Should we all adopt Holacracy?

A study into the new management trend for 2014. Fad or the future?

There’s been a lot written about Holacracy recently, mainly thanks to Zappos, the Amazon acquired $multi-billion online retailer announcing their decision to say goodbye to bosses. They are the newest and so far the largest company to adopt a Holacratic philosophy and organisational structure. So should we at least consider adopting Holacracy or is it a fad, a load of new-fangled management mumbo-jumbo? Does it represent a paradigm shift in how many of us think about business, governance and hierarchy? Or is it a high-risk experiment that turns out to be great in theory but chaos in practice?

Let me give you a scenario. You are to start a company and expected to hire some great people. At some point you’d naturally think about what your job and title is going to be; CEO, Founder, MD and you automatically start to think about the people you needed to hire and the jobs you need to fill. You’d most likely have considered sketching out org charts with clear reporting lines and have carved out specific job descriptions.

Now let’s consider a Holacratic way to start a company. Firstly, there are no job titles. There are no managers. And no one has the authority to tell anyone else what to do. The concept of not having anyone reporting to anyone seems so completely alien to us because we’ve become conditioned to traditional corporate hierarchies. The message that Holacracy brings is that there is a choice, there is a new way.

Firstly, Holacracy isn’t for everyone. In fact, it presupposes that a company is purpose-led with a clear sense of direction that is shared amongst all employees. If someone doesn’t know exactly why the company exists then the system could (and probably will) fall down. The direction and purpose of the company can (and probably will) change as a business evolves under its new structure, but there needs to be a common goal in the first place.

Organisational Structure

Holacracy is what’s known as a “distributed authority system” which means that unlike conventional top-down or bottom-up structures, it combines the benefits of both without relying on leaders or managers for governance. Critically, it’s focused on organising the work, not the people. Teams, known as “circles”, are created and rather than employees having a pre-defined job to do each day, their job is to fill many roles in many circles within the organisation. Roles get created in a “governance meeting” and no one has the authority to create a role outside of these meetings. Each circle has a “lead link” who has the responsibility to take the roles created in the governance meeting and assign them to suitable individuals. Of course, employees can refuse to take on a role should they not want it or can accept any role provided that it does not conflict with any other roles they are fulfilling.

Each role has a list of responsibilities that are attributed to an individual within a circle. These responsibilities are 100% public and editable in real-time making it more adaptable to the pace of modern business.

Governance

Unlike startups where an anything goes type approach to management and leadership seems like the natural thing to do, Holacracy is actually governed by a strict set of rules and what is known as a “constitution”. Much like how our society is governed by-laws, rules and common decency so is Holacracy. The CEO makes a commitment that power is now fully conceded to this constitution, however, they still have the authority to move to a different governance structure should they choose to.

Regular governance meetings structure and evolve how the work gets done — everyone leaves with clarity on who is accountable for what, with what authority, and with what constraints there are. In Holacracy you have complete autonomy and responsibility for the roles you’ve been elected or assigned to. Again like modern society there are individuals’ rights and expectations, for example, anyone can ask you to be transparent about how you are fulfilling your roles, but no one person can tell you what to do or how to do it. Despite this, there are still accountabilities and Holacracy has a unique process to identify who is not a good fit with either the role or the company. Firstly a circle’s lead link can remove someone from a role and find a better fit for the role from the talent pool available; this is not being fired as such, it just means the company can find someone better to fulfil that role. This also frees up that person’s time to focus on something more aligned with their strengths. What this does is completely flip the traditional hire and fire culture on its head; instead of making things personal, it’s all about finding the best fit for each role.

Holacracy doesn’t actually prescribe how to hire or fire. Like with any business people can be removed completely but this process needs to be decided on by governance, a committee sometimes known as an “anchor circle”. You may also be removed if you can not find enough roles to do in the organisation, which could be a much better way of managing people out of an organisation who show less desire to contribute to the company mission.

Tensions

The backbone of Holacracy is noticing gaps between what is and what could be, more commonly known as “tensions”. It’s a sense of stretching, from the current reality to a better way of working, doing or being. It could be an idea, a problem, an opportunity — it’s a gap that needs processing to facilitate some sort of change. Because of the autonomy and clarity people have in their roles, tensions are there to be acted upon by the assigned person within each circle. This is where the Holacracy in theory really pays off, if you sense that something needs to change rather than having meetings about how something needs to be done, if it falls under one of your areas of responsibility, you can just get on and do it.

Summary

It’s important to note that Holacracy is merely an operating system and not a prescription on what decisions to take (such as how to hire, fire, compensate or motivate employees). Such things need to be decided upon by the company itself through it’s newly adopted governance process. However, if Holacracy is adopted then I would imagine that any compensation system based purely on a hierarchical level will quickly become incompatible. Perhaps a more relevant compensation system is to be based on overall contribution to the business in terms of skills brought, internal rating and results achieved.

In theory, Holacracy makes a lot of sense, and it’s very exciting but it’s still early days and with Zappos and Medium as the first big names to adopt it the next 12 months are crucial in seeing whether it will become a successful model in practice.

Best of all though Holacracy seems to embody the Japanese philosophy of Kaizen, or constant or never-ending improvement. Like all great companies, sports teams and indeed relationships, this obsessive focus on improving the little things to achieve great things is a philosophy that could just give it’s adoptees the edge.