Think holacracy: 6 steps to complete organisational transformation

New rules of engagement

As more organisations strive to increase employee engagement and encourage innovation, many are turning to self-organising models, such as holacracy, that offer a different chain of command.

Updated 18 March 2016

Holacracy aims to create a nimble, energised and engaged workforce without the bureaucracy that often stifles innovation. Authority doesn’t disappear completely; the CEO is still the boss. However, employee teams are given ownership and explicit permission to perform their roles without seeking approval, as long as they operate in alignment with the organisation's mission and objectives.

Their activities are coordinated by decision-making “circles” led (but not run) by a “lead link” who allocates people to roles. If someone in the circle doesn't uphold their responsibilities, the project falters and the team quickly becomes aware of its weakest link.

Proponents believe a well-run holacratic workplace increases transparency, agility, accountability, clarity, employee engagement, productivity and efficiency, and encourages a more even spread of power and authority.

Australian holacracy coach Stephan Jenner says the technique lets a company “tap into energy and creativity that normally gets [quashed] in organisations”.

Says Adam Ryan, CEO of Australian payment software venture Think Procurement: “The work that you do with your team is more enjoyable, more rewarding, more fun, and the relationships you build are much stronger.”

So, how do you bring holacracy to your organisation? Here are seven basic steps:

1. Make sure you want holacracy

Holacracy is not anarchy – far from it. It has detailed rules. Founder Robertson says holacracy “requires companies to change their meeting practices very profoundly, so a significant amount of training is needed to teach everyone the new rules of the game”. He warns that that “implementing full holacracy is not realistic for many companies”.

Holacracy coach Jenner says that people who derive their power from the traditional management model “sometimes struggle to get their head around holacracy”.

“The people who struggle most are those who like to come in and rescue people – the white knights,” he says. “They have to allow the role-filler to achieve what's required without stepping in.”

Management theorist Jeffrey Pfeffer has noted that holacracy tends to be promoted by “benign dictator CEOs” who can resist the logic of management hierarchy.

It’s clear that for a holacratic structure to work, each worker must be 100 per cent committed to it. “If you have one person in the ecosystem who's not helping, it starts to fracture,” warns Think Procurement’s Ryan.

2. Read and research

Visit the HolacracyOne website and download the constitution, which outlines rules and processes. The latest version has been simplified, replacing legal jargon with plain English. However, at just under 19,000 words, it's still not an easy read.

On the same site, you can check out the Quick Start Guide, “intended to assist with 'bootstrapping' holacracy in your organisation, department or team”.

Advises Jenner: “Roll it out in stages, and then you can expand it as required. It's like learning a new sport; you get better with more practice.”

The HolacracyOne website heavily promotes webinars, workshops, training events and certification programs for followers.

3. Consider GlassFrog

This cloud-based software is used to monitor and govern meetings, rules, roles, responsibilities and metrics. It is claimed to be indispensable for monitoring a holacratic workplace. Licences start at US$495 a month.

According to Jenner, holacracy is like a new operating system.

“If you download iOS9 onto your iPhone,” he says, “it gives you a whole bunch of new features you can use if you choose to, but you can still run your old applications.”

Professional Development: Skillsnet: leadership essentials: motivating employees

4. Know thy neighbours

The movement’s community is eager to help. The Holacracy Community of Practice maintains a highly active website with guidance and answers to members’ questions.

“Holacracy was not invented in a university or laboratory,” says Jenner. “As Brian Robertson's brainchild, he started running his business this way. The knowledge base is practical.”

5. Prepare for disruption

Perth-based niche engineering company Present Group lost almost half its managers in the structural shake-up required by a holacracy implementation.

“Some managers were violently against it, because it played right to the heart of their identities,” recalls partner Peter Midgley.

“The people who were used to being told what to do approached it with caution. The natural instinct for many was to keep their heads down, but it's been really inspiring and exciting to watch people start to self-organise.”

As expected with a new system, Present Group has had teething problems. Evaluating performance and determining compensation can be challenging when employees perform multiple roles, and contribution is more important than position.

The rules of hiring and firing are also unclear and there have been criticisms relating to priority, with some employees opening time-wasting circles for poorly conceived ideas.

Holacracy is not immune to office sociopaths, Machiavellian types and cynics subverting the rules of the game. It can also attract blinkered cheerleaders incapable of critical thought. Midgley argues that if you do your job well, holacracy is your friend.

“You take away the artificial barriers of hierarchy,” he says, “and what floats to the top is based on role competence.”

6. It’s not as strange as it seems

Substantial companies have already implemented holacracy in some form. The pioneers include social media scheduler Buffer, video game developer Valve, social content-sharing site Medium and Amazon-owned shoe and clothing retailer Zappos. An established engineering firm like Present Group demonstrates that the technique is not just for Silicon Valley start-ups.

Zappos CEO and entrepreneur Tony Hsieh began experimenting with the methodology in 2013 because of what he saw as the mismatch between slow-moving hierarchies and a fast-changing business environment.

As he explains: “My frustration was in us moving slower as we continued to grow and realising the problem was with the structure itself, not with the employees.”

In 2015, the company's 1500 employees were given an ultimatum: embrace holacracy or take a permanent holiday with a minimum of three months’ severance pay. Some 14 per cent of workers packed up their desks.

Related: How a radical shift left Zappos reeling (Fortune magazine)

Self-management approaches existed before holacracy, too. The US military has been empowering teams of soldiers for years through “commander's intent”, a concept that pushes decision-making and accountability down the chain of command. (Victoria Cross recipient and now business speaker Ben Roberts-Smith explored commander’s intent in INTHEBLACK’s November 2013 edition.)

Away from the battlefield, US businessman Ralph Stayer dismantled hierarchy at his Johnsonville Foods back in 1982, allowing teams to set targets and plan accordingly. Since then, the family company’s annual sales have grown from US$12 million to nearly US$1 billion.

In a much-quoted case study, Ricardo Semler streamlined and simplified his Brazilian company, Semco, allowing workers to set their own production quotas and creating an environment that could essentially work without him. His book Maverick was a worldwide bestseller in the 1990s.

Holacracy proponents say the methodology provides a roadmap to achieve what Stayer, Semler and others have already demonstrated.

Read next: Why a happy workplace is essential to your bottom line

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