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Holacracy – A Radical Approach to Organizational Design
Chapter · April 2014
DOI: 10.13140/2.1.3740.8645
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CHAPTER 2
HOLACRACY – A RADICAL APPROACH
TO ORGANIZATIONAL DESIGN
Pepijn van de Kamp
2.1
Introduction
TM
Holacracy 1 is a governance framework for organizations which radically replaces
some of the practices we have used to craft our organizations in the past century: (1)
the top-down hierarchy and (2) the need for management. It promises a lean and
adaptable organization, highly effective, distributed authority and purpose driven
work. So far only small and medium-sized, mostly technology-related companies
adopted the framework. In December 2013 the billion dollar retailer Zappos announced a planned transition to Holacracy in 2014. Since then, the interest in Holacracy has increased exponentially (see Figure 2.1). Business and management crit1 Holacracy
is a registered trademark of Holacracy One, L.L.C. of Spring City, PA, USA.
13
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HOLACRACY – A RADICAL APPROACH TO ORGANIZATIONAL DESIGN
ics started to share their opinions. Rumor has it that Holacracy will become the new
management trend of 2014.
Figure 2.1: Google Trends: Interest over time (%) of search term Holacracy2 . Numbers represent search interest relative to the highest point on the chart.
The software engineering field is still under the spell of the Agile revolution. More
and more companies start to adopt agile practices in their software development departments. Holacracy provides a framework to bring agility to the organizational
level and is therefore likely to complement better with the agile practices at the software development level than the traditional organizational designs. It is therefore
relevant to provide an overview of what Holacracy is all about and what we can learn
from this practice to make our companies more agile and able to benefit more from
the ever changing organizational environment.
This chapter attempts to take a step back in the midst of the battle of opinions and
investigate the following questions:
What is Holacracy?
When could it work?
What can we learn from Holacracy in managing our businesses?
To answer these questions, first some background information is provided on how
Holacracy emerged to what it is now. Second, a brief overview of Holacracy is
provided. Third, the existing theories that Holacracy incorporated and refined are
investigated.
Finally we reason about what we can learn from Holacracy from the following perspectives:
What we know at this point from theory.
2 Source:
2014]
http://www.google.com/trends/explore?q=holacracy [Accessed March 16,
BACKGROUND – IN SEARCH OF AGILITY
15
How Holacracy would complement software development methods like Scrum
and RUP.
The experience of a practitioner with two years of experience in Holacracy.
My personal humble organizational experience.
2.2
Background – In Search of Agility
Top-down hierarchies have been used as the organizational structure by many companies in the past century. But the way we cooperate with each other in our businesses
has changed a lot since the start of the information and telecommunication revolution. Our devices make sure information and communication reaches us as soon as
possible. Never before did our actions result in such rapid feedback.
Software engineering was one of the first crafts where it was noticed that the plandriven approach we were so used to did not always deliver sound results. Either the
world was changing too fast, we delivered too late or we did not learn enough from
what was happening around us. To keep up with society’s pace, a new approach
came to light in February 2001, Snowbird, Utah: 17 software craftsmen with different backgrounds joined forces to compose a set of new principles published in
the Manifesto of Agile Software Development [1]. Instead of following a plan and
delivering software at the end of a project, with Agile, software is delivered in small
iterations, allowing to respond more quickly to changes in the environment. Although it is arguable whether Agile software development suits all kinds of project
environments, it has become a practice that can no longer be ignored.
Other markets followed the Agile movement with great interest as it produced its first
results. How could other practices and processes benefit from Agile’s ideas? Which
fruits could be reaped from this practice? As the world around us changes, it makes
sense to find ways to be as aware as possible of what is going on in order to be able
to act and benefit.
It was not long after the introduction of the Agile Manifesto that Brian Robertson
started a new software company (Ternary Software) and decided to not turn to the
usual solutions of organizational design. Through years of trial and error, an organizational design aimed to enhance organizational agility emerged to what we now
know as Holacracy [9].
Small and medium sized organizations, mostly technology related, started to pick up
the practice. But it was not until December 2013 that Holacracy really caught the attention of the media. Zappos, an online shoe and fashion retailer with 1,500 employees, announces that its aim for 2014 will be to implement the practice throughout the
whole company, and thus be the first large sized company to break with traditional
organizational designs and follow Holacracy. Until now, from a scientific perspective, little is known about Holacracy, except that it has borrowed and refined practices
16
HOLACRACY – A RADICAL APPROACH TO ORGANIZATIONAL DESIGN
from existing theories. Empirical evidence is still scarce, and besides that, very hard
to gather. So all we can do for now is investigate what is known at this point in
time on Holacracy and reason on when it will work and what we can learn from it
in managing our own organizations. Hopefully we can tell more on how Holacracy
worked for Zappos by the end of 2014.
2.3
A Brief Introduction to Holacracy
In order to have a basic understanding of what Holacracy is, we will summarize it
briefly. For a better understanding we encourage the reader to read the official material on the website of Holacracy [5] or the official paper by Robertson [9].
What is Holacracy?
The official Holacracy website3 defines Holacracy as: a real-world-tested social
technology for agile and purposeful organization. It radically changes how an organization is structured, how decisions are made, and how power is distributed [5].
What Does it Promise?
Holacracy promises the following results [5]:
1. Lean and adaptable organization
2. Highly effective meetings
3. Clearly distributed authority
4. Purpose-driven work
How Does it Work?
Organic Structure vs. Artificial Hierarchy
In Holacracy the organizational structure consists of a holarchy of self-organizing
teams, called ‘circles’. This holarchy of circles emerges in the process and evolves
over time. Hereby Holacracy aspires to result in a natural hierarchy focused on work
instead of individuals [9] (See also Figures 2.2 and 2.3)
3 http://www.holacracy.org
A BRIEF INTRODUCTION TO HOLACRACY
17
Figure 2.2: From hierarchy to holarchy [9]
Roles Instead of Job Titles
One of the most notable differences between a traditional organizational governance
and governance with Holacracy is the fact that individuals do not carry job titles anymore, hence there are no management titles either. Holacracy states that job titles are
often status-related and are often vaguely related to the work the individual is actually doing on a daily basis. With Holacracy, roles are defined with a clear purpose
only at the point where they contribute to the organizational purpose and the aim of
the circle. When a role does not contribute any more it is withdrawn. Individuals
can energize multiple roles. Roles serve a specific purpose and include real responsibility and authority. “Everyone becomes a leader of their roles and a follower of
others” [5]. Note that Holacracy does not prescribe a set of roles in a way that a
method like Scrum does, the roles will emerge over time from the work to be done.
By removing job titles and defining roles when they are needed, Holacracy aspires
to make the work to be done more explicit. By giving roles authorities and responsibilities, decision-making is distributed throughout the organization [8].
Process
By distributing leadership throughout the organization, Holacracy aspires to be more
of an open system where its employees are more in touch with the changing environment. By energizing their roles, individuals sense opportunities, called ‘tensions’, to
improve the organization to align better with its purpose. Holacracy divides tensions
in two categories: tensions on operations (the processing of the work) and tensions
on governance (structure of the organization) [9, 5] (See also Figure 2.4)
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HOLACRACY – A RADICAL APPROACH TO ORGANIZATIONAL DESIGN
Figure 2.3: Example of a general company circle with sub-circles[5]
Meetings
To facilitate the effective execution of tensions of operations, the members of a circle
have various meetings with different scope and at different intervals, from daily to
yearly. Circle members also meet regularly to evolve the governance process of
the circle to uncover the roles needed to reach the circle’s aim. The various circles
synchronize their information by applying the concept of double linking: In each
circle meeting one elected member from the super circle (‘lead link’) and one elected
member from every sub-circle (‘rep link’) attends the meeting to ensure the circles
decisions align with the needs of the super circle and the perspectives of the subcircles. Decisions are made based on consent (instead of consensus) and should
lead to actions that allow rapid feedback rather than a thorough cause analysis. This
concept of rapid decision-making based on real data to enable rapid feedback is
called Dynamic Steering in Holacracy, and will be explained more later on in this
chapter [9].
Although there is a lot more to Holacracy then we summarized here, the above description gives a basic overview of how Holacracy works.
HOW DOES HOLACRACY RELATE TO EXISTING THEORIES?
Figure
2.4:
The
Holacracy
process
(Source:
19
http://www.
topmanagementdegrees.com/holacracy/)
2.4
How does Holacracy Relate to Existing Theories?
To form an opinion on when Holacracy could or could not work, the most prominent
theories that have been incorporated and further refined in Holacracy are investigated. For each theory is briefly described how its philosophies or practices are
embedded in Holacracy’s governance process, drawn from scientific work as well as
the official material from the Holacracy website.
Agile
The Agile movement emerged in a response to break with the traditional up-front
plan-driven software development approach called waterfall. Where the waterfall
method is a highly predictive approach, the Agile methods aspire to be highly adaptive and are therefore able to respond to changes in the environment [1]. Robertson states that today’s complex organizations can be compared to complex software
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HOLACRACY – A RADICAL APPROACH TO ORGANIZATIONAL DESIGN
systems and have the same need to be able to adapt to an ever changing environment [8].
Agile software development tries to achieve control by embracing change and adapting continually instead of relying on up-front predictive analysis. At the organizational level this concept can be compared with the concept of dynamic steering
in Holacracy, where the decision-making process focusses on rapid feedback from
reality [9].
Integral Theory (Ken Wilber)
Holacracy has incorporated concepts of Ken Wilber’s Integral Theory [9, 3, 4, 2].
First of all, the name Holacracy refers to the concept of a holon. Fuhs [4] defines
the concept of a holon as an entity that is simultaneously a whole and also part of
a larger whole. In Holacracy, the circles are the holons, and a hierarchy of holons
is called a holarchy. Holacracy, taken literally, means governance by the organizational holarchy, the organizational entity itself. Robertson states in [9] that Holacracy
aspires to facilitate the emergence of a natural consciousness for the organization itself: “This organizational ‘will’ feels clearly different from the will of the people
associated with the organization – just as the organization persists even as individuals come and go, so too does this consciousness.” This concept contradicts with
the traditional concept where some members of the organization dominate the will
of the organization [9]. Cardoso and Ferrer report that from an integral perspective, Holacracy substitutes the artificial pressure exerted by leadership by distributing
healthy tensions throughout the organization, which allows for constant learning and
innovation [2].
Sociocracy (Gerard Endenburg)
Sociocracy is a governance structure developed by Gerard Endenburg. According to
Endenburg (and also according to Senge [6]), the traditional top-down structure of
organizations limits the learning ability of the organization. The structure of Sociocracy is based on a hierarchy of circles. A circle is a policy-making unit of a group of
people with a common work objective [6]. Holacracy has incorporated and refined
practices of Sociocracy regarding circles and circle meetings [9, 8, 6]:
Concept of a hierarchy of self-organizing teams in circles.
Effective meetings where decisions are made based on consent.
Elections by consent.
Circle meetings maintain the quality of its resources by means of integral education.
Synchronization of circles through double-linking.
DOES HOLACRACY WORK?
21
In consent-based decision-making decisions are made when nobody has a reasoned
objection against the proposed decision. This requires to integrate all perspectives
into the decision-making process [8]. In consensus-based decision-making everybody has to be in favor of the decision, which could lead to individuals getting
emotionally involved, arguing about which decision is best. The goal of consentbased decision-making is not to find the best decision, but to make small working
decisions rapidly and let the best decision emerge over time [9]. Robertson notes
that consent-based decision-making is a critical rule in order to be able to embrace
Holacracy’s concept of dynamic steering, because small and rapid decisions enable
rapid feedback.
Requisite Control Structure (Elliott Jacques)
In contrast with Endenburg, Jaques defends hierarchy as a natural and efficient form
of social organization, but states that a poor organizational structure can prevent employees from working at their full potential. Hierarchies that do reflect the complexity of problem solving can release energy, improved morale and creativity [6]. In a
Requisite Organization, the revision of the system itself should be the focus of organizational development activities [2]. According to Robertson [9], Holacracy allows
the requisite structure to emerge over time. Through dynamic steering on governance
tensions, the quality of the structure of the organization can be continually improved
as more can be learned from experience.
Fuhs theorizes in [4] that although there is no evidence of the effect, the way Holacracy embeds the requisite control structure in its framework could result in a balance of structure and agency unrealized by other organization design forms.
2.5
Does Holacracy Work?
In order to be able to reason about whether or not Holacracy could work for your
business, the practice is discussed here from the perspective of (1) the investigated
management theories, (2) software development methods Scrum and RUP, (3) the experiences of a Holacracy practitioner and (4) from the perspective of my own humble
management experience.
From the Perspective of Theories
From the perspective of the investigated theories Holacracy is expected to deliver the
promised results. From the investigated scientific work in general, the concept of dynamic steering, arose from Agile and Integral philosophies and the Requisite Control
Structure (among others), can be appointed as a revolutionary concept for organizations in order to become more adaptive and aware of the changing environment. The
22
HOLACRACY – A RADICAL APPROACH TO ORGANIZATIONAL DESIGN
incorporated practices from Agile, Sociocracy and Requisite Control Structure could
in theory increase the effectiveness of the organization by (1) enhancing organizational learning, (2) make the work to be done more explicit and driven by purpose, (3)
let the organizational structure emerge from the work that is to be done and (4) distributing authority to individuals in explicit roles within self-organizing teams. From
the perspective of theories Holacracy looks promising, but (empirical) evidence is
needed to support these claims.
From the Perspective of Software Development Methods RUP and
Scrum
To investigate how Holacracy could work for software development we reason on
how two common development methods would complement Holacracy. Where Scrum
is an Agile software development method which can be described as adaptive, RUP is
more descriptive method (although not as prescriptive as the Waterfall approach) [7].
In [10] Robertson states that the predictive control approach often conflicts with the
agile software development process. The software process is Agile, but does not
interface well with other parts of the organization (like, for example, Sales). It is
therefore expected that an adaptive control approach, like Holacracy, would complement well with an adaptive software development process like Scrum [10]. The
reverse is also expected: An adaptive control approach could conflict with a prescriptive software development process because an adaptive control approach needs rapid
feedback in order to work. In [7] Noorderloos et al. reports how a transition from
RUP to Scrum resulted in more rapid feedback. Scrum delivers more rapid feedback
and is more adaptive (that is, more capable of acting according to changes in the
environment) than RUP, therefore it is expected that Holacracy complements better
with Scrum than with RUP.
From the Perspective of a Practitioner
One of the early adopters of Holacracy was Twitter founder Ev Williams’ content
platform called Medium. Stirman, manager at Medium (and former Twitter), tells in
an interview [11] on more than two years of experience with Holacracy at Medium.
He compares his experiences with his former job at Twitter where a traditional topdown structure was in place. Stirman states the difference between Holacracy and
traditional management: “With traditional management, tensions felt at the top of
the organization were ordered to be resolved at the lower operational level of the organization by people who may not even understand these tensions, and the tensions
felt at the bottom of the organization are not taken into account at all. Holacracy
makes people accountable for the tensions they feel and gives a voice to all tensions
felt throughout the organization.” Stirman acknowledges that from a practical perspective something is missing in the framework of Holacracy: Praise, feedback and
validation are important to a healthy work environment. These tasks were formerly
CONCLUSION
23
fulfilled by managers. Medium took a holacratic approach to this problem and created several roles responsible for feedback, coaching and validation.
From the Perspective of my personal Humble Management Experience
As a software development manager at a small sized company I have four years of
management experience. In these four years I was also responsible for implementing
the agile way of working within our team and company. I would describe myself as
a servant leader, who rather supports than directs. From this perspective I will try to
share my opinion on Holacracy here.
After the transition to an Agile software development process I started noticing the
conflict with the rest of the organization (also mentioned by Robertson [10]): our
Agile process did not interface well with the business. After a year the rest of the
business was used to our process, but Agile did not make it to the core of the organization. From my opinion the Holacracy approach could, especially in a rapid
business like IT, uncover the great potential of being more in touch with the environment.
Doubts that I have on the practice is how it will work out for more junior employees.
From my personal experience, Scrum works most effective with senior developers,
and I wonder how this works out with Holacracy at the organizational level. Second,
from my own management experience I can tell that not everybody is equally capable
of self-organizing and Holacracy provides no safety net on this matter. I expect
that the less-organized will eventually be excluded from any roles and it is arguable
whether or not this is a good thing.
2.6
Conclusion
In this chapter we reported on Holacracy, a relatively new governance framework
that could possibly replace top-down hierarchies in organizational designs in order
to increase the effectiveness of organizations [9]. Because Holacracy aspires to bring
agility to the organizational level it is likely to complement with existing Agile approaches in software development, hence it is relevant to provide an overview of
what Holacracy is and what we can learn from Holacracy in managing our own businesses.
Instead of a traditional top-down hierarchy, a holacratic organization consists of a hierarchy of self-organizing circles in which employees energize multiple roles. Each
role has a defined purpose with an explicit description of the work to be done and the
necessary responsibilities and authority to fulfill the role. Hereby decision-making is
distributed throughout the organization and employees are given the opportunity to
act on tensions they feel at their level of the organization. Information flows through
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HOLACRACY – A RADICAL APPROACH TO ORGANIZATIONAL DESIGN
all levels of the business by providing a framework for efficient tactical meetings
and governance meetings. The structure of the organization emerges naturally by
energizing tensions throughout the organization in order to satisfy the purpose of the
organization [9, 5, 8, 10].
To (help the reader) form an opinion we have discussed Holacracy from various
perspectives. Existing theories have been combined and refined within Holacracy,
resulting in revolutionary concepts like dynamic steering and organizational consciousness [2, 4]. Also practices from existing theories have been incorporated to
ensure effective organizational learning and an efficient process [6]. From the perspective of theories Holacracy looks promising, but (empirical) evidence is needed
to support these claims.
From the perspective of software development methods Scrum is more likely to
complement with Holacracy than a more prescriptive method like RUP, because the
decision-making process of Holacracy drives on rapid feedback from the environment [9, 10]. The perspective of a practitioner showed positive feedback but also
revealed a missing element. Feedback and coaching, a role normally fulfilled by a
manager, are not explicitly prescribed in Holacracy [11].
My personal opinion is that the Holacracy approach could, especially in a rapidly
evolving business like IT, uncover the great potential of being more in touch with
the environment and benefit from this, but I also doubt how Holacracy will work
out with more junior teams and people who are not proficient yet in the art of selforganizing.
All eyes are now on Zappos to see how a Holacracy implementation in a large business will work out. Hopefully we can tell more on how Holacracy worked for them
by the end of 2014.
Bibliography
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