Zappos strips job titles from its employees

This is a rush transcript from "Your World," May 13, 2015. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, you sit in the corner office, you keep your eye on the door. Online shoe retailer Zappos stripping job titles from its workers and getting rid of all management positions, or most of them.  Around 14 percent of those workers really didn't like that at all.

They took a buyout, left the company.

Craig Smith, Charlie Gasparino say, well, you know, that was the point maybe and it shows it's pure genius. Hitha Herzog say, you know, they're both nuts.

You don't think it's good strategy.

HITHA HERZOG, FOUNDER, THE STYLE FILE GROUP: No. I think this is corporate "Lord of the Flies."

CAVUTO: Touche.

HERZOG: This is just a disaster waiting to happen.

And when you see these corporations trying to do the right thing for their employees, I commend them. But what ends up happening, it -- the bottom line suffers. They have these employees that want to go ahead and try to motivate themselves, motivate themselves to sale -- to sell and meet these sales deadlines.

CAVUTO: Right.

HERZOG: It doesn't happen. We see less than normal, if not usual top-line growth.

CAVUTO: All right, the bottom line, if they want to do this -- and it's a trend among some companies, even in the high-tech community, to remove titles so that we have this egalitarian, equal...



CAVUTO: What do you think?

GASPARINO: This is really about cutting the work force.

CAVUTO: You really think so?


I mean, listen, they -- remember when IBM made its transformation under Lou Gerstner? Guess what they did? They wiped out all middle management.  This is what they're essentially doing here. There is no middle management. You're not called a manager anymore. You want to be a worker or you can leave.

And that's essentially what they're saying here. Listen, I don't support it. I don't think it's a great societal benefit, but there's never been a history where they have done cuts like this that it hasn't helped the bottom line. It's always helped the bottom line, always, always, always.


HERZOG: Explain to me what...


HERZOG: Because that's what they're calling this.


CAVUTO: Craig, what do you make of this? Because you do this in your company. You fire everybody. Go ahead.

CRAIG SMITH, CEO, SWISS AMERICA: Neil, Charlie, the cuts were voluntary.  These people decided, no, we don't want to work under this. They got a minimum of three months' severance pay, in some cases $5,000 on top of it, three months' worth of medical benefits.

CAVUTO: But you don't think that they were pushed out? No one argued...


CAVUTO: ... with them and said hey, you want to go, go, don't let the screen door hit you on the way out?

GASPARINO: Craig, Craig, they took three months' pay. It's not exactly like a year's pay. They took three months' pay because they knew they were going to get the axe.

HERZOG: Exactly. Exactly. And they had a hiring plan in place for that, for those people that ended up leaving.


CAVUTO: But they got a free pair of shoes. They did get a free pair of shoes.


GASPARINO: Those shoes are lousy. Can you imagine leaving with three months' pay and those crummy shoes?

CAVUTO: They're great shoes.


SMITH: Neil, please, I have got to get this in.

CAVUTO: Go ahead. Please do.

SMITH: When I did the research on this, because I read about what -- I had never heard of it before.

Neil, I have been doing this in my company for 33 years. And I have the biggest retention.


CAVUTO: Firing people?

GASPARINO: Of course.


SMITH: No, not firing people. I have people who have been with me, the same people, for 31 years. This gives people a voice in decision-making.

CAVUTO: They sound like leaches. Then they sound like leaches. What do you do to get rid of them?

SMITH: I don't want to get rid of them. They are productive. And because we have everybody's input and they're not silenced by all of the consensus of the tyranny, they can help make great decisions.


HERZOG: That's exactly what Whole Foods said.


GASPARINO: Because they don't have people? How about people -- how about consumers...


CAVUTO: What is your position, Charlie? Do you like this or not? Are you saying it's...


GASPARINO: It's bad for society, but let's not -- let's not sugarcoat this. What was the name of the term again? I forget.

HERZOG: Holacracy.

CAVUTO: Holacracy.

GASPARINO: Holacracy is malarkey. OK? What they are doing -- what they are doing is...


SMITH: Baloney.


GASPARINO: Excuse me. What they are doing is...


CAVUTO: ... behavior.

GASPARINO: ... what this gentleman has done his entire career. It's called downsizing.

And when you have businesses that are easily -- more easily automated, when they have less need for human capital, they downsize.

SMITH: Whoa. Whoa. Whoa. Tony Hsieh is a downsizer?

GASPARINO: Excuse me?

SMITH: Charlie, Tony Hsieh is a downsizer?


CAVUTO: He's a hater, Craig. I'm sorry. He's a hater.

HERZOG: He's a good businessman. And he sits there and...


HERZOG: ... used holacracy.


CAVUTO: What of the things that he seems to be saying here is, you know, we do emphasize...

SMITH: You guys are wrong.

CAVUTO: ... managers too much, and we want to be an equal opportunity field. Everyone can have...


CAVUTO: We had no less than Jack Welch push that.

HERZOG: But Charlie has a good point here.

CAVUTO: He never has a point.


HERZOG: He actually has a good point here.

CAVUTO: All right.

GASPARINO: Tell them. Stick up for me.

CAVUTO: Yes. Yes.

HERZOG: Basically -- basically, what is going to happen is that people are probably going to get paid less, have more responsibility, in the guise that they are going to have to wear more hats because of this holacracy.

CAVUTO: More shoes, right.


GASPARINO: ... turn FOX News into a holacracy.

CAVUTO: You can only wish.


SMITH: Hey, Charlie, Charlie, would you rather have top-down management or progressive bottom-up management? This is a halfway middle.

GASPARINO: Progressive bottom-up means -- is a label to fire people.

HERZOG: I would rather have to see top-line growth.


SMITH: Everything seems to be a label to fire.


SMITH: So, the boardroom doesn't fire?

GASPARINO: I'm paranoid, small and petty, yes.



CAVUTO: I kid. Great job, guys.

GASPARINO: I like to see a job cut when I see it.

CAVUTO: Yes. Well, believe me, sooner than you think. All right.

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