Holacracy® - 4imprint Learning CenterHolacracy is a new way of running an organization. The...

Holacracy®Blue Paper

May 16, 2016

An empowering management model—withoutmanagers

So long, managers! Hello, Holacracy!

Holacracy is a new way of running an organization. The Holacratic model removespower from the typical top-down management hierarchy and distributes it to the teammembers doing the work.[1]

Holacracy was developed to increase responsiveness, remove obstacles and createclarity.[2],[3] Holacratic companies organize around the work instead of the peoplewho do the work. Titles aren’t important—but getting stuff done is!

This Blue Paper will explore the emergence of Holacracy, how it works, why it’s achallenging management model and best practices for adopting (or adapting) thepractice.

Getting to know Holacracy

Holacracy has gained visibility thanks to famous practitioner Zappos®, the online shoeretailer. With 1,500 employees, Zappos announced in November 2013 that it wasshifting to a Holacracy and, to date, is the largest company to do so.[4] BesidesZappos, about 300 organizations use Holacracy, including the Washington stategovernment.[5] So far, outcomes from adopting Holacracy have been anecdotal, butbasically all organizations that make the shift expect to gain efficiency and driveproductivity.

Zappos adopted a Holacratic framework to prevent the company from “becoming toorigid, too unwieldy and too bureaucratic as it grows.”[6] In other words, leaders sawthat bureaucracy was getting in the way of adaptability.

Holacracy as a term and practice was developed by software entrepreneur BrianRobertson, who had interest in how people work together. In 2007, Robertson co-founded HolacracyOne, which helps organizations implement Holacracy.(HolacracyOne holds the registered trademark for Holacracy.)[7],[8]

Holacratic companies may be a fringe trend, but there’s definitely movement toward

simplification. Agile models with lean processes show up at Google®, Amazon.com®

(which is Zappos’ parent company), Uber™ and Spotify®.[9] The speed of businesstoday inspires these new, speedy practices.

A Holacratic practice may accelerate decisions and productivity. But, it’s not easy toadopt and takes widespread commitment. Some employees balk at Holacracy, asZappos has found. To get all its people on board with Holacracy, Zappos gaveemployees an ultimatum in March 2015: Embrace the strategy or take a buyout. As ofJanuary 2016, about 18 percent of employees so far have taken the buyout.[10] It’s achallenging shift that demands vigorous participation.

Holacracy® of 13 info.4imprint.com

In spite of that, Zappos leader Tony Hsieh says he wishes he would have switched toa Holacracy sooner. One benefit so far is that the organization’s 20 percent turnover is“well below” most other call centers, Hsieh said. Holacracy has helped Zappos“maximize the number of employees that believe in the company mission, arepassionate about customer service and believe that this is the right culture forthem.”[11] In short, Holacracy helped Zappos keep truly dedicated team members.

Holacracy vs. traditional management

Comparing Holacracy to traditional management drives understanding of thenontraditional model. The most common operating model is command and control(C&C). C&C is a hierarchy, where decisions come from the top and “action lives at thebottom.”[12] It’s all about your boss—and your boss’s boss (and it goes up the chainof command from there).

In a traditional hierarchy, team members work within their title and department.[13]But, when people can’t incite change, they often protect their turf and disengage.[14]The organization suffers.

To compare, in a Holacracy, team members take on roles that match their skillset andcompany demands.[15] They don’t convince someone else (e.g., a boss) to act. Theyhave authority to act on their own.[16]

Figure 1 below breaks down the differences between a traditional organization and aHolacratic organization:[17]

Figure 1: Traditional organizations versus Holocratic organizations[18]


http://info.4imprint.com/wp-content/uploads/P2-4imprint_Holacracy_BPGraphic_1.jpg


How Holacracy works

Holacracy is more than getting rid of managers (although that’s part of the model).Here’s a look at the principles of Holacracy:[19],[20],[21],[22],[23],[24],[25]

1.) Work is aligned with roles.

Roles are aligned with areas of expertise. One-to-one identification with your titledoesn’t exist. For example, instead of saying, “I am a marketing associate, and I amresponsible for X,” team members have multiple roles on multiple teams. Roles areworks in progress. They are constantly updated by the teams tackling the projects sothat roles have authority, rather than people.

In a Holacracy, all the actions critical to success—accountabilities—are laid out. Then,roles are created by grouping accountabilities. Here’s an example of how roles aredeveloped in Figure 2:[26]

Figure 2: How roles are developed in a Holacracy[27]

Roles are the backbone of a Holacratic organization. They help create valuebecause:[28]

▪ Team members can use all of their skills. They’re not lockedinto a title.




▪ The organization may not need to add new staff to get workdone. The people who already deeply understand thebusiness have everything covered.

▪ They encourage creativity, which drives productivity.▪ Stuff gets done effectively because skillsets are appropriately

matched.▪ People feel like they’re working as a team (vs. inside silos).

2.) Networks outrank hierarchies.

Teams as we know them don’t exist in a Holacracy. Instead, people work withincircles (Figure 3):[29]

Figure 3: Holocracies have circles, not teams[30]

While it’s true Holacracies don’t have managers, each circle has a lead link whoassigns people to roles. The lead link can define work priorities and strategies, butthey cannot tell people what to do. Functions may be delegated away from a leadlink, but no additional functions may be added to the role.

3.) Team members are autonomous.

Leadership is distributed throughout the company, and meetings give team membersauthority to move forward without say-so from a higher-ranking team member.Everyone becomes an entrepreneur in his or her role. The goal is serving the purposeand customer. In a self-managing environment, lead links balance trusting their teamwith driving accountability.

4.) Use meetings for rapid iteration.

Meetings help guide work toward incremental improvements. The meetings followstrict rules where everyone has a voice, but there’s no call for consensus.




Self-organizing teams hold two types of meetings: tactical and governance. Tacticalmeetings are for a triage of work. Governance meetings, usually held monthly,determine revisions to roles and processes to reflect changing team conditions.Governance meetings may change functions for lead links. Incremental steps—versusa massive reorg in a traditional organization—shift who owns what work.

Below is a visual representation of life in a Holacracy (Figure 4):[31]

Figure 4: Life in a Holacracy[32]

In a Holacracy, proposals are safe to try. Anyone can make, or change, a proposal atany time. The high frequency of proposals means there’s less pressure for perfection.As long as a proposal is safe to try—i.e., it will help collect valuable data—it’s a go.Proposals are rejected only if the circle doesn’t have domain or if there’s proof onecould harm the organization before it could be mitigated. In the safe-to-tryframework, “you can’t simply object because you don’t like an idea or have a betterone. Even if you make more mistakes this way, you’ll learn and course correct faster.”

5.) Document everything for the sake of transparency.




Authority lives in the process. It’s documented in a Holacratic constitution, not a topleader. A written document lays out ownership, decision-making and accountability.The constitution identifies “who will act as lead link from the individual or groupratifying the constitution.” The lead link in the constitution-ratifying “anchor circle” isresponsible for designating lead links for sub-circles. And, those sub-circle lead linksdesignate lead links for their sub-circles.

A documentation system helps record rules, changes over time and lessons learned.This transparency empowers team members by providing context. Organizations mayemploy a wiki or other intranet-based solution to aid in adoption, record keeping andongoing practice of Holacracy. Transparent communication tools—for a price—alsoexist.

So, what does Holacracy look like in action? And, can it help make money? Consider

the case of Blinkist®, which produces summaries of nonfiction books you can read inan app. Customers kept asking for audio versions of the summaries. To enable thecreation of audio versions, Blinkist shifted from a complex C&C model to a nimbleHolacracy, getting rid of titles and signing up everyone with roles. The switch alloweda more multidisciplinary approach to completing the work, which wasn’t possible inthe old organizational structure. Thanks to the Holacracy, the audio project was readyfor customers in just two months, and since its launch, audio has been the biggestdriver of the threefold monthly revenue increase.[33] Holacracy is a new practice, butit’s creating value for some organizations.

Why Holacracy is hard

Even if you think Holacracy—or elements of it—could work for your organization, thepractice is challenging. Here’s why:[34],[35],[36],[37],[38]

Command and control is the norm. People are used to hierarchies, and they likethem. “Show me any group of five human beings or five apes or five dogs,” saidauthor and Stanford University business professor Bob Sutton. “And I want to see theone where a status difference does not emerge. It’s who we are as creatures.” Theproblem with Holacracy is that most people only have worked in C&C environments.At first, it feels wrong, and there’s a strong urge to fall back into the C&C mind-set.

There’s a learning curve. And, because hierarchies are the norm, it takes time andcommitment to get the hang of self-management and self-organization. In self-management, a team member decides how to work on her own. In self-organization,team members work together as a group to “form, evolve and disband.” Teammembers are not hired to fill a job description, but instead to discover where they cancreate the most value.

Holacracy is rigid. Each organization has a unique culture with unique norms.However, the Holacratic framework, as established by HolacracyOne, is rigid and mayneed to be adapted to feel more natural. There’s new jargon and a process thatshakes up everything you know about working on a team.

Holacracy fights the human factor. Holacracy isn’t human centered; it’s processcentered. In Holacratic meetings, team members explore tensions in the work athand. If you’re a new employee, this forum can be a strange place to ask for feedbackand guidance. Hiring in a Holacracy also is challenging. For example, the hiring


process at Valve, a Washington-based software company that practices Holacracy, isby employee consensus, which is “extremely difficult,” according to founding memberGreg Coomer. “We’ve demanded of ourselves that we’d never hire someone who wewouldn’t want to be our boss, at the highest and lowest levels.”

Holacracy isn’t impossible, but it’s not a turnkey solution. The efficiencies a Holacracycan introduce may be worth a challenging implementation.

How to make Holacracy work for your organization

In a Holacracy, “people bring themselves more fully to the organization instead of justtheir professional selves.” Many additional benefits to adopting a Holacracy exist:[39]

▪ Increased personal responsibility▪ Distributed decision-making▪ Boosted productivity▪ More accountability▪ Decreased bureaucracy▪ Increased creativity and collaboration

What’s more, Holacracy eliminates the shortcomings of traditional hierarchy,including:[40]

▪ The growing cost of adding managers (who earn more thantheir subordinates) as you add employees

▪ The danger of uncontestable decision-making that rests withtop leadership

▪ The slow pace of decision-making as it passes through levelsof hierarchy

▪ How low-level employees are disempowered, shrinking theirincentive to “dream, imagine and contribute.”

If the benefits of Holacracy have piqued your interest and you’re ready to testHolacracy for yourself, keep these best practices in mind, whether you’re going all inor shopping al la carte:[41],[42],[43]

First, master self-management. Self-management doesn’t come easy foreveryone, so be gentle. “Make your own decisions!” isn’t the right way tocommunicate with every team member. If one person struggles, the entire teamstruggles. To maximize productivity in an environment of self-managers, match peopleand work. When people and work don’t jell, help them find a better path.

Put your own spin on it. If you’re using Holacracy (or elements of it), examine howthe practice falls short in your organization and come up with your own simple,flexible and custom solution to bridge those gaps. Your people will be happier for it!To ensure humanity isn’t lost in a Holacracy, tell the true stories—good, bad andugly—of how the model has evolved in your organization. Management models impactpeople, and people want to relate to and learn from other people.

Strive to reduce complexity.


▪ Bust up bottlenecks. Team members make decisions. Leadlinks should stay out of work unless it’s a decision that’sunder their authority or a teammate is looking for advice.

▪ Give away authority. Hand off work if you’re not skilled atit, you’re not passionate about it, a teammate is better suitedfor it or you don’t have time for it.

▪ Stay on task. The health of the team and its ability tocreate value depends on defining the work, allocatingresources and establishing metrics for success. Shut downdistractions.

Keep communicating.

▪ Be transparent. Install a system that lets your team knowexpectations from work as they evolve, who has authorityand what rules must be followed in your Holacraticenvironment.

▪ Drive accountability. When someone says they’ve got it,follow up early and often to make sure the commitment is ontrack.

▪ Give constructive feedback. Share what you like about anidea. Then, offer suggestions for how to make it even better.

▪ Set an example. Be self-aware of your actions, seekfeedback on your own work and work shoulder-to-shoulder tounderstand hardships and opportunities. Behavior iscontagious across a team.

Know if you’re a good fit for Holacracy. Holacracy seems to complement certaintypes of organizations. Tech companies, including Washington-based softwarecompany Valve and Japanese gaming developer Kayac, have done well with flatorganizations. According to Ethan Bernstein, assistant professor at Harvard BusinessSchool, “Coders seemingly understand this sort of system better than non-coders.” Ina Holacracy, team members are “T” shaped—they “have deep expertise and are alsolaterally obsessed.”

Elements of Holacracy could fire up value creation and inspire culture change at yourorganization. Adapt the Holacratic “safe to try” mind-set if you’re curious!

Shaking things up with Holacracy

You don’t have to fully adopt Holacracy to gain benefits. Even in small doses, thismanagement method is guaranteed to shake up any team that takes it on. A freshperspective brought about by Holacracy can help you identify new opportunities. Infact, the leading practitioners of Holacracy encourage taking a “test drive” to knowwhether the model could work for your organization.[44] The good news is it’s not anall-or-nothing practice. The bad news is it’s not easy to break free from traditionalmanagement.

While Holacracy in its purest form might not fly for all firms, its principles of

transparency, accountability and responsiveness are critical to every 21st centuryorganization. Knowing what you need to do—and doing it well—always will contributeto success.


Endnotes

[1] “How It Works.” Holacracy. HolacracyOne, 21 May 2015. Web. 01 Mar. 2016.<http://www.Holacracy.org/how-it-works/>.

[2] “What Is Holacracy?” YouTube. HolacracyOne, 18 Sept. 2014. Web. 01 Mar. 2016.<https://youtu.be/MUHfVoQUj54>.

[3] Pisoni, Adam. “Here’s Why You Should Care About Holacracy.” Fast Company. FastCompany Inc., 06 May 2015. Web. 01 Mar. 2016. <http://www.fastcompany.com/3045848/hit-the-ground-running/heres-why-you-should-care-about-holacracy>.

[4] Groth, Aimee. “Zappos Is Going Holacratic: No Job Titles, No Managers, NoHierarchy.” Quartz. The Atlantic Monthly Group, 30 Dec. 2013. Web. 01 Mar. 2016.<http://qz.com/161210/zappos-is-going-Holacratic-no-job-titles-no-managers-no-hierarchy/>.

[5] Noguchi, Yuki. “Zappos: A Workplace Where No One And Everyone Is TheBoss.” NPR. NPR, 21 July 2015. Web. 18 Mar. 2016. <http://www.npr.org/2015/07/21/421148128/zappos-a-workplace-where-no-one-and-everyone-is-the-boss>.

[6] McGregor, Jena. “Zappos Says Goodbye to Bosses.” The Washington Post. TheWashington Post, 3 Jan. 2014. Web. 01 Mar. 2016.<https://www.washingtonpost.com/news/on-leadership/wp/2014/01/03/zappos-gets-rid-of-all-managers/#!>.

[7] Ibid

[8] “Holacracy Backstory.” Holacracy. HolacracyOne, 11 Mar. 2015. Web. 04 Mar.2016. <http://www.holacracy.org/backstory>.

[9] Groth, Aimee. “Why It’s More Demanding to Work for a Company without aTraditional Hierarchy.” Quartz. The Atlantic Monthly Group, 13 Feb. 2014. Web. 02Mar. 2016. <http://qz.com/176102/why-its-more-demanding-to-work-for-a-company-without-a-traditional-hierarchy/>.

[10] Ibid

[11] Ferenstein, Gregory. “The Zappos Exodus Wasn’t About Holacracy, Says TonyHsieh.” Fast Company. Fast Company Inc., 19 Jan. 2016. Web. 08 Mar. 2016.<http://www.fastcompany.com/3055657/most-creative-people/the-zappos-exodus-wasnt-about-holacracy-says-tony-hsieh>.

[12] Pisoni, Adam. “Here’s Why You Should Care About Holacracy.” Fast Company.Fast Company Inc., 06 May 2015. Web. 01 Mar. 2016.<http://www.fastcompany.com/3045848/hit-the-ground-running/heres-why-you-should-care-about-Holacracy>.

[13] Klein, Sebastian. “Our Startup Launched Its Own Version of Holacracy andTripled Its Revenue.” Quartz. The Atlantic Monthly Group, 13 Apr. 2015. Web. 01 Mar.2016. <http://qz.com/379455/our-startup-launched-its-own-version-of-Holacracy-and-tripled-its-revenue/>.


[14] “What Is Holacracy?” YouTube. HolacracyOne, 18 Sept. 2014. Web. 01 Mar.2016. <https://youtu.be/MUHfVoQUj54>.




[18] Ibid





[23] Walker, Paul. “10 Ways ‘Leaders’ Limit Success.” Zappos Insights. ZapposInsights, Inc., n.d. Web. 01 Mar. 2016. <http://www.zapposinsights.com/about/Holacracy/10-ways-leaders-limit-success/>.

[24] “Holacracy Quick Start Guide.” Holacracy Quick Start Guide (2014): n. pag.Holacracy.org. HolacracyOne, LLC, 21 May 2015. Web. 18 Mar. 2016.<http://www.holacracy.org/wp-content/uploads/2015/05/holacracy_quickstart_guide_v2.3a.pdf>.

[25] “Holacracy Constitution V4.0.” Holacracy.org. HolacracyOne, LLC, 15 Mar. 2013.Web. 18 Mar. 2016. <http://www.holacracy.org/constitution40>.


[27] Ibid

[28] Ibid



[30] Ibid


[32] Ibid



[35] Caddell, Bud. “Why Self-Organizing Is So Hard.” Medium. Medium, 27 Mar. 2015.Web. 01 Mar. 2016. <https://medium.com/the-future-of-work-is-flox/why-self-organizing-is-so-hard-247821591e67#.kle2u1l1m>.

[36] Groth, Aimee. “Zappos Is Going Holacratic: No Job Titles, No Managers, NoHierarchy.” Quartz. The Atlantic Monthly Group, 30 Dec. 2013. Web. 01 Mar. 2016.<http://qz.com/161210/zappos-is-going-Holacratic-no-job-titles-no-managers-no-hierarchy/>.

[37] Ibid


[39] Misra, Romy. “Myths Of Companies With No Management.” Fast Company. FastCompany, Inc., 30 Apr. 2015. Web. 18 Mar. 2016. <http://www.fastcompany.com/3045509/hit-the-ground-running/myths-of-companies-with-no-management>.

[40] Hamel, Gary. “First, Let’s Fire All the Managers.” Harvard Business Review.Harvard Business Publishing, 01 Dec. 2011. Web. 18 Mar. 2016. <https://hbr.org/2011/12/first-lets-fire-all-the-managers>.

[41] Walker, Paul. “10 Ways ‘Leaders’ Limit Success.” Zappos Insights. ZapposInsights, Inc., n.d. Web. 01 Mar. 2016. <http://www.zapposinsights.com/about/Holacracy/10-ways-leaders-limit-success/>.

[42] Caddell, Bud. “Why Self-Organizing Is So Hard.” Medium. Medium, 27 Mar. 2015.Web. 01 Mar. 2016. <https://medium.com/the-future-of-work-is-flox/why-self-organizing-is-so-hard-247821591e67#.kle2u1l1m>.


[43] Groth, Aimee. “Why It’s More Demanding to Work for a Company without aTraditional Hierarchy.” Quartz. The Atlantic Monthly Group, 13 Feb. 2014. Web. 02Mar. 2016. <http://qz.com/176102/why-its-more-demanding-to-work-for-a-company-without-a-traditional-hierarchy/>.

[44] “Implement Holacracy.” Holacracy. HolacracyOne, 22 May 2015. Web. 08 Mar.2016. <http://www.holacracy.org/implement>.


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