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Holacracy A Radical Approach To Organizational Design
Holacracy A Radical Approach To Organizational Design
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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 an-
nounced a planned transition to Holacracy in 2014. Since then, the interest in Ho-
lacracy has increased exponentially (see Figure 2.1). Business and management crit-
1 Holacracy is a registered trademark of Holacracy One, L.L.C. of Spring City, PA, USA.
13
14 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 . Num-
bers 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 de-
partments. Holacracy provides a framework to bring agility to the organizational
level and is therefore likely to complement better with the agile practices at the soft-
ware 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 per-
spectives:
What we know at this point from theory.
Top-down hierarchies have been used as the organizational structure by many compa-
nies 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 revolu-
tion. 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 plan-
driven 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 dif-
ferent 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. Al-
though 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 orga-
nizational 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 at-
tention of the media. Zappos, an online shoe and fashion retailer with 1,500 employ-
ees, 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 perspec-
tive, 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.
What is Holacracy?
3 http://www.holacracy.org
A BRIEF INTRODUCTION TO HOLACRACY 17
Process
Meetings
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 investi-
gated. 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 adap-
tive and are therefore able to respond to changes in the environment [1]. Robert-
son states that today’s complex organizations can be compared to complex software
20 HOLACRACY – A RADICAL APPROACH TO ORGANIZATIONAL DESIGN
systems and have the same need to be able to adapt to an ever changing environ-
ment [8].
Agile software development tries to achieve control by embracing change and adapt-
ing continually instead of relying on up-front predictive analysis. At the organi-
zational 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].
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 organiza-
tional holarchy, the organizational entity itself. Robertson states in [9] that Holacracy
aspires to facilitate the emergence of a natural consciousness for the organization it-
self: “This organizational ‘will’ feels clearly different from the will of the people
associated with the organization – just as the organization persists even as individ-
uals 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 perspec-
tive, Holacracy substitutes the artificial pressure exerted by leadership by distributing
healthy tensions throughout the organization, which allows for constant learning and
innovation [2].
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 em-
ployees from working at their full potential. Hierarchies that do reflect the complex-
ity 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 orga-
nizational 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 Ho-
lacracy embeds the requisite control structure in its framework could result in a bal-
ance of structure and agency unrealized by other organization design forms.
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 ex-
periences of a Holacracy practitioner and (4) from the perspective of my own humble
management experience.
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 dy-
namic steering, arose from Agile and Integral philosophies and the Requisite Control
Structure (among others), can be appointed as a revolutionary concept for organiza-
tions 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 organiza-
tional 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) dis-
tributing 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.
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 top-
down 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 or-
ganization 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 per-
spective 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 cre-
ated several roles responsible for feedback, coaching and validation.
2.6 Conclusion
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 con-
sciousness [2, 4]. Also practices from existing theories have been incorporated to
ensure effective organizational learning and an efficient process [6]. From the per-
spective 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 environ-
ment [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 self-
organizing.
All eyes are now on Zappos to see how a Holacracy implementation in a large busi-
ness will work out. Hopefully we can tell more on how Holacracy worked for them
by the end of 2014.
Bibliography
[1] K. Beck, M. Beedle, A. Van Bennekum, A. Cockburn, W. Cunningham,
M. Fowler, J. Grenning, J. Highsmith, A. Hunt, R. Jeffries, et al. Manifesto
for agile software development. 2001.
[2] M. Cardoso and R. Ferrer. The integral management meta-model: A man-
agement model for second-tier organizations. Journal of Integral Theory &
Practice, 8, 2013.
[3] T. Collins and A. Hines. The evolution of integral futures. World Future Review,
5, 2010.
[4] C. Fuhs. Toward an integral approach to organization theory. 2009. Available
from ClintFuhs.com.
[5] HolacracyOne. Holacracy — Social technology for purposeful organization.
http://holacracy.org, 2008. [Online; accessed 16-March-2014].
BIBLIOGRAPHY 25