Holacracy – What Is It And How Does It Fit Into Your Strategy Journey?

By Julie Choo

Published: April 11, 2017

Last Update: April 28, 2020

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How many times have you sat at work thinking of an elaborate scheme to win favour with your manager? Or maybe you are thinking of going over their head? Are you trying to impress someone higher up the management ladder? Or maybe you’re not looking to impress. Are you sitting at your keyboard, poised to type an email that will throw a colleague deep into the ongoing office row?

Office Politics

We’ve all seen statistics that tell us about how much time and money office politics and toxic workplaces cost business. The State of the American Workplace Gallop poll conducted in 2013 discovered that 70% of US workers were not engaged at work. They translated this into between $450 and $500 billion in lost profits. High turnover of employees and loss of productivity aren’t just signs of a bad workplace. They can be the reason that a great company is losing profits. Or the reason a unicorn startup is failing to scale.

So, when we are constantly looking at new ways to do business, are there new ways to structure our workplaces? Can we say goodbye to org charts and management structure and hello to something different? How do we solve one of most challenging obstacles to successful business transformation – changing corporate culture?

It was a great pleasure to meet Sally McCutchion, one of just two certified Holacracy coaches in the UK to understand the potential benefits of this methodology. We got talking about Holacracy and how companies are using it to do something different from the usual corporate management triangle. I think Holacracy is an interesting way to look at structuring the Operating Model of a business and developing the right kind of high-performance culture within that business.

What is Holacracy?

One their site, Holacracy One describe Holacracy as ‘a complete system for self-organisation.’

‘Holacracy is a complete, packaged system for self-management in organizations. Holacracy replaces the traditional management hierarchy with a new peer-to-peer “operating system” that increases transparency, accountability, and organizational agility.’

Under a holacracy, employees have roles, not job descriptions, defined around work. Teams self-organise and authority is shared amongst teams with decisions being made locally.

Sally describes it as an ‘alternative.’

‘A complete, scalable system for structuring a company without a traditional management hierarchy, yet with more clarity, accountability, and agility.’

Who is Using Holacracy?

It is so easy to see the attraction of an organisation with no hierarchical structure but how does this work in practice? Holacracy, like remote working, is a relatively new concept. It is easy to dismiss it as something that simply wouldn’t work in practice. So, are there companies that are using it? And is it a success?

One of the most high-profile companies using Holacracy is Zappos. Founded by Tony Hsieh, Zappos was one of the first online shoe retailers. Founded in 1999, by 2008 it hit $1bn in sales and was acquired by Amazon in 2009 for $850m.

Tony Hsieh - Zappos - Holacracy

In his book, Delivering Happiness, Hsieh talks about the culture of Zappos. He was clear from the outset that he wanted to create a new work culture at Zappos, and they invested time in their company culture from the start.

From these early beginnings Zappos has transitioned to using holacracy. But Hsieh’s vision is beyond that. He sees holacracy as the starting point of Zappos’ journey in workplace culture and hopes that Zappos will eventually become a Teal organisation, on Frederic Laloux’s scale detailed in his book ‘Reinventing Organisations.’

There are plenty of articles writing about Zappos’ experiences with holacracy. As one of the largest companies that has tried to make the transition, it is clear that it wasn’t always going to be easy. Some staff have left, citing holacracy as the reason. But many have stayed and the company certainly hasn’t stepped away from its commitment to using holacracy as a way to run such a large enterprise.

Another company that uses holacracy is Impact Hub. It is a global network of coworking spaces focusing on bringing together those working in the social enterprise space. Impact Hub is moving forward with a new way of working, as well as a new take on the growing coworking trend.

As Lauren Higgins, one of the Lead Links at Impact Hub explains ‘it [holacracy] reflects our values about the future of work.’ She sees that many of their employees aren’t used to the level of empowerment that holacracy offers. She thinks they are waiting for someone to give them direction, rather than finding it for themselves. But for all the growing pains she concludes ‘when we saw Holacracy, we knew it was for us.’

Steps Towards Holacracy Success

Being new to Holacracy myself, I can’t speak for how successful it is as a technique. I’m keen to learn more as I start to explore deeper. What I do like about it is the alignment to the first stage of an organisation’s strategy journey. According to Holacracy experts, the first step for a business to begin the transition to holacracy is  ‘defining your organisation’s purpose.’

‘Your organisation’s purpose enables it to be its own living entity. Personal hopes and dreams can be aligned with your organisation’s purpose but should be separate from it to allow the organisation to grow in its own right.’

One theme that echoes in many of the articles about holacracy is this alignment. It seems that the process of transition to becoming a holacracy is often more difficult when people don’t feel aligned with what is going on in their organisation. Mission and Vision are so key to the foundations of a good strategy journey.

To Holacracy and Beyond

For some companies Holacracy is just the start. Zappos is moving towards Holacracy but CEO Tony Hsieh has made it clear that this is just the first step. He sees Zappos as using Holacracy as a transition from traditional management to eventually becoming a truly Teal organisation. Teal organisations, according to Reinventing Organisations by Frederic Laloux, are an independent force with their own purpose, running entirely in a self-organised way.

Another way of looking at these new models for structuring a business is the sweetly titled, Firms of Endearment. They have sought to look at what they call the ‘world’s greatest companies’ and show how they run with purpose and passion. They credit the financial success of these companies as a by-product of an environment where all the companies’ stakeholders thrive.

According to an article from Bain & Company, posted in the Harvard Business Review, research has shown that it is no longer financial capital that will make the key difference in effective strategies but human capital.

We are starting to see that many jobs are being replaced by automation and artificial intelligence. Jobs done by people can be replicated by machines, not just factory robots. It is becoming apparent to leaders in many organisations that the key to differentiate and build competitive advantage is through talented people. The key is developing human-centred capabilities that are superior to that of competitors.

Could Holacracy be the answer to this need and deliver the required changes to corporate culture? From experience, some of the best talent simply say nothing and move on to greener pastures when their environment or ecosystem doesn’t support their personal development or align to their values. I’ve often seen the ‘dead wood’ spend their dying breath fighting to keep their jobs, when they could easily have been replaced by machines or, at worst, been made redundant.

Leaders who don’t want to lose their best people might want to consider Holacracy. Are there ways to blend Holacracy practices or techniques into an organisation to slowly? Could you positively disrupt and eventually remove some of the bureaucratic work practices which have frustrated so many talented people who crave change and might leave their jobs?


References:

Delivering Happiness by Tony Hsieh

Reinventing Organisations by Frederic Laloux

The State of the American Workplace, Gallop Poll

Sally McCutchion

Julie Choo

About the author

Julie Choo is lead author of THE STRATEGY JOURNEY book and the founder of STRATABILITY ACADEMY. She speaks regularly at numerous tech, careers and entrepreneur events globally. Julie continues to consult at large Fortune 500 companies, Global Banks and tech start-ups. As a lover of all things strategic, she is a keen Formula One fan who named her dog, Kimi (after Raikkonnen), and follows football - favourite club changes based on where she calls home.

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