Holacracy, a Living Structure

1. About us and our project

We are five French students at EMLYON Business School and we decided to work together on Holacracy as part of a course entitled “Learning How to Think Differently”. We discovered Holacracy thanks to an article published in The Economist and we immediately thought it could be a perfect match with the topic of the course.

We’ve been asked to divide our project into two main parts: The first one consists of looking for academic articles defining the edges of the subject in order to write a literature review. Hitherto, there is no academic thesis dealing explicitly with Holacracy, therefore it was not the easiest part. We decided to look for authors in philosophy, social sciences and management whose ideas could be underlying to Holacracy. We know that Holacracy went from practice to theory and not the opposite but we thought it could be interesting to choose the opposite approach: from theory to practice.

The second part of our project consists in gathering experiences, testimonies and feedbacks in order to have a down to earth approach of Holacracy and the way it works. We had the opportunity to get in touch with people working in small or big companies, such as Danone, Kingfisher, HolacracyOne, iGi Partners, Springest, FutureLogic, The David Allen Company … We are currently working on these feedbacks to sum up our main findings on Holacracy.

2. A theoretical approach of Holacracy

Our theoretical approach is divided into three different categories: Philosophy, Social Sciences and Management. We tried to gather several authors offering different visions in each of the previous categories. In each of these authors’ theories we can see the shivering of Holacracy. Though none of them explicitly talks about Holacracy, their ideas share a strong link with Holacracy.

· Philosophy:

We would like to start with philosophy since it could appear as very distant from our subject. We won’t spend much time on it, but we think that the theories of Vaihinger or Leibniz can be relevant.

Let’s start with Vaihinger’s theory of the “As if”: Vaihinger explains that in order to conduct our lives we must rely on fictions. Fictions are not the same things as myths: A fiction is a rational construction which aims at organizing the comprehension of reality. Vaihinger says that one fiction can be replaced by another one which is more efficient and human beings have the possibility to choose which fictions they want to adopt according to their personality. According to him, these fictions contribute to their happiness because these fictions grant them a higher level of understanding. For instance, micro-economic models (Such as monopolism) are fictions because they aim at understanding how the economy works. Here we found an interesting link with the roles in Holacracy: each role can be considered as a fiction, everybody chooses the roles which fit them the most and which enable to reach the higher comprehension of their work.

Leibniz is another philosopher whose ideas could be relevant: He thinks that the more a human being creates his own personality, the more he helps the entire world to go further. According to him, each human being is a mirror of the world and the wealth of the world relies on the personality of each individual. It’s exactly the same principle in Holacracy: Holacracy allows people to develop their own personality thanks to the roles they fulfill. The empowerment of each makes the structure go faster and further.

· Social Sciences:

Among all the authors we found in this category, the most interesting and relevant one was Herbert Simon (Nobel Prize in Economics). He developed the theory of “limited rationality”: The more people are locked in rigid structures, the less efficient are their decisions. These structures limit the ability of people to find the best solution by narrowing their knowledge and their options. Therefore they only make acceptable decisions which could have been better if people had had access to more information. This is what Holacracy intends to do: Empowerment enables people to use their entire rationality so as to make the best decisions. Indeed, removing the standard hierarchy involves removing several layers of restrictions.

· Management:

First of all, the traditional organization inherited from Taylor has evolved into more dynamic structures. In the wake of this observation, Holacracy could be considered as a step forward based on principles of methods such as Lean Management or Agile Management. To define it briefly, we could say that Lean Management focuses on optimization of the process and empowerment of each of the employees in order to have expertise-based decisions. Holacracy goes even further by reorganizing the whole company around these two principles. The goal of Agile Management is to allow companies to adapt to the market’s changes as fast as possible. Beside flexibility, Agile Management also highlights the importance of continuous improvement in companies. Holacracy has an answer to these two concerns: By definition, roles can be added, redefined or removed to suit the company’s needs and Holacracy has a whole system to process tensions in order to keep moving forward.

3. Our findings on Holacracy

· The improvements brought by Holacracy:

The major improvement we found clearly is clarity: Even though it may create more pressure because everyone can see what you do or what you have to do, it seems to really make things easier in a company. Indeed, many people have told us about how the company seems to be running by itself, without the need for a CEO. Thanks to this very detailed and organized structure, everybody has well-defined roles and accountabilities, thus everybody knows what has to be done and what can be done. Relief seems to be a very common feeling when holacracy is implemented: The owner or former CEO no longer has to worry about how everything is done or about the upcoming issues, because the structure takes care of itself. Furthermore, relief can also be felt by any other employee because holacracy puts an end to the permission culture, which means that people can do everything they want in their domains provided that there’s no policy against it, rather than having to wait for the approval or the permission from the hierarchy. To sum up very quickly, clarity makes everything smoother and easier.

We also observed how deeply holacracy seems to involve everyone. We can see many reasons for this phenomenon but the first one is that holacracy provides a safety net for everyone: You can rely on the system when you have to deal with an issue or a tension. Holacracy provides a steady basis for everyone in order to move further. We have seen the importance of empowerment in companies: When people are given more accountabilities, they immediately feel the need to be more involved in the company’s evolution. Moreover, holacracy grants everyone the ability to deal with the tensions felt, but, even more than that, it also demands people to express the tensions they feel in order to fix them. Therefore people seem to become more proactive and to be more active towards change: Sometimes people can feel that something is not working properly and in holacracy everybody has a safe spot to address it. Besides, it also creates a safe spot to show your thoughts, your ideas and your suggestions. Thus people seem to be more involved in the company and to feel as if they were working in a start-up even though they are not.

Besides, we have also noticed that holacracy seems to create a more pleasant atmosphere than any other kind of structure because it separates the people from the functions. In a traditional hierarchy, the individual is EQUAL to his function. For instance, when you have to talk to someone in your firm, you have to adopt a certain behavior due to his position; he is his position. Whereas in holacracy, people have many different roles in different circles, with different kinds of accountabilities… Nobody is your superior and nobody can give you orders in your domain. Therefore, we can say that holacracy gets rid of the hierarchy of people and replaces it with a hierarchy of roles which doesn’t (Or barely) affect the relationships between coworkers. In the wake of that observation, we can say that holacracy puts an end to the Karpman drama triangle: Because there’s no “traditional” boss, nobody can be a persecutor and thus nobody can be a victim. That’s why holacracy seems to create a more pleasant and welcoming atmosphere.

Last but not least, we can say that holacracy is a living structure. Indeed, it is in constant evolution thanks to updates to the Constitution based on feedbacks from companies. There’s a very explicit metaphor about holacracy: It’s is just like an operating system; it grants a basis (Frequently updated) to which you can add all the apps you want. It means that holacracy doesn’t tell you how to run your company, it gives you support to run it. But you can also tinker it by adding new features and customize it in the way that seems to fit your purpose the most. That’s exactly why we can say that holacracy is a living structure.

· Some topics on which holacracy could be improved:

Through all the interviews we made with people working in holacracy, we have found a common issue that holacracy still has difficulties to address. As we said earlier, holacracy is very efficient to change the organizations and to make them move faster. However, holacracy has difficulties changing the mentality of people. We have uncovered that several kind of personalities are not adapted to holacracy. For instance, some managers don’t want to lose their power and their authority, they want to hold sway on the entire structure. To change their mentality, these people have to do some coaching to know how to adapt to holacracy. But sometimes, even the coaching doesn’t work and they leave the company. To adopt holacracy, open-mindedness, curiosity and a certain appetite for risk are required. Moreover, some individuals experience difficulties taking decisions and initiatives themselves. They are used to asking for advice and to relying on the others to help them making the final decisions. In holacracy, every person has the authority to make his own decisions. It’s a big change of mentality since in every company working in hierarchy, people live in a permission culture. They only do things that are explicitly allowed. In holacracy, it’s the opposite: people can do whatever they want if it’s not explicitly forbidden by the company’s policy. We were told by some of our interviewees that several people didn’t adapt to holacracy because they failed to learn how to take decisions by themselves. Changing the mentality of people is therefore a significant issue holacracy should try to tackle.

The notion of risk is significant since we uncovered that holacracy may scare people. As we have seen, it creates a high level of clarity and it makes it possible to always know what the expectations of every role are. Holacracy gives power to the structure, to the rules, and these rules (hard to learn at the beginning) can deter some persons to adopt holacracy.

It also appeared that in some companies allegedly using holacracy, only a part of the structure currently uses it. It is of often due to the will of CEOs to try holacracy at a small scale to see whether the results are positive or not. However, this strategy creates some difficulties owing to the efficiency gap between those using holacracy and those who don’t. The part of the company implementing holacracy develops solid tools to address tensions rapidly and effectively. Thus, it becomes more efficient than the rest of the company which slows those using holacracy. Holacracy cannot develop all its potential if it is mixed with standard hierarchy. A hybrid model slackens the pace of holacracy and becomes a burden for those willing to go further.

The last thing we noticed is the issue of the traditional managerial functions (Hiring people, letting them go and defining wages). Holacracy doesn’t explain how to handle these topics and companies are free to handle them how they want: Holacracy could be described as an operating system defining how to organize a company and the solutions to these issues could be described as “Apps” that need to be installed. However, the problem companies face is the lack of choice: Except for the traditional way where somebody decides, there is no explicit choice for companies.

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