Everyone is a Leader, New Management Concept: Holacracy

Holacracy is a method of decentralized management and 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 by for-profit and nonprofit organizations in several countries.

Origin

The Holacracy system was developed 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 company's best practices into an organizational system that became known as Holacracy in 2007. Robertson later developed the "Holacracy Constitution", which lays out the core principles and practices of the system. 

In June 2015, he released the book Holacracy: The New Management System for a Rapidly Changing World, that details and explains his practices.

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: ὅλον, holon neuter form of ὅλος, 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.

Circle Structure

Holacracy structures the various roles in an organization in a system of self-organizing (but not self-directed) circles. Circles are organized hierarchically, and each circle is assigned a clear purpose and accountabilities by its broader circle. However, each circle has the authority to self-organize internally tobest achieve its goals. Circles conduct their own governance meetings, assign members to fill roles, and take responsibility for carrying out work within their domain of authority. Circles are connected by two roles known as "lead link" and "rep link", which sit in the meetings of both their circle and the broader circle to ensure. 

The philosophy behind holacracy—that power needs to be distributed throughout the network— makes intuitive sense, particularly in the age of emerging blockchain technology.HolacracyOne counts a few hundred companies as clients and estimates that there are about 1,000 organizations around the world that have adopted its methods. Google, Ernst & Young, and Dubai governmental agency KHDA have all experimented with holacracy, with varying degrees of success.

In Holacracy, teams are renamed 'circles,' and they can be created or destroyed anytime. The domain of a circle can be redefined multiple times, and the roles within a circle can be changed accordingly. Sounds messy, but there's one rule that keeps things together: Circles only have the authority to change things that are in the domain of their authority. They can also create new circles under them if that's necessary to get the job done. Essentially, circles are structured hierarchically, they're just subject to constant change that keeps them trained on the most important problems and work at any given time.

Role not Soul

Allowing all of your employees to propose changes to teams or roles would not work at a C&C company. First, title and rank are too important. And second, people generally only have one role on one team with one focus. People identify 1-1 with their title, making them imprecise and inflexible. Rank also tends to aggregate accountability for everything below it, no matter what your title is. This makes it even less precise. If you talk to 10 CMOs, you'll get 10 different answers about what their job and accountabilities are.

Holacracy fixes this problem by decoupling “role from soul.” Roles are defined based on logical groupings of accountabilities or areas of expertise, ignoring the physical number of people at your company. You can have more roles than employees, and it's expected that people will fill multiple roles within several circles. In fact, it's common for one person to handle multiple roles in the same circle. This makes it easy to move accountabilities from person to person without changing titles or hurting egos.

Role over Rank

Simply decoupling role from soul wouldn’t be adequate given the importance of rank. We’ve all experienced how rank can trump role. While Holacracy may have a hierarchy of circles, it tries to decouple the humans from that hierarchy as much as possible. It would be misleading to say there is no hierarchy, however. Each circle has a single role called Lead Link who has authority over assigning people to other roles in the circle. Unlike a normal “boss” though, the Lead Link isn’t supposed to tell the occupants of those roles how to do their jobs.

Why and Who over How and What

At a traditional org, a lot of time is spent arguing about what work to do or how to do it. This often takes up the bulk of meeting time and stems from a lack of clear accountability. No one knows who gets to decide what. If anything, attempts to empower employees within traditional frameworks have only made matters worse.

Networks over Hierarchies

The most effective way to solve any problem is to put together all of the people with the skills required to solve it. We call this a cross-functional or multi-disciplinary team. Sounds obvious, but as anyone who’s worked at a large company will tell you, it's rarely done in practice.

Earlier, I mentioned that relying on long-term, rigid plans makes it hard to adjust as new information is learned. You may not recognize it but the organizational chart itself is merely the manifestation of an earlier long-term plan.

Imagine you were tasked with creating a car manufacturer from scratch. You'd probably start by figuring out all the products you wanted to make. Then all of the different types of work needed to make those products. You'd then design the org chart around those products and functions. One of your goals would be to create an org chart that gave maximum autonomy to each team by minimizing their dependency on each other. That's because work which can be done wholly within a formal team is much easier than work that requires participation from multiple teams.

This strategy gets increasingly difficult as the number of teams grows. In the end, you get people who have never worked together who really should. This problem has plagued companies forever, but has gotten worse as work becomes more complex and the future less predictable. Our best response to this problem so far has been the addition of the “dotted line” a.k.a. matrix structure. While this may have helped a little, it doesn't address the fundamental issue:

Conflict Resolution

When collaborating happens on a daily basis, good conflict resolution is vital. Holacracy, unlike traditional business models, has a highly structured process for dealing with “Tensions”, or something that has potential to become a conflict. Once flagged, the Tension is addressed at the next Governance meeting. Once presented to those present at the meeting, Proposals are given for solutions to the Tension. Ethan Bernstein, Management Professor at Harvard, says, “Holacracy replaces that [traditional] structure with a structuring process, to resolve conflicts in a potentially less-hierarchical, more self-organized, and more adaptive fashion.” Holacracy has built-in pathways that allow individuals to turn these potential conflicts into something positive, before the conflict even happens.

Streamlining

Another benefit of the decentralized authority practiced in Holacracy is the ability to streamline projects. In a conventional organization, ideas or initiatives brought to the attention of the higher authorities might be welcomed in theory, but due to lack of time or resources, put to the side or even lost. The structure of Holacracy “removes those obstacles so that [you] can support innovative thinking,” says Compagne. The processes associated with making a decision that affects the company as a whole are streamlined themselves. Individuals take their decision straight to the people who will be affected, known as “going role to role.” This ensures that the messages themselves are not distorted or watered-down as well.

How does holacracy work?

Holocratically organised companies define dynamic roles based on work and not on people. Employees can therefore take on different roles in different teams, which are dynamically adapted to their daily work requirements. Decisions are made locally, since authority is highly decentralised and teams can therefore work independently and autonomously.

Nevertheless, the individual persons and teams do not act completely independently of each other, but are networked with each other through connections (“lead link”, “rep link”, “cross links”). As a result, employees and teams work more autonomously and managers focus on strategy and planning instead of operational micromanagement.

Often the concept of holocracy is described and accepted as non-hierarchical, managers are abolished. However, the holocratic enterprise is based on ever-growing circles, with inner circles being subordinate to outer circles. Roles therefore exist that are quite hierarchical.

This organisational structure is adapted to current challenges in regular team meetings (“governance meetings”). The system is supported by clear and transparent rules that are visible and valid for everyone in the so-called Holocracy Constitution.

Examples of holocratic companies in practice

The Holocracy concept has already been used by over 300 organizations in the USA. The best-known and largest of these is Zappos, an online shoe and fashion mail order company with around 1500 employees, which served as a model for the German Zalando of the Samwer brothers. Especially for Zappos, an organization that was already agile and customer-oriented before the Holacracy introduction, holocratic structures seem to bring added value through reduced administrative activities and less bureaucracy. Therefore, a holocratic organizational structure can make sense in order to become more dynamic and promote self-management.

Other companies in which holocracy has been introduced:

German-speaking area:

Blinkist, a start-up specializing in the compilation of non-fiction texts

Netcentric, Swiss Software Developer

Soulbottles, a Berlin eco-start-up oriented towards holocracy and non-violent communication

Deutsche Bahn, which is experimenting with holocracy in selected areas

ESBZ, a reform school in Berlin, which renounces the school management

International:

AdScale Laboratories

bol.com, in some teams

Paramount Software Solutions

Durabilis

MySign

Swisscom, in parts of the company