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.
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
- 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.
- 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.
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 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.
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.
- 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.
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