Holacracy

Most organizations have business structures designed like pyramids. The person at the top makes the most important decisions, which then get distributed to managers at various levels until strategies and policies reach workers. There are variations on this format, but they mostly happen on the pyramid's interior. The outside keeps the same shape.

Holocracy offers a radical departure from this kind of top-down governance. When used properly, it can empower people throughout the company to follow their passions and get more work done.

What Holocracy Means

Holocracy throws out the old top-down hierarchy and replaces it with a more open, transparent business structure built from circles. It places organizational power in an explicit process, one that organizes around an explicit purpose. This allows emergent behavior of the whole system, without being controlled by either a single heroic leader or even the collective group. Each employee in the business can become a member of several circles depending on his or her strengths and interests. Since the circles are linked together, there is oversight to make sure that others meet their goals.

The details of how holocracy works can get fairly complex. Experts have written entire books on the subject. It's easier to clarify the advantages of holocracy by looking at a specific example.

In a Rigid Hierarchy

Let's say Sam, an employee for a business that uses a traditional hierarchical structure, notices that she can improve her efficiency by making a software macro that automates simple tasks. She can't install it on her work computer or give it to her peers until she gets permission. She schedules an appointment with her manager and meets with her the following week.

The manager thinks that Sam's idea is great, but she doesn't have time to take a closer look. She's already managing a department that experiences daily crises, but she promises to consider Sam's suggestion as soon as possible.

A year later, everyone has forgotten about Sam's idea.

In a Holocracy

This story's plot looks very different when it happens in a holocracy. Instead of scheduling a meeting with a business manager, Sam would attend one of her regular circle or governance meetings, where she could raise the idea and get it approved or denied via an integrative decision making process. After getting a couple of other employees to test the macro for compatibility and security flaws, Sam releases the update.

Note: A three-paragraph example turned into one paragraph. When hierarchical levels are replaced with democratic circles, jobs often get done faster.

The Benefits of Turning Holocratic

Turning a business into a holocracy takes time. Many employees and former-managers may still follow old scripts required by hierarchy. Over time, though, those scripts fade from memory. This isn't to say that holocracies automatically evolve into something great. The Holocracy Constitution is a rather long document explaining exactly what organizations should do to make holocracy work for them.

When used properly, organizations can expect holocracy to:

  • Encourage employee engagement
  • Change quickly to evolving market conditions
  • Improve transparency
  • Create an environment that attracts the most talented employees
  • Give talented employees more opportunities to show and develop their skills
  • Improve office morale
  • Create more accountability

Not every organization will necessarily see these benefits, but many have already shown that it's possible to improve through Holocracy.

Thriving in a Holocracy

Zappos is the most famous company following the holocratic concept, but there are plenty of examples, including:

  • Medium
  • David Allen Company
  • Precision Nutrition
  • Moveline
  • Undercurrent
  • Adscale Laboratories

It's important to note that these companies already had progressive leaders willing to use new ideas to their advantage. A company that truly thrives in a holocratic environment may need an open culture that makes social/hierarchical change relatively easy.

Anyone considering this organizational style should also consider that there are unique challenges. A writer from Forbes worries that holocratic businesses spend too much time looking inward instead of focusing on their customers.

If this criticism is true, then it makes sense that a company like Zappos could thrive even while using holocracy. Jeff Bezos has always focused on customers, even going so far as to leave an empty seat at each meeting to remind people that the customer is in the room. Perhaps holocracy works for Zappos because Bezos gives it a customer-oriented focus.

Holocracy is an exciting idea that more companies are starting to consider. It's not something to jump into, though. It takes a lot of careful planning to find the right approach. Just thinking about the change, however, could get you on track to restructuring your business.

Image courtesy of: http://vienna.impacthub.net

Tristan Boutros
Author: Tristan Boutros
Senior Vice President & Chief Process Officer
Tristan Boutros is currently Senior Vice President & Chief Process Officer for one of the world's largest media and entertainment firms located in New York City where he oversees Program Management, Process Improvement and Enterprise Architecture. He holds over 10 professional designations including his Lean Six Sigma Black Belt (LSSBB), Project Management Professional (PMP), Certified Scrum Professional (CSP), and his Master Project Manager (MPM) certification. Order a copy of Tristan Boutros's book The Process Improvement Handbook: A Blueprint for Managing Change and Increasing Organizational Performance from Amazon.

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