Our Holacracy Experience — what it is and why it works
You know the old design dogma, form follows function? When it comes to organizational design, life is a little more complex. Alongside ‘function’ the other big influencing factor is ‘environment’. After all, the basic function of a business — produce an excellent product, offer a first-rate service — may remain the same but the world in which we operate is constantly changing. It’s basic evolution: change or die.
I’m always looking for new management solutions in my businesses, better ways to stay a step ahead of the changing environment. In 2017, after some months’ careful thought, consultation and discussion, we embraced holacracy as a way of flattening the structure and sharing out the power and responsibility. We’ve yet to regret it and this is the first in a series of articles in which, as CEO and founder of XSolve and co-founder of sister company Chilid, I’ll share our change journey — pitfalls and all — to a more open, collaborative and creative organization.
What is holacracy?
First coined by Arthur Koestler in 1967, the term holacracy is seen as a combination of “holistic” and “democracy”. More recently, the concept has been fleshed out and popularized by Brian Robertson, based on his experiences as a software development company CEO.
Holacracy’s key features are:
- Flatter organizational structures
- Diffused decision-making
- Agile responses to changes
And yes, that last point refers to the agile framework for software development and project management which we’ve been using for years as our basis of operations. In that sense, for us, holacracy was a (quantum) leap forward in the direction we were already traveling in.
Before I tell you more about holacracy in action, let’s consider the most important question: “why?”
3 reasons why holacracy’s time is now:
1.The world is changing.
In fact, it’s already changed. The AI revolution is coming and work will never be the same. Oxford University researchers are already predicting that in the US, two-thirds of workers will be replaced by AI within the next 20 years. The list of jobs no longer available to humans will grow. We won’t become obsolete but we will see a shift towards work and tasks that require more human capacities — creativity, innovation and emotional engagement — and that shift requires a more stimulating workplace.
This is the point I made at the beginning about environment. When an environment changes radically, it’s pointless to continue operating in the same way. It’s like a fish still trying to breathe water after the move to living on land. Instead, what’s required is rapid adaptation to the new surroundings.
If your business is structured along traditional hierarchical lines, your competitive advantage will be steadily eroded as your competition adopts cultures that are more supportive of creative behaviors from its flesh and blood workforce. In other words, old-style hierarchical management no longer works (if it ever did!)
2. The Millennials are here!
As a recent Forbes article put it, the Millennial generation are now in the “economic driver’s seat”. The values, needs and requirements of this latest age group to enter the workplace are now a dominant force. And generally, Millennials are not keen on traditional, formal power structures. Traditional role hierarchies and rigid responsibilities are out, flexibility and full participation are in. Ignore this fundamental change at your peril.
3. Information is everywhere.
Information didn’t used to be so easy to share and cheap to store. Before the so-called Digital Age and the instant dissemination possible with the Internet and our modern communication tools, individuals were the repositories of knowledge and expertise. Accessing and sharing information was a slow, often one-to-one process.
The classic hierarchical organizational structure comes from a time of limited information flow; a time when the vast majority of the workforce was unskilled, often illiterate. In such an environment, restricting decision-making to those ‘in the know’ was logical. But today’s highly-skilled and educated workers work in an environment in which information is democratized, widely distributed and easily available. They have all they need to do their own decision-making.
How does holacracy work day to day?
First of all, a holacratic organization has a greatly different structure to a traditional set up. Company structures are much more complex than organizational charts would suggest. Aside from the official network of job titles and responsibilities, most companies have informal power structures based on internal politics, favoritism, and personal relationships. These are usually the real barriers to performance and progress. The key features of a holacracy are as follows.
Holacracy brings with it a set of clear rules relating to governance that enable a workforce to sidestep this kind of complexity. Instead of job titles, there’s a strong focus on the roles that people take on within the company, specifically, the purpose and aim of each role, and its associated specific accountabilities. Clarity is key. Every task or project assigned to an employee must be within the accountabilities of their role. Should a role be large enough to require more than one person then each must be clearly defined and distinct.
Within these defined boundaries each employee has the freedom and, most importantly, the power to make independent decisions without consultation. Of course, discussion is encouraged (demo-“cracy”, remember?) but each individual has real power. In other words, there’s no longer a need to constantly gain permission and freed of such traditional dependencies, the employee begins to work more proactively.
In a holacracy, employees form teams known as “circles”, independent and self-governing units with clear responsibilities. To ensure the right amount of direction, each circle has a “Lead Link” whose role includes the circle’s overall strategy (ensuring a common alignment of purpose within the circle) and resource allocation.
There is no rigid timetable or structure for communication in a holacratic organization. However, one fundamental recommendation is that circles hold regular “Tactical Meetings”, focused on operational issues relating to assignments and projects, associated metrics, and any problems that require tackling.
Another must-have is the “Governance Meeting”, held when it’s necessary to deal with organizational structure issues such as adding, removing or changing roles or accountabilities. Likewise, circles may be created or dismantled according to project and/or company needs.
The wider benefits of holacracy
So far, this might all sound a little too good to be true, right? You might be wondering what are the risks? For example, are people really engaged and motivated by all this individual responsibility?
In fact, they are. Not only is this our experience at XSolve, but some of the latest research has shown that while salary and remuneration is important to people, the real day-to-day motivators of great performance are: meaningful work, ownership of that work, rising to a challenge, and just the joy of being creative (for more on this, see the excellent TEDx Talk by behavioral economist, Dan Ariely).
At XSolve, our experience so far (with no sign of that experience changing) is that holacracy has been nothing but beneficial for our company and the results we get; for example:
- Employee engagement
Engagement is a direct result of taking responsibility. The system of roles and accountabilities and empowered decision-making is incredibly effective. The secret is the clear delineation of roles so that each person can fulfil their purpose undisturbed, as much as possible, by others. As long as their decisions are in the interest of both company and circle, and don’t impact on the work of others, they’re free to proceed. Even better, although each circle has a Lead Link, employees are not responsible to a traditional manager. Performance is monitored and reviewed by their peers in the circle.
- Quicker competence
With the greater transparency of holacracy comes faster onboarding of new hires. From day one, it’s clear how the company operates and is governed. It’s much easier for newbies to settle in and start contributing. That’s great performance-wise but it’s also good for morale all round.
- Better decision-making
Possibly the most important plus is the increased speed and agility of decision-making. By vesting so much power in the roles, individuals can act instantly. There’s no bureaucracy, no need to wait on a decision further up the line. This power-sharing principle lies at the very heart of holacracy.
- Less overheads
Maybe the most obvious benefit is financial savings from the reduced management overhead. A traditional governance hierarchy is expensive to maintain but with responsibility for strategy and decisions disseminate among individual roles, the management costs can plummet.
The reality is, in today’s business environment, with today’s workforce, and today’s access to information, the holacratic approach encourages:
- Greater empowerment of individuals.
- More thought leadership at all levels.
- More and better ideas.
- Engagement across the whole workforce.
- Easier collaboration for stakeholders.
- Advancement on pure merit, as opposed to seniority or tenure, etc.
- An organizational culture that is influenced by the many rather than being set by the few.
I accept that it’s early days yet for XSolve and Chilid and the only real test of whether holacracy is the right management solution for us will be time and results. What I can say with fear of contradiction is that coming from an agile background, holacracy fits our culture like a glove. And what’s more, it has so far given us enhanced employee engagement, and the built-in principles of self-organization and self-management are supporting our people to reach their full potential. I really believe that giving up the power and control normally vested in the CEO role may have been one of the smartest (and most productive) decisions of my career.