Tony Hsieh, the former visionary CEO of Zappos, has died. Here’s how his radical business philosophy transformed Zappos and made him ‘a pioneer of a company culture.’

• Tony Hsieh, the retired CEO of Zappos who died suddenly last week, was a visionary thinker who had an obsession with company culture, according to his friends and colleagues. 
• Hsieh, who served at the helm of Zappos for 20 years, adopted a method called “Holacracy” in 2013. 
• Holacracy is an operating structure that relies on self-management — employees are equally privileged and work in circles dedicated to specific functions, which overlap. 
• Hsieh hoped it would allow for more innovation and productivity since employees with a great idea wouldn’t need to navigate through layers of bureaucracy.
• Though Holacracy wasn’t popular among all employees — 14% of them quit in 2015 rather than adopt the method — Hsieh’s singular focus on creating a company culture that empowered everyone was praised by those close to him. 
• Alfred Lin, a partner at Sequoia Capital who previously served as Zappos’ COO, CFO, and chairman, called Hsieh “a pioneer of a company culture.”
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Tony Hsieh was singularly focused on improving company culture. 

The visionary former Zappos CEO died on Friday at age 46 after sustaining injuries in a house fire. Hsieh’s sudden death, mourned by his colleagues in the tech industry, Wall Street investors, and politicians, came just a few months after his retirement from Zappos, the ecommerce company he ran for 20 years. 

Though Hsieh’s career included two wildly successful acquisitions — including when Amazon bought Zappos in 2009 for $1.2 billion — his focus remained on Zappos’ culture. One of the company’s core values is “create fun and a little weirdness” and the company’s Las Vegas headquarters includes everything from huge stuffed animal to sculptures made by the Blue Man Group, according to The New York Times. 

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But the messaging went beyond just a cool office. 

In 2012, Hsieh — who was already a motivational speaker and author of the business book "Delivering Happiness" — became inspired by a new form of management called "Holacracy." The method, invented by startup founder Brian Robertson, is a self-management tool designed to eliminate bureaucracy at a company. 

"Many years prior to meeting Brian, I had a nagging sensation that as we kept getting bigger, we kept getting more bureaucracy built into the corporate structure," Hsieh told Business Insider in 2016. "Because I wanted to stop this trend, I was spending a lot of time thinking about how we could avoid losing a startup edge and how we could empower every employee to act like an entrepreneur."

Holacracy is an operating structure that relies on self-management — employees are equally privileged and work in circles dedicated to specific functions, which overlap. Rather than a pyramid structure, power is distributed across those circles, Hsieh said. 

For example, when Hsieh made a decision to shut down a bridge connecting the company's parking ramp and office to encourage everyone to use the same entrance, employees were able to overrule him thanks to Holacracy, according to The Times.

While Holacracy sounds like a free-for-all, the method is highly regimented: though there are no job titles and employees are able to choose which circles they work in, there is specific software and lingo employees must use to communicate with each other, according to The Times. 

Adopting such a radical new organizational style was not a seamless process for Zappos. By March 2015, two years ago Hsieh implemented Holacracy, only 85% of the company had adopted it. Some managers stood in the way of employees taking on authority, resulting in conflicts, Hsieh told Business Insider. 

"What we found was that it was really hard for people to be half in one world and half in the other," he said. "The default became falling back on habits, and so it hindered the whole adoption process."

Upon realizing this, Hsieh sent an email to the entire company with an ultimatum: Adopt Holacracy by April 30 or take a three-month severance package and leave Zappos. The move resulted in 210 Zappos employees, or about 14% of the company, taking the offer. 

"This new environment isn't right for everyone ... it gives them a lot of freedom, but I understand at the same time that amount of freedom can be super scary for some people," Hsieh said. 

Several Zappos employees told The Times in 2015 that Holacracy was empowering, but also "weird," "painful," and "slow." Because the structure relies on formality and structure, it could negatively affect productivity and result in hours of meetings, one employee said. 

But Hsieh hoped it would allow for more innovation and productivity since employees with a great idea wouldn't need to navigate through layers of bureaucracy — instead, "they can run with the idea and find people who'd like to join them," he said. 

That focus on passion and innovation was a hallmark of Hsieh's management style. He moved the company from San Francisco to Las Vegas in 2004 in an effort to revitalize the city's downtown. In the process, he offered a buyout for anyone who didn't share his vision: three month's pay or one month's pay for each year employees had worked, whichever ended up being greater.

And when new employees join Zappos, they start a five-week training program. At the end of five weeks, they're offered $2,000 to quit. 

"We want to make sure that employees aren't here just for paychecks and truly believe this is the right place for them," Hsieh said. 

Following news of Hsieh's death, friends, acquaintances, and former colleagues praised Hsieh's focus on culture above all else. Alfred Lin, a partner at Sequoia Capital who previously served as Zappos' COO, CFO, and chairman, called Hsieh "a pioneer of a company culture." His longtime friend, the journalist Sarah Lacy, described him as a "visionary genius" who created a "pro-employee, never-say-no utopia."

Hsieh told Business Insider in 2016 that he hoped his philosophy would be "a whole new way of working and living that infects other companies."

"There are so many people working at bureaucratic, big corporations who are unhappy," he said. "Hopefully, we can help change that."