Today we will talk about Holacracy. Sorry, Hola – what? Please, don’t worry if you don’t know the term or haven’t heard much about Holacracy principles. Just read its definition below and then we’ll move on to more interesting things related to this phenomenon.
According to the Wikipedia
“Holacracy is a social technology or system of organizational governance in which authority and decision-making are distributed throughout a holarchy of self-organizing teams rather than being vested in a management hierarchy. Holacracy has been adopted in for-profit and non-profit organizations in the U.S., France, Germany, Switzerland, New Zealand, Australia, and the UK. The Holacracy system was incubated at Ternary Software, an Exton, Pennsylvania, company that was noted for experimenting with more democratic forms of organizational governance.
Ternary founder, Brian Robertson, distilled the best practices into an organizational system that became known as Holacracy in 2007. Robertson later developed the Holacracy Constitution in 2010, which lays out the core principles and practices of the system, and has supported companies in adopting it.
In June of 2015, Robertson released a book, ‘Holacracy: The New Management System for a Rapidly Changing World’ that details and explains the practices of Holacracy. The term holacracy is derived from the term holarchy, coined by Arthur Koestler in his 1967 book ‘The Ghost in the Machine’.
A holarchy is composed of holons (Greek: <U+1F45><U+03BB><U+03BF><U+03BD>, holon neuter form of <U+1F45><U+03BB><U+03BF><U+03C2>, holos "whole") or units that are autonomous and self-reliant, but also dependent on the greater whole of which they are part. Thus, a holarchy is a hierarchy of self-regulating holons that function both as autonomous wholes and as dependent parts.”
You will find it difficult to argue that today, business models and marketplaces are in the process of reshaping. The same thing happens within companies. The most revolutionary ones are rethinking their internal structures and processes.
They are abandoning top-down hierarchy in favor of decentralized management models. Zappos, Medium, AirBnB, Uber, Lending Club and other famous companies are striking examples of successful Holacracy system implementation. The adoption of this fresh model made them more flexible, adaptable and responsive to change.
Day by day it’s becoming apparent that the structure of modern organizations is at odds with the chaotic, fast-changing reality. However, most of the corporations still tend to be built on an industrial-age hierarchical model that seeks to achieve stability and success through centralized control and up-front planning. But this type of model was effective in simpler times as it was actually designed for them.
We live in the post-industrial world. Organizations face new, complicated challenges, e.g.: increasing complexity, enhanced transparency, greater interconnectedness, shorter time horizons, economic and environmental instability, and growing pressure to be sustainable and ethical.
The top-down, predict-and-control structure often fails to provide the agility needed in this landscape of rapid change. And it’s quite natural that such a model rarely ignites the passion and creativity of the employees the way peer-to-peer networks are igniting the marketplace.
We would suggest that the structure of our organizations is ripe for reinvention, and a few creative companies, mentioned above, are already taking up the challenge. They are striving to create the ability to evolve in real time.
Holacracy offers a new “social technology” for governing and operating an organization. A version that authentically distributes authority, and embeds flexibility and self-organization into the rules and processes through which the organization structures itself and goes about its business.
“The social technology underpinning modern companies has become the primary constraint to their evolution and adaptability,” explains Holacracy-One co-founder Brian Robertson.
Holacracy is by no means the first attempt to democratize management
The Economist points out:
Holacracy goes further in shaking up working practices than most (other) approaches
Holacracy was initially inspired in part by Agile software development and Lean manufacturing. The model enables just-in-time responsiveness to pressures and opportunities at every level of the organization. As a result, an organization is continually evolving and adapting its own structure and processes through ongoing, peer-to-peer governance.
Holacracy is a very moot point to lots of business leaders, thinking that shifting to a more distributed power structure may lead to leaderless anarchy. Many, though, may find the idea of self-organization appealing. But self-organization doesn’t happen by itself. It requires smart, conscientious, forward-thinking leadership, believing that authoritarian control is not the best recipe for success.
We don’t suggest that the leaders abandon structure altogether, everybody knows that it can be cumbersome. Holacracy is not as simple as it might seem at first sight. Replacing the top-down leadership is a robust and comprehensive process that keeps everyone aligned and unified.
Holacracy in no way can be characterized as “flat” or “anarchic. It is a highly structured way to distribute authority and enable self-organization, with built-in safe-guards and carefully tested rules and processes.
Let’s draw a parallel: companies like Uber and AirBnB are effective because they’re built on sophisticated technological platforms. So are the companies using Holacracy. They are effective because they are built on a sophisticated social platform allowing the company to design itself.
Holacracy can be compared to a new computer operating system — an upgrade from an outdated platform like MS-DOS to iOS or Windows.
The conformist management hierarchy is traditionally presented in the form of a pyramid, while Holacracy can be visualized as a structure based on the idea of holarchy. Look below. There is a series of nested circles. Each circle (i.e. team) is made up of a set of roles, grouped together around a specific function. It may be a specific project team, a department, a support function, or a business line. Some circles will contain sub-circles, and all are placed within the largest super-circle, the “General Company Circle.”
As you see, each circle is a holon - both a self-organizing entity in its own right, and a part of a larger circle. It has autonomy and authority to manage itself, but must coordinate with other circles in the system. This way companies using Holacracy get both alignment and agency without the typical pathologies of “leaderless” groups or autocratic micromanagement.
The biggest structural shift in Holacracy is that it aims to organize a company around the work that needs to be done instead of around the people who do it.
This makes sense, doesn’t it? It doesn’t matter who can give orders to whom anymore - Holacracy structures where work lives within the overall system, and the boundaries between the various entities doing that work.
Particular roles are invested with the authority to carry out certain tasks and pursue particular aims, and a set of “accountabilities” that clarify what is expected of them. Sometimes the responsibilities attached to a role become too much for one individual to carry, then, that role may need to break itself down further into multiple sub-roles, becoming a circle of its own.
Traditional job descriptions are often vague, theoretical, and quickly outdated. So, unlike them, Holacracy’s role definitions are constantly updated and clarified based on the day-to-day needs of the circle. Along with all the governance records, they are fully transparent and available for any circle member to refer to at any time.
Let’s compare the governance in conventional and Holacracy remodeled organizations.
Conventional organizations are governed from the top – the board of directors or the executive team. Typically, the organizational approach has a single leader - a CEO, president, or managing director. All job descriptions, reporting structures, and responsibilities are handed down from there, and often have little relationship to the reality of the daily running of the company.
One of Holacracy’s most significant innovations is making governance something that happens at every level of the organization. Governance becomes an ongoing process that happens in each circle, during regular “governance meetings.” Holacracy places some of the organizational design functions into peer-to-peer processes, enacted throughout the organization, with everyone’s participation. Holacracy’s approach to governance is tension-driven. This means that issues are added to the agenda when any team member senses “a gap between how things are and how they could be”.
If an issue becomes a problem, team members can raise specific arguments around roles, accountabilities, decision-making authority, and expectations of each other. These issues are “processed” using a very specific “integrative” meetings format to gather and consider each circle-member’s input, without relying on a single leader to arbitrate or needing to come to consensus. The process is facilitated by an elected facilitator following the steps set out in the Holacracy constitution.
To make a long story short, distribution of governance to every circle dramatically enhances the organization’s capacity to harness input and capture learning. Questions of governance are equally relevant on all levels. In fact, people working on the front lines are often better positioned to drive continual improvements within their areas of expertise and monitor the results day-to-day. In order to keep up with a fast-changing world, governance needs to become an ongoing part of how an organization operates, at every level.
According to Jason Stirman, Holacracy Implementation Lead at Medium:
“Our employees really feel like it’s their company because decision-making authority is not concentrated at the top.”
We have just told you about Holacracy foundational structure created through governance. Holacracy provides further rules and easy to implement processes that help a team get work done together as well. Proper governance enables more efficient and productive operations. It clarifies exactly what is expected of each individual and what they can expect of each other, and gives individuals the authority to take action within their domains of responsibility.
Holacracy encourages and empowers individuals to “lead” their own roles; taking the best action as they see fit to fulfill the organization’s purpose. Weekly Tactical Meetings are held to keep teams coordinated. They offer a fast-paced forum to deal with ongoing operations, synchronize team members, and “triage” any issues that are preventing forward progress. Both governance and tactical meetings focus not on coming to “perfect” solutions but on quickly reaching practical decisions to increase work efficiency. Any decision can be revisited any time if it creates tension for any circle member. This frees the way for the teams and they move swiftly from discussion and planning to actually testing decisions in reality and learning from the results. Solutions that start out imperfect can be quickly aligned with actual needs through a continual process of incorporating feedback. Thereby, the team avoids the time-consuming trap of trying to “predict and control” outcomes during meetings.
If the difference between running a traditional company and the one using the Holacracy management is still obscure to you, please have a look at the table below. It will visually show you the major differences between both models.
Just like every innovation, Holacracy has its proponents and opponents, as well as actual pros and cons.
Holacracy is claimed to increase agility, efficiency, transparency, innovation and accountability within an organization. This approach encourages individual team members to take initiative and gives them a process through which their concerns or ideas can be addressed. The system of distributed authority reduces the burden on leaders to make every decision. According to Zappos' CEO Tony Hsieh, Holacracy makes individuals more responsible for their own thoughts and actions. According to Zappos employee Kristy Meade, Holacracy helps prevent typical gender-biased behaviors. It "provides protections that create an environment in which some actions based on unconscious bias are not possible."
Lastly, Denning added that the voice of the customer was missing from the Holacracy model, concluding that for agile and customer-focused companies such as Zappos, Holacracy is a way to add administrative rigor, but that Holacracy would not necessarily work well in an organization that did not already have agility and passion for the customer.
These criticisms have been responded to point by point by HolacracyOne partner Olivier Compagne in an article on the company's blog. He maintains that Denning's criticisms misunderstand Holacracy, and proceeds to explain how the rules of Holacracy address or avoid those alleged pitfalls.
Quite possibly you may have your own personal viewpoint on the matter and being a company manager, for example, it’s your choice which way to go. You can stick to traditional, time-tested methods and succeed, or be revolutionary and turn everything upside-down and also succeed. We would be happy to hear your thoughts on Holacracy. What you like about it and what concerns you. Do you think that Holacracy is the model for running companies in the future? If no, please state your arguments. We are always open for discussions and here is our viewpoint based on everything analyzed above and experts’ opinions.
Holacracy can be considered a better way of working. If organized properly, the potential result is an organization that is “not just evolved, but evolutionary,” as Robertson puts it. He cites the work of Oxford University economist Eric Beinhocker, who describes evolution as an algorithm, “an all-purpose formula for innovation ... that, through its special brand of trial and error, creates new designs and solves difficult problems.” Markets, Beinhocker explains, are highly dynamic, but the “brutal truth” is that the vast majority of companies are not.
Organizations have very little capacity to evolve and adapt. They are subject to evolution’s process at the market level and may survive or die as a result, but they are rarely adaptive organisms themselves, at least on more than a superficial level. “The key to doing better,” Beinhocker argues, “is to ‘bring evolution inside’ and get the wheels of differentiation, selection, and amplification spinning within a company’s four walls.” Holacracy offers the possibility of doing just that, embedding within the organizational DNA an enhanced capacity to evolve dynamically and continually. Ultimately, Holacracy is just one example of a system that uses peer-to-peer self-organization and distributed control in lieu of more traditional approaches to achieving order. It reflects a broader societal trend toward a new way of structuring human systems and interactions, and it aspires to contribute to that shift by modeling the benefits of leaving behind outdated autocratic models.
Holacracy helps create organizations that are fast, agile, and that succeed by pursuing their purpose, free from the tyranny of top-down planning or the impossible pursuit of consensus. It’s not a silver bullet—it takes hard work and practice to make the shift to such a dramatically different way of organizing. As David Allen, author of Getting Things Done and a business leader with years of Holacracy experience in his own company, puts it, “Holacracy is not a panacea: it won’t resolve all of an organization’s tensions and dilemmas. But, in my experience, it does provide the most stable ground from which to recognize, frame, and address them".
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