What I learned from three years of practicing Holacracy

5 leadership lessons from practicing Holacracy and why it might (not) work for you

Joris Janssen
Luscii

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How did it start?

It was January 2018 when I decided I didn’t want to be a manager anymore. I was responsible for a product development department of about 25 people working on two exciting healthtech products. I had started the department three years prior and hired everyone myself. But I didn’t like the role anymore.

I was constantly handling people issues, wrestling with HR, frustrated with slow decision making processes, and balancing everyone’s complaints. I wanted to focus on my passion for product and together with a coach I came to the realisation I needed to make a change. At the same time, the company could really use more focus on product management, so I decided that that should be me.

I told the engineering team: “I had a great time, and learned a lot from all of you, but it is time for me to stop being a manager and transfer to another role”. And I gave them two options. “You can choose the regular path, and we will put out a vacancy and find a new manager. Or we can do an experiment and see if you can work without a manager.” They unanimously voted for the experiment.

Designing from scratch

We sat down with the whole team and started to write down all of the work I was doing as a manager. Hiring people, giving feedback, setting fair compensation, coaching people to grow, managing underperformance, handling conflicts, setting strategy and priorities, reporting to the management team. We grouped things together and gave them a name: Recruiter, Coach, Strategist, etc. We had created roles, each constituting a small piece of work normally done by the manager. And instead of me doing them, we divided them among all the people in the department. All I was left with was firing people, as nobody else was comfortable taking that role.

Unknowingly, we had started implementing some of the core elements of Holacracy. And it worked. Everything kept running smoothly and suddenly I had very little to do.

Unknowingly, we had started implementing some of the core elements of Holacracy. And it worked. Everything kept running smoothly and I suddenly had very little to do anymore, so I could really focus on my new role. People were thriving in their new roles. And everyone still seemed to have enough time for their regular responsibilities.

I was still the interface to the rest of the company, being part of the management team and acting to them as if I was managing everything. The rest of the company still functioned in the old way and not everyone believed that what we were trying made any sense. Coincidentally, a few months later, we decided to split the company in two, with the engineering team going to a new company named Luscii. With our newfound way of working made the radical change to Holacracy suddenly obvious.

Holacracy is a new way of structuring and running your organization that replaces the conventional management hierarchy. Instead of operating top-down, power is distributed throughout the organization — giving individuals and teams freedom while staying aligned to the organisation’s purpose (www.holacracy.org).

The launch of Luscii

When we started with Luscii, everyone signed the Holacracy constitution and Daan, who was the CEO of the FocusCura and was seen as the new CEO of Luscii, wrote down the word CEO on an empty roll of toilet paper, and threw the role/roll out the window. It was clear. There was no CEO anymore. This was the new way of working for us. And we were not going back to the old days.

The first few months we invested a lot in adopting Holacracy. We hired an agency called Energized (www.energized.org), who did a wonderful job in guiding our transition. And we slowly evolved our organizational structure into something that worked for us. People started to learn how to take care of their own tensions. And former managers learned to the magic words “What do you need?” when people complained or requested help. I loved every minute of it. For me, it was the most exciting, joyfull and effective way of organization I had ever experienced. And it still is.

Luscii’s current organizational structure (March 2021) showing circles and roles within the circles.

What did we learn?

Holacracy makes it very clear who does what, and who can make a certain decision. This is done through roles and policies. We have 232 roles at the moment, with 60 people, so everyone has multiple roles to fill. And it counts on every individual to make those decisions, as they see fit. As a result, the entire process of decision making becomes a lot clearer and faster. Previously, we often had large meetings to discuss issues and sometimes did not even know if we had decided something. This rarely happens these days. We actually explicitly captured this in a concept we call the Minimum Viable Group: i.e., the smallest number of people that are needed for a specific decision. In most of our cases, this is just one person, and it is very clear who that person is.

The minimum viable group is the smallest number of people that are needed for a specific decision. In most cases this is just one person and it is very clear who that person is.

I sometimes hear a worry that this must lead to many suboptimal decisions. Holacracy is geared towards change and experimentation. For most complex decisions, we don’t know how they pan out until we try them. So instead of mulling over what we should do, we just try. And if it doesn’t work, we revert back and try something else. It is as simple as that. Holacracy captures this in a sentence that we ask ourselves a lot: “Is this safe enough to try, knowing we can revert back at any time?” Taking this approach, decision making can become almost instantaneous.

When we started Luscii, Daan became the first Lead Link of the company. The Lead Link is a special role that sets the main strategy, priorities and metrics. And the Lead Link is accountable for filling the roles with best people for those roles. Daan realized after a while that he might not be the best fit for the Lead Link role. He had the insight that he would provide more value to the company if he could focus on other roles. Replacing a senior leadership position in most companies can take weeks or even months to decide upon. In our case, when Daan realized he wanted to make a change, it took only 3 minutes to transfer that role to somebody else, which was me.

Since there is very little politics and everyone has to take care of their own needs, former managers spend a lot more time on strategy and direction, and generally the contents of the work. That way, their time is used so much more valuably and effectively, driving the entire business forward. As a manager who wasn’t always intrinsically energized by solving people issues, Holacracy provided me a great way of still being a leader but focussing more on my strengths to bring the company forward. I do a lot more work now on strategy.

A final really significant advantage of Holacracy is that the organizational design is everyone’s responsibility. Anyone can start a new team or department (called a circle). And anyone can create or remove roles and policies. This results in a continuously evolving organization. The collective landscape of our experience, knowledge, customers, competitors, and partners changes every day. And Holacracy provides us a wonderful way to adapt to it whenever someone feels we need to.

Challenges and problems

Holacracy also came with its challenges and problems. First of all, learning all the rules and changing everyone’s behavior and mindset is a slow and somewhat cumbersome process. Many people are so used to the traditional way of organizing, having worked in such organizations for many years. Although the rules of Holacracy are not that hard to understand, changing your behavior and mindset to this new approach is difficult. And it requires patience, guidance, and failure. In our case, I think it took three to six months of learning without any clear benefits. And we still spend a significant amount of time, especially with new hires, on training and teaching the holacracy ways of doing things.

We also learned that Holacracy isn’t for everyone. Some people don’t want to take care of their own problems and tensions. They work much better when there is a manager who takes care of them every day. Although no one was openly against our Holacracy implementation in the beginning, it became apparent that some people adjusted really quickly and others had a very hard time adjusting. You cannot hide in a Holacracy organization. You have to do the work, and it will be very visible if you don’t.

Ultimately, about 10% (3 out of 30) of the initial joiners left Luscii within the first year because of their struggles with Holacracy. I do believe these people weren’t a great cultural fit from the start, and Holacracy made that more clear, for themselves and for the rest of the organization as well.

Misconceptions

When you start with Holacracy it is just an empty shell which you have to fill with your own processes and structure. A common misconception is that Holacracy will prescribe many processes for the company to follow. It doesn’t. You still need a lot of processes and those aren’t easy to develop. Normally you rely on managers to guide processes like setting compensation, hiring people, firing people, growing and training. With Holacracy, those managers don’t exist, and you have to invent new ways of doing things in a more self-organizing way. Instead, you have to create roles and policies yourself for things you took for granted in the past.

Luckily, there are many great examples of such processes out there that provide inspiration and a good starting point. And you could even decide to create a Manager role that takes care of all these things initially and evolve from there. One way to view

Holacracy is as a very large set of possible organization structures and processes, that includes the set of traditional management organizations. In a way, you can create all the traditional roles and policies of an organization within holacracy as well, and nobody would even know they are in a Holacracy organization. This could be a great starting point for Holacracy adoption.

Another misconception that I often hear about Holacracy is that it is flat and lacks the leadership positions that every company needs. This might not be further from the truth. In fact, the organizational structure in Luscii is quite hierarchical. We have a group people that lead our main circles which you could compare to a management team. And our main circles could be compared to departments, which can have subcircles, which are the different teams within the departments. This hierarchy gives us the necessary structure and clarity we need to function well, especially now that we are slowly getting bigger.

The hierarchy is not a bad thing. Where in a traditional organization it might lead to politics, less transparency, and unclear decision making, we do not have this problem. Anyone can still make changes to the organization any time they see fit. So as soon as it doesn’t work anymore, it evolves. And there are no managers that hold all the power. Power is distributed among many people, which hold each other accountable. This makes that the advantages of the hierarchy are there, and the disadvantages aren’t.

Where do we go from here?

Holacracy started out as quite a selfish experiment in which I did not want to manage people as intensively anymore. But it has become a great standard for Luscii driving the core of our culture. And although we learned that this model is not for everyone or every organization, and it is not easy to implement or maintain, we love it very much, and it works extremely well for us. I can see us practicing Holacracy for a long time to come.

About the author

Joris is co-founder of Luscii and the architect of Luscii’s holacracy and ways of working. He holds a PhD (cum laude) in Human Technology Interaction from Stanford and Eindhoven University of Technology and is an inventor on 4 patents.

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Joris Janssen
Luscii
Writer for

Developer, designer, inventor, and scientist. Probably in that order.