Company Culture

Holacracy - How to Change Your Company Structure and Hierarchy

Who said democracy is just for politics? Is management still dependent on just a few people at the top? Leading companies across the globe are ditching  traditional, bureaucratic management styles for something called Holacracy. This system scraps the management hierarchy policy and replaces it with a modern corporate democracy. But, how are these companies succeeding? What are the pros and cons of this new system?

First, it’s important to define what Holacracy is. Brian Robertson’s, the brain child of this system, objective was to find a solution to what he saw as barriers to productivity, creativity and transparency. He decided to create HolacracyOne, a consulting company that offers training for companies that want to implement the system. Holacracy attempts to rethink organizational management structures.

What Holacracy offers is one of the most structured methods for achieving this goal and, unlike other systems, it does not promote a completely flat hierarchy, making it less radical than what skeptics might have you believe. With this system, employees no longer take job titles. Instead they inhabit roles that create autonomy over their work.

Restructuring

According to Elliot Jaques, an organizational theorist, there are three types of structures in a company. A “Formal Structure” is the organisations charts and job descriptions, which are  out of date and irrelevant when it comes to clarity on what the focus should be or what to expect from others.  “Extant structure” is an indication of the way things are done and what is actually operating. Then there is the “requisite structure”, what the company actually wants their structure to be like. According to Brian Robertson,  there is a tension gap between what it is and what could be. He believes that in a Holacracy focused organization, people do refer to their and others’ job descriptions regularly, sometimes on a daily basis—because they contain relevant, accurate, and useful clarity on what makes sense to do and expect. As a result, three structures collapse and become one.

Getting Things Done is an example of that phenomenon, David Allen, CEO of the company reorganized it using Holacracy. Originally, they were structured as departments. According to David, “Over several months, it became clear that some natural value streams within  company were getting clogged up because of how they were structured. Work was not flowing. It was ping-ponging off the different departments.We restructured our organization into three value streams with a clear customer at the end of each. We now use the structure to help push work through the value streams to get to the customer with fewer handoffs and touch points. Before, we had questions on who has authority on the profit and loss; now it is crystal clear.”

Precision Nutrition, a multidisciplinary team of coaches for companies, adopted Holacracy when the company was growing 50% every year. The company adopted Holacracy to provide leadership throughout the organization, not in the managerial sense but to give people a say in the governance and strategic meetings. Phil Caravaggio says that the hardest part was to make the mental shift. In this article Phil sustains “Other people are going to have genuine authority. They will be the authority, not me, on X, Y or Z. I will be subservient to them in these various functions.” He adds: “Just letting go of entire chunks of the organization and allowing other extremely capable people to take that on is the hardest thing to do. It sounds trivial because it’s something that I think you’d imagine every organization has to face as it grows. But in some organizations, they really don’t face it.”

Enhancing Feedback

Not all companies adopt Holacracy as a whole, many of them implemented the system in different aspects of daily work. When it comes to feedback, leading companies such as GE, Accenture, Adobe, realised that feedback between peers and upward feedback was more than necessary in order to  boost productivity, rather than annual performance reviews. That’s why many of them started adopting real-time feedback tools such as Impraise,  in order to empower everyone in  the company to provide real-time feedback in cost-beneficial way.

Medium, the online-publishing startup led by Twitter co-founder Ev Williams, has been using Holacracy for 2 years now. When it comes to feedback at work, they found that one of the system’s shortcomings was the lack of a mechanism for giving praise or feedback to employees, a task traditionally carried out by managers. To solve this problem, they utilized the system’s fast iteration process to simply create a new roles called “Group Leads” with the specific purpose of administering feedback to employees.

Blinkist, after adopting Holacracy, got rid of managers in the traditional sense of who will oversee work and keep up with workers’ progress. “For example, instead of a manager giving feedback, the group gives feedback to every team member by raising tensions in a weekly tactical meetings” says Niklas Jansen, Co-Founder of the company.

Critics of Holacracy 

Onboarding employees to a brand new type of work culture when there is no hierarchy,  represents a challenge for any company. Zappos, famous for offering new employees money to leave the company, saw an incrementation of 1% to 14% of employees opting to leave the company when offered several months’ severance pay to leave because they were not embracing what was happening. Steve Denning in his article makes a valid question, “It would thus be interesting to know how many of the 14% who have just opted to leave Zappos have left, not because of the failure to embrace self-empowerment, but because they were concerned at the apparent complexity of the processes being introduced.” Employees have noted that the transition has been rocky. “It is really painful and slow at first” Christa Foley, a Zappos employee for 10 years , told the Times.

According to a Forbes article about Holacracy complications, the irony is that holacracy is supposed to be a great leveler, tearing down red tape and formal bureaucracy that supposedly stymie creativity. And yet to make it work, holacracists have to attend hours of regimented meetings conducted with a procedural formality that seems antithetical to the original freewheeling intent.

In Zappos critics to Holacracy are split between those who feel comfortable working under this original type of management and others who are criticizing it for being too rigid and dogmatic.As the Wall Street Journal suggests, it might take “five extra hours of meetings a week as workers unshackled from their former bosses organize themselves into circles and learn the vocabulary of Holacracy.” Critiques are also based on the questions left unanswered. As Aimee Groth sustains in her article in Quartz, “HolacracyOne, provides a basic framework but has left big questions unanswered, like compensation and hiring/firing”. It becomes harder to calculate compensations when there are many people doing many roles at the same time and switching constantly. Companies like Zappos have even created a specific department to calculate compensations now that they operate under Holacracy rules.

In Brief

Today’s workplace environment is changing at a rapid pace, a far cry from the cubicle and hierarchical structure of yesteryear. In order to yield a high rate of productivity,  companies are seeking ways to understand the needs of every employee. Through Holacracy, employees are given the opportunity to be leaders in their own right. However, adopting this new structure can be a shock for many employees, especially those ones coming from a bureaucratic background. The system doesn’t seem to offer a clear pathway for its adoption, making the latter even harder and improvised.

Photo by Nick Royer