Holacracy by Brian Robertson

For the last six weeks, Holacracy has been front and center in the business news as Zappos makes the shift from a traditional, hierarchical business model to the Holacracy model. Pundits across every media platform have been weighing in on the advantages and the disadvantages of the new organizational system, but few, if any, have demonstrated a concrete understanding of the system itself—and so the questions abound: How can any organization run without managers? How is corporate organization handled, and chaos averted? How are decisions made and specific responsibilities distributed? How is compensation determined, and how is advancement managed? And how can a company where everyone is a leader succeed?

In Holocracy: The New Management System for a Rapidly Changing World (Henry Holt, $26.00 Hardcover, ISBN: 9781627794282; on-sale: June 2, 2015), Brian Robertson, co-founder of HolacracyOne responds to the rigid, static, and opaque management structure of old, and the need for agility in a rapidly changing business world.

A Conversation with Brian Robertson

In simplest terms, what is Holacracy?

Holacracy is a "rule book" for organizations that maximizes potential, both for the organization and the individuals working within it. You can think of it as an operating system that makes it easy to update your business processes as needed. When a group of people collaborate for a shared purpose, few ever ask, "What type of organizational system are we going to use to accomplish our goal?" Typically, people revert to command-and-control hierarchies or spiral into anarchy. In contrast, Holacracy offers a set of rules and processes to maintain structure without requiring a certain group of people to "manage" another group of people. Work is organized by roles, each with a unique job to carry out, and roles cluster in teams with a shared function to carry out. Instead of a single job description, people in Holacracy-powered organizations usually occupy several different roles across several different teams. Each role has significant authority over its own work; when conflicts between roles arise, a defined "integrative decision-making process" helps to resolve them.


Wouldn't such a system result in complete chaos?

Holacracy is a system of rules, so it's actually the opposite of chaos. Through transparent and integrative processes, people in Holacracy-powered organizations are able to pursue their work and align with others in the organization. It has been said that Holacracy helps companies to run more like cities. Just as basic rules of traffic help keep things running smoothly but don't dictate where individuals go or how they get there, Holacracy helps workers to coordinate their individual efforts without the hindrance of micromanagement.


Why change the old, tried-and-true system if it's worked all these years?

The old system is running into limitations. Inefficiencies, bureaucracy, and top-down shortsightedness are increasingly heavier loads to bear as global competition looms and the pace of innovation increases. In the midst of this change, modern peer-to-peer technologies have increased our ability to generate transparency and accountability between individuals, without someone on top to "manage" it all. Holacracy is a part of this larger trend of solutions. Holacracy allows organizations to bring the best of these peer-to-peer processes inside their own walls while eliminating the inefficiencies of traditional top-down management.


There's been a lot in the media about the "Millennials" and changing work priorities. Is it this younger generation that's driving the shift in models?

The younger generation owns a piece of the broader shift in work models, but it's not the only factor. Peer-to-peer technologies and the value of transparency and self-organization are impacting all generations. It's an exciting time.


Without hierarchy, who makes the decisions?

Let's start by dispelling the myth that there is no hierarchy in Holacracy. The difference is that, in organizations running with Holacracy, nobody has the authority to tell anyone else what to do or how to do their job. In Holacracy, as in any type of work, there is often a clear sequence or hierarchy of how the work flows between roles, and what the expectations are between individuals. Holacracy takes pains to create clarity about the responsibilities of each role. Decisions are made by the individuals whose roles are imbued with the authority to make them. When conflicts or new needs arise, everyone has a voice in redefining and evolving those authorities. When individuals can work with clear rules, clear accountabilities, and a shared purpose, decision-making becomes highly collaborative. Individuals are free to make decisions to make things better in their areas of authority without the hassle of getting clearance from the "higher ups" in the familiar organizational power structure.


You mention a "Lead Link."  Isn't that the same as a manager?

A Lead Link is a little bit like a manager, but there are some important differences. The similarities are that both a Lead Link and a manager can allocate resources, set priorities, and both represent their "circle" to others within the company and the wider world. The differences are that a Lead Link has no authority to tell someone how to do the work or what work to accept. They also have no power to hire, fire, or set compensation. So while there are a few similarities, the differences are both dramatic and significant.


How does Holacracy differ from other approaches to distributed authority?

In a traditional company, a manager is a centralized decision-maker and can veto team member's decisions. Because this causes bottlenecks, reduced employee engagement, and a lot of other problems, many companies have explored alternative ways to distribute authority. The challenge is that the decision to distribute power is still often made by a single individual power holder who retains the right to change things back. When everyone still knows who is really in charge, people will still need to navigate the implicit culture and power structure to get things done. Implementing a quick-fix avoids the deeper issue of "how we decide how to decide," which means the best you can hope for is temporary relief; more often, approaches like this are greeted with moans and groans about another "change initiative" that only functions as a band-aid. In Holacracy, authority is redistributed in a deep, real, and explicit manner, which means that it's both more complicated to implement and also much more impactful. When a company reorganizes using Holacracy, it doesn't just make a change; it develops the ability to continually evolve.


Why so many rules?

The Holacracy constitution may seem like it has a lot of rules, but they are actually far fewer in number than the rules that govern what happens in a traditional workplace. Most companies have an organizational chart that purports to demonstrate the channels of power and communication, but that is often not a true reflection of how things actually get done. Most employees spend a large share of their time trying to look good to their boss, playing politics with co-workers, and preparing for and sitting in long and sometimes painful meetings; all of this gets in the way of just doing the work. When companies use Holacracy, the org chart and constitution actually capture how things really work. At thirty pages, the constitution is small in comparison to what you need to know to navigate a traditional organization.


Is it possible to effect change by adopting select elements of the system, or is it necessary to embrace the entire model?

Many people love the Tactical and Governance meeting practices, or the clarity of the role-based structure, and on their own, these elements can be extremely valuable. Every organization makes the best decisions they can, given their unique situation, so there is nothing inherently wrong with adopting pieces of the Holacracy system. The only important caveat here is that you can't expect to reap all of the benefits by adopting a piecemeal approach. The unique value of Holacracy is that it is a comprehensive system, like your computer's operating system, which ensures that all of its components work together. If you only extract pieces of it, you'll likely run into compatibility issues. With that said, having compatibility issues may still be a step forward. It all depends on the specific needs of the organization.


But without titles and "upward" movement, how do you determine compensation?

The Holacracy constitution, one of the primary tools for implementing Holacracy, doesn't determine how a company hires, fires, or compensates people. To return to the analogy of the operating system, Holacracy is like a basic platform that allows organizations to flexibly deal with these issues as they see fit. Hiring, firing, and compensation, are akin to software applications; different organizations will want to use different approaches or "apps" to resolve these questions.

Some ways of handling compensation will be more compatible with Holacracy than others. For example, companies that have compensation set by management with individual incentives and large salary differences may run into problems. Since there are no managers in Holacracy, it's difficult to centralize the compensation decisions, so the most effective compensation "apps" in Holacracy use variations of a transparent peer-rating process. For shift workers, Zappos is experimenting with real-time market-based compensation in which employees sign-up for shifts using a dashboard that constantly adjusts pay depending on employee demand. The innovative approaches that you see in Holacracy-powered organizations are one of the reasons why there isn't a standard answer to the compensation question.


Then why isn't the Holacracy constitution open-source?

The latest version of the Holacracy constitution (version 5) is open source. More specifically, it's under creative commons license, allowing anyone to use the document and make changes to it provided that they give appropriate credit, provide a link to the license, and indicate if changes were made. With that said, in order to provide a comprehensive and compatible system, the first versions of the constitution evolved from the few organizations running it. Now that there are more and more companies adopting Holacracy, the timing is right to open up the evolution more broadly.

ABOUT THE AUTHOR

Brian J. Robertson created Holacracy and founded HolacracyOne, the organization that is training people and companies all over the world in this new system. Robertson had previously launched a successful software company, where he first introduced the principles that would become Holacracy, making him not just a management theorist, but someone who has successfully implemented a holacracy-powered organization. He lives in Philadelphia.