What Is Holacracy And Why It Matters In Business

A holacracy is a management strategy and an organizational structure where the power to make important decisions is distributed throughout an organization. It differs from conventional management hierarchies where power is in the hands of a select few. The core principle of a holacracy is self-organization where employees organize into several teams and then work in a self-directed fashion toward a common goal.

Aspect	Explanation
Holacracy	Holacracy is a self-management and organizational governance framework developed by Brian Robertson and popularized by his company, HolacracyOne. It is designed to restructure traditional hierarchies in organizations and create a more agile, adaptive, and decentralized approach to management and decision-making. Holacracy is built on the principles of distributed authority and dynamic self-organization.
Core Principles	Holacracy operates based on several core principles: distributed authority, clear roles and accountabilities, circles and subcircles, transparent rules and processes, and a governance process that allows for rapid decision-making and adaptation. These principles are designed to reduce bureaucracy and empower employees at all levels.
Roles and Circles	In Holacracy, organizations are divided into circles, each with specific roles and accountabilities. These roles are defined and regularly updated through a governance process. This clear definition of roles ensures that every member knows their responsibilities and has the authority to make decisions within those boundaries.
Governance Process	The governance process in Holacracy allows teams to continually update roles, policies, and processes. This process, known as a circle’s governance meeting, involves structured discussions and decision-making to evolve the organization’s structure and adapt to changing needs. It’s a key aspect of Holacracy’s flexibility and responsiveness.
Tension Processing	Holacracy encourages individuals to bring up tensions, which are perceived gaps between the current reality and the desired outcome, during meetings. These tensions are discussed and either acted upon immediately or captured for future consideration. This process promotes ongoing improvement and adaptation.
Decentralized Authority	Holacracy shifts decision-making authority from a few top leaders to many individuals and circles throughout the organization. This decentralized approach empowers employees to make decisions that affect their roles and domains, resulting in faster responses to challenges and opportunities.
Challenges	Implementing Holacracy can be challenging for organizations accustomed to traditional hierarchical structures. It requires a cultural shift, training, and ongoing commitment. Not all organizations find success with Holacracy, and it may not be suitable for all industries or business models.
Examples	Several well-known companies, such as Zappos and Medium, have adopted Holacracy or elements of it to reshape their organizational structures. These examples showcase how Holacracy can promote agility, innovation, and employee engagement when effectively implemented.
Benefits	The potential benefits of Holacracy include increased agility, faster decision-making, greater employee autonomy, improved adaptability, and enhanced alignment between individuals and the organization’s purpose. These advantages can lead to better performance and responsiveness.
Conclusion	Holacracy offers a new approach to organizational management, emphasizing self-management and distributed authority. While it’s not a one-size-fits-all solution, it has demonstrated success in certain contexts and can be a valuable framework for organizations looking to foster innovation and adaptability.

Understanding a holacracy

The core principle of a holacracy is self-organization. Instead of having employees waste time waiting for a boss to give them instructions, they organize into several teams and then work in a self-directed fashion toward a common goal.

Indeed, a holacracy empowers employees with responsibility. While they are required to complete their work in a satisfactory time-frame, how that work is completed is left to the teams themselves. This has several benefits for businesses and their employees, including transparency, employee engagement, agility, and better company culture.

Shoe company Zappos and its 1,500 employees are perhaps the most notable example of a company adopting the holacracy approach.

Valve Corporation, a video game software company, is also an advocate. Employees there can work on whatever interests them, but they must take full ownership of the finished product – whatever the outcome.

Advantages and disadvantages of a holacracy structured businesses

Advantages

Purpose-driven. With the hierarchical management style removed, individual employees work toward the same goal which is soon reflected more broadly across the business.
Agile customer service. Zappos noted that as the company grew, they were unable to efficiently respond to customer queries because of a convoluted management structure. A holacracy allowed every employee to deliver exceptional customer service without the need to refer enquiries to more senior colleagues.
Sets clear expectations. Holacracies by their very nature set clear and transparent objectives, so every employee knows what is expected of them. This negates inefficiencies and the often hidden power struggles that exist in hierarchical organizations.

Disadvantages

Difficult to implement in large organizations. Although the transformation of Zappos into a holacracy was a success story, examples of similar businesses doing the same are uncommon. In some cases, vast amounts of resources must be devoted to re-training. Some managerial styles also become entrenched in company culture and are hard to remove.
Lack of accountability. Loosely defined roles in a holacracy without distinct performance standards make it more difficult for HR departments to measure employee capability.
Lack of focus. The focus on teamwork can lead to confusion and a lack of focus. Decisions may be debated ad-nauseam, leading to inefficient work practices and the wrong decision being made. Furthermore, some employees have skillsets or personalities that are better suited to solo work.

Holacracy examples

Zappos and Valve are two of the most well-known examples of holacracies. With that in mind, let’s take a look at some others that may be less frequently mentioned.

Medium

Medium is an online platform for amateur and professional writers launched in 2021 by Twitter co-founder Evan Williams.

Williams adopted the holacracy model to realize several important benefits such as increased productivity, more dynamic roles, better employee relations, and more directed freedom.

In 2016, however, Medium abandoned the approach after just four years. Company representative Andy Doyle noted that the move was not made because the idea of holacracy was invalid or ineffective.

According to Doyle, the company moved on as “many of the principles we value most about holacracy are already embedded in the organization through how we approach our work, collaborate, and instigate change. Beyond that, the system had begun to exert a small but persistent tax on both our effectiveness, and our sense of connection to each other.”

In other words, Medium’s holacracy was getting in the way of work and was simply too problematic for initiatives that required substantial cross-functional coordination.

Moving forward, the company looked at ways to incorporate holacracy principles into its functional systems and horizontal management structure.

Blinkist

Book subscription company Blinkist claims it was interested in holacracy before the term was made fashionable.

Despite its obvious benefits, however, leaders at the company noted that the adoption curve was higher than some other approaches because of specific lingo employees needed to understand and embody.

There were also instances where terms were open to interpretation with no mutual understanding of how tasks should be approached or indeed who was responsible for performing them.

In response, Blinkist implemented a unique structure which it called Blinkracy – a scaled-back version of holacracy with a core focus on employee autonomy and even power distribution.

Over time, holacracy created an ideal company culture but Blinkist still felt there was too much structure to their operations.

The company believed aspects of the holacracy were too visible and that the best organizational systems tended to be those that were somewhat invisible.

Moving forward, Blinkist developed seven core values: champion self-empowerment, default to transparency, strive to learn and grow, communicate directly, support each other, leave egos behind, and embrace failure.

It then built a set of value-based processes and principles and dropped the parts of holacracy it believed were causing a lack of clarity.

Holacracy was critical to the early success of Blinkist, helping it grow from a passionate team of 4 to 40 people with an enviable culture.

The company admitted that it could have stuck with the “traditional” holacracy indefinitely, devoting more time to implementation and working longer hours .

Ultimately, leaders recognized that the specific structures and processes of holacracy were more than the company needed at that point in its evolution and simply made it inefficient.

Case Studies

David Allen Company
- The organization behind the popular productivity method “Getting Things Done” implemented holacracy. The model’s emphasis on clarity and action aligns well with the principles of the GTD methodology.
Washington Technology Solutions (WaTech)
- As the central technology service provider for the state government in Washington, WaTech experimented with holacracy in some of its teams. The intent was to foster more innovation and responsiveness.
Springest
- A Dutch platform that compares training programs and courses, Springest adopted holacracy as a way to stay agile and innovative. The company believed in providing a platform for individual growth, and holacracy was seen as a management model that supports personal development and autonomy.
Arca
- This company, focusing on digital payments and commerce solutions, adopted holacracy. It allowed them to streamline their processes and be more adaptable to the ever-evolving digital commerce landscape.
Precision Nutrition
- A company offering personalized nutrition coaching, Precision Nutrition adopted holacracy to align its organizational structure with its philosophy of individual empowerment and personal growth.
Starlite Holdings
- A group of companies focusing on print, packaging, and paper trading, Starlite Holdings implemented holacracy to foster a more innovative and responsive organizational culture.
The Moment
- A Canadian innovation design consultancy, The Moment shifted to holacracy to support its mission of helping other organizations innovate. They believed that by practicing what they preach, they could deliver better results to their clients.

Key takeaways:

A holacracy is a non-hierarchical governance structure characterized by self-organized groups who hold an equal share of authority and voice.
A holacracy empowers employees to become more invested in their careers through open communication and flexible work practices. This strengthens company culture and allows a business to reach its goals.
A holacracy creates a purposeful and agile workforce that understands what is expected from them. However, it will not be suited to large organizations with established cultures. The focus on teamwork and loosely defined roles can also lead to substandard employee performance.

Key Insights

Core Principle: The central principle of holacracy is self-organization, empowering employees to take ownership of their work and make decisions within their teams. This fosters transparency, engagement, agility, and a positive company culture.
Examples: Notable examples of companies adopting holacracy include Zappos and Valve Corporation. Zappos found that holacracy improved customer service by empowering employees to respond to queries without hierarchical approvals.
Advantages: Holacracy promotes a purpose-driven workforce with clear and transparent objectives. It allows for agile decision-making and reduces inefficiencies caused by power struggles in hierarchical organizations.
Disadvantages: Holacracy may be challenging to implement in large organizations due to the need for re-training and the entrenched managerial styles. The loosely defined roles and lack of distinct performance standards can also lead to a lack of accountability and focus.
Medium’s Experience: Medium, an online writing platform, adopted holacracy but later moved away from it due to challenges in cross-functional coordination. The company incorporated holacracy principles into its management structure instead.
Blinkist’s Approach: Book subscription company Blinkist implemented a scaled-back version of holacracy called Blinkracy. They focused on employee autonomy and power distribution but felt the need to drop certain aspects of holacracy to maintain clarity.
Suitability: Holacracy is well-suited for purpose-driven organizations that value employee empowerment and collaboration. However, its success may vary depending on the size and culture of the company.
Empowerment and Flexibility: Holacracy encourages employees to communicate openly and be more invested in their work, fostering a positive company culture. It allows for flexible work practices and adaptability to changing circumstances.
Purposeful Workforce: With clear objectives and a focus on teamwork, holacracy aligns employees towards a common goal, promoting efficiency and innovation.
Challenges in Implementation: Holacracy may face resistance in larger organizations with established hierarchies and cultures. Proper training and understanding of the principles are crucial for successful implementation.