fast‐paced, intense, and often strenuous. Amazon's warehouse workers have been known to say they are “treated like a piece of crap” (Soper, 2011, p. 1), but Zappos makes working conditions a primary concern. The warehouses are air‐conditioned, and lunch breaks are embellished with free food, video games, and karaoke—the equivalent of adding several dollars to the hourly rate. One employee summed it up: “It's a hot boring job, and we may not get paid top dollar, but with our benefits and free food, it really makes a difference.”

In 2013, Hsieh concluded that Zappos was developing too much bureaucracy and proposed a “holacratic” form that eliminated jobs and the organization chart. Managers were replaced by “lead links” of self‐managing teams, and individuals were charged to use the “Role Marketplace” (Bernstein et al., 2016, p. 10) to look for work that interested them and needed to be done. The new system turned off some employees, and Zappos lost almost a fifth of its workforce. The transition to holacracy required major investments of time and energy as everyone struggled to figure out how the new system was supposed to work. Things got worse before they got better, as is typical of structural change. Most efforts fail. But, working within the holacracy framework, by 2015, Zappos achieved a 75 percent year‐over‐year increase in profits (Bernstein et al., 2016). The long‐term impact on Zappos' free‐wheeling culture remains to be seen, and Zappos has modified the model to make it more consistent with the company's human values, but this experiment may turn out to be less crazy than critics expected (Groth, 2020).

Zappos and Amazon achieve customer satisfaction through entirely different structural arrangements. What makes the story even more interesting is that Amazon paid over $1 billion to buy Zappos in November 2009. More than a year later, Zappos CEO Tony Hsieh sent a memo to employees saying the culture was still intact, Zappos was still in charge of its own destiny, and business was better than ever (Lashinsky, 2010). That was still true a decade later in 2020.

Exhibit 3.3. Structural Imperatives.

Dimension Structural Implications
Size and age Complexity and formality typically increase with size and age
Core process Structure must align with core processes or technologies
Environment Stable environment rewards simpler structure; uncertain, turbulent environment requires a more complex, flexible structure
Strategy and goals Variation in clarity and consistency of strategy requires appropriate structural adaptations
Information technology Information technology permits flatter, more flexible, and more decentralized structures
Nature of the workforce More educated and professional workers need and want greater autonomy and discretion
Reframing Organizations

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