Holacracy and the mirage of the boss-less workplace: Lessons from the failures at Github, Medium & Buffer

Holacracy, an innovative company organization system that favors flat structures over a classical hierarchy, was all the rage a few years ago. This way of structuring a company is not new, however. Some companies ran as flat organizations well before holacracy became a tech sector sensation.

It became more widespread, though, following the leak of an employee handbook at Valve, the creator of some of the most iconic games in the history of computer gaming, and the company behind Steam, the largest distributor of digital PC games. The document described how Valve is run, and when it came to light, what it revealed made a big impact on a lot of us. For a while, it was what everyone talked about. Many companies, including the company I was running at the time, tried to adopt some of Valve’s principles: Managers were out. Everyone was equal. The old ways were replaced by the popular label #oneteam.

Github, a code repository company that geeks are in love with, was one of the early adopters of holacracy. So was Buffer, a social media darling, and Medium, the company I use to host my articles. But over the last few months, these companies began renouncing Holacracy and returning to a more conventional pyramid-shaped command structure.

What is holacracy?

Holacracy is a system designed to move companies away from rigid corporate structures and toward decentralized management and dynamic composition. As envisioned, under a holacracy teams largely self-organize, and individuals operate with a fair amount of autonomy. Ideally, this puts work at the forefront and lets a company’s organizational structure support that work, rather than the other way around. As Tom Thomison, a partner at HolacracyOne — the company teaching this system — puts it, “Nothing gets in the way of the work.”

On the surface, it is a very attractive system for employees and owners alike. The system promises autonomy to the casual worker and innovation and productivity to the company’s owner(s). No wonder some of Silicon Valley’s poster children adopted it as their way of structuring their teams.

But holacracy failed for some of the best and most well-known startups. Let’s examine the reasons it did so as described by the very companies that were once among its greatest advocates. To do so, I investigated the blog posts that describe the reasons for this failure and identify the core causes.

Why did it fail?

Coordination (or the lack of)

Github names the lack of coordination while operating under a holacracy as a core challenge for them, especially as they grew in size.

“As GitHub has grown to about 600 employees, it says a flat organization compromised its ability to get things done. GitHub says coordination by the heads of the engineering, legal, marketing, sales, and other departments has been crucial to recent achievements, including the ability to open-source more projects than before, increase the frequency of some product updates to quarterly, and secure a major partnership this year with IBM.”

Medium had similar experiences, despite being a much leaner organization compared to Github:

“Our experience was that it was difficult to coordinate efforts at scale. In the purest expression of Holacracy, every team has a goal and works autonomously to deliver the best path to serve that goal. But for larger initiatives, which require coordination across functions, it can be time-consuming and divisive to gain alignment.”

Coordination is a foundational component of any strategy. We are not even discussing good versus bad strategies here. Without synchronization there is no strategy to begin with. Period. Strong strategy should come with a set of coordinated actions that takes the organization closer to its goal. It is not something unique to the business world. The German Blitzkrieg was an example of how coordination between divisions acted like a force multiplier:

A young company needs the focus and the power conferred to them by coordination. The company operates on borrowed time, and a situation in which the “soldiers” are all running around like headless chickens can mean death for the business. This seems to be what happened at Github and Medium.

Lack of direction

In the early days of its use, the flat structure created a strong sense of camaraderie at Github. But as the company grew employees didn’t know who to direct their questions to, neither with regard to uncomfortable confrontations with colleagues nor concerning their own performance.

“Without even a minimal layer of management, it was difficult to have some of those conversations and to get people feeling like they understood what was expected of them, and that they were getting the support that they needed in order to do the best work,”

… says Avalos, who’s since been promoted to chief business officer, the only C-level position at Github besides CEO.

Though the self-driven employee ultimately turned out to be a mirage, I was one of the people who believed in this approach at one point, especially since I was blessed to know and surround myself with some of the most dedicated people I could have found. All good entrepreneurs choose very driven individuals to be a part of their core team. We look for people that share our passion and are restless in their pursuit of the company dream. Through inductive reasoning, we then tend to believe that all employees must also be like our core team members. We assume there is that craving, that hunger for success in all the people we work with. We tend to think that the one thing we must do is communicate the company’s mission and values to the employees to align them with the company’s culture, which will then propagate a system to successfully operate under.

The drive behind and the purpose for the company can be communicated beautifully (and it should be). But there is still a reason companies are started by a select group of people. The drive and the passion of the founding team is unlikely to be matched, and there is nothing good communication can do to change this reality.

What we soon found out is that it is quite hard to scale the founding team. And the people that joined later needed the guidance and the direction that we assumed they brought to the table themselves. In the real world, Buffer realized that “higher-level strategy work that provides guidance and leadership is something we feel has had a big impact already since we brought it [hierarchy] back a few months ago.”

Systems too complex to manage

Holacracy also requires a deep commitment to record-keeping and governance. Every job undertaken requires a role, and every role requires a set of responsibilities. While this provides helpful transparency, it takes time and discussion.

The irony of holacracy is that although it advocates freedom from an organizational system that can get in the way of work, the bureaucracy it replaces it with tends to be much more complicated to maintain. Milton Friedman famously said that “one of the great mistakes is to judge policies and programs by their intentions rather than their results.” Undoubtedly an intention of a holacracy is to offer a lot of autonomy to the employees. Autonomy is a requirement for agility, a fact understood by the Mongols of Genghis Khan more than 800 years ago. But the Mongols achieved their unchallenged agility by keeping their processes to a minimum rather than expanding their regulations:

Shared ownership

“More importantly, we found that the act of codifying responsibilities in explicit detail hindered a proactive attitude and sense of communal ownership,”

.. explained Ev Williams, the CEO of Medium.

This represents the biggest problem. Fundamentally it encompasses all the previous points I’ve made, but I withheld it to last for dramatic effect.

Technology companies operate with ideas, with thoughts transformed into code. They all rely on very smart people using their brains at 120%. There is no such thing as shared ownership in the real world of ideas. Communal ownership can only produce mediocre products — you know, like the bland, lackluster services we expect from our government agencies, not the creations of cutting-edge Silicon Valley startups:

“The mind is an attribute of the individual. There is no such thing as a collective brain. There is no such thing as a collective thought. An agreement reached by a group of men is only a compromise or an average drawn upon many individual thoughts. It is a secondary consequence. The primary act — the process of reason — must be performed by each man alone. We can divide a meal among many men. We cannot digest it in a collective stomach. No man can use his lungs to breathe for another man. No man can use his brain to think for another. All the functions of body and spirit are private. They cannot be shared or transferred.”
Howard Roark (The Fountainhead by Ayn Rand)

An attraction to shared ownership is as old as time. The choice members of each community had to make at some point was: Should they empower a gifted, driven, powerful member of the community in a leadership position? Or should they create a society in which all citizens are “equal” (note, a discussion of equality is beyond the purpose of this article)? The former approach can lead to dictatorship, the latter to mediocrity. The former optimizes for upside, the latter protects against the downside. So which one should a company choose?

I will make the claim that startups should be optimized for the upside, not protecting themselves against the downside. Building moats is a bad use of one’s energy, energy that could be better put to use building bigger guns. Startups are all about growth and expansion, not protection. With that in mind, creating a corporate structure in which ideas are commonly shared is nothing more that a form of isolationism. Isolation from risky initiatives, complicated projects or uncomfortable ideas: pretty much from all things that could make a company a success.

This is not a philosophical problem that suddenly afflicted us in the last 100 years. It has been known about since Antiquity. The Roman Republic was created as a response to a long period of abusive kingship. The Roman citizens protected themselves against kings by selecting two consuls to co-rule the republic. Consuls also served as the top military commanders and during a military campaign would alternate their command on a daily basis. This proved to be disastrous when the Carthaginian general Hannibal invaded. He would choose to engage in battle on the days when the less-competent of the consuls was commanding the army. At the Battle of Cannae, Hannibal remarked to Gisgo, one of his officers who complained that the Carthaginians were outnumbered by the Romans, “There is one thing that’s more wonderful than their numbers… In all that vast number there is not one man called Gisgo.” And he was right. While the Roman Senate debated and debated, Hannibal roamed the Italian lands, winning battle after battle for ten years. Roman salvation finally came from a driven, committed, ambitious and capable general, Scipio, who was capable of taking on Hannibal:

History is a collection of great tales about great people. We study the German Blitzkrieg because of Guderian; we are amazed by the Mongol invasions because of Genghis Khan; and we know about the Carthaginians because of Hannibal. Holacracy represents an interesting concept, one that proved successful at a handful of companies. Its underlying foundations are nothing if not good intentions. But startups are about growth and conquering new territories, markets and clients. It’s what companies like Buffer, Medium and Github now focus on during this stage of their existences. And what history teaches us is that there are better models to adopt than holacracy.

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