Holacracy, managerless offices and the future of work

[Image by Gerd Altmann under Creative Commons]

By: Chris Russell

About 15 years ago, Brian Robertson was feeling fed up and frustrated. More specifically, he was feeling fed up with the management hierarchy traditionally used by companies and the way, to his mind, it had a tendency to stifle innovation, create inefficiencies and prevent individuals from fulfilling their potential. But rather than bottling it up inside, Robertson has channeled that dissatisfaction into the development of one of the best known self-management systems, Holacracy.

That mission to change the way we work led him to co-found HolacracyOne, an organization dedicated to the development and dissemination of Holacracy, and he’s also literally written the book on the subject in the form of Holacracy: The New Management System for a Rapidly Changing World, which was published in June 2015.

In the process, Robertson and his system have earned the admiration of Tony Hsieh, CEO of e-commerce site Zappos, and Evan Williams, Founder of the publishing website Medium—both companies have or are in the process of implementing Holacracy. There’s been recognition from Thinkers50 too, with Robertson shortlisted for the 2015 Breakthrough Idea Award. But along with the praise, Holacracy has also met with a more skeptical audience, and particularly when it comes to its adoption by Zappos, with no small amount of articles decrying Holacracy for “bringing confusion” to the company.

[Brian Robertson, co-founder of HolacracyOne]

In this interview, Robertson clears up some of the misconceptions and gives an overview of the at times daunting world of Holacracy. Excerpts:

Q. For those who aren’t familiar with Holacracy, what are the basic elements of it?

A. I use the metaphor of [Holacracy being] a new operating system for an organization, in this case a social operating system, and it’s an alternative to the one we’re used to. We’re used to the management hierarchy as the fundamental operating system for how we structure and organize business and we look to the management hierarchy to give us some really necessary functions. It gives us alignment, it gives us a way to break down the work and distribute it out, it gives us a way to make sure we have accountability, it gives us a lot of other things, and we need all of those. Holacracy doesn’t throw those out, but what it does is give you a different system to get them. Holacracy replaces the function of managers doing that with a series of processes that get embedded in every team and that have the same effects. And the processes that Holacracy uses are a little different in some key ways.

One, everyone on a team gets to be involved in the process. So instead of a single manager figuring out who’s responsible for what and who’s going to do what, there’s a group process for every team that figures the same things out. So at the end of the day you still get clarity on who’s going to do what, who will make which decisions, what are the responsibilities of the different parties involved, but we get there through a group process of trying to learn together what serves the purpose of the company, the purpose of the work, how do we need to break down and structure the work and organize ourselves in order to achieve the best results, and it’s an on-going process. [With management hierarchy] you might have a big reorganization once every few years, but other than that the structures are static—with Holacracy, it’s very dynamic.

Another one is, because there’s no managers in the conventional sense, when you fill a role within a company using Holacracy, you get a lot of autonomy. Typically, ideally, a management hierarchy also gives you autonomy, right? The idea is a manager defines the boundaries and says, “Hey, you know, this is your work and within these boundaries you go use your judgment and make decisions.” But in practice, most managers are not very good at that—most managers end up saying, “Go do something that makes sense to me and as long as it makes sense to me I won’t jump in and micromanage you, but as soon as it doesn’t I’m basically going to jump in and make sure you’re doing what I think is best.”

With Holacracy, you have some protection from that when you fill a role that’s defined by the group process—with Holacracy, you get a lot of autonomy on how you execute the role. If you’re in charge of the website for example, it’s up to you what you do with that—you know the bounds, you know your responsibilities and you know when you need to get somebody else involved, which means short of that you can do anything that makes sense to you to get the job done. So you end up with a company where people have, even at the front lines, real leadership autonomy and no boss to micromanage or trump that autonomy. But you do have a team process that can update it to find constraints or bounds on it and responsibilities that go with your authority, so that is all kind of at play in the system.

So put all that together and what you end up with is a very different way of structuring a company, and one that gives you more structure, not less than a management hierarchy, but at the same time gives you a more flexible, dynamic structure that’s constantly changing and evolving and leaves more room for autonomy at the same time.

Q. What was the motivation for creating Holacracy? Where did a lot of the ideas stem from?

A. I think almost the more interesting thing is where didn’t this come from. It actually didn’t come from theories or ideas, which I think is really fascinating—a lot of management approaches come because somebody has a theory or an idea and then they go about building a system that enacts it. But that wasn’t the case with Holacracy. With Holacracy, it came from entrepreneurial experimentation. So it wasn’t that we had a pre-existing idea of how we thought things should be and then built a practice or process around it. Instead, it came from me—I’m an entrepreneur, not a management theorist or anything like that, I build companies—and about 15 years ago I got really, really fed up and frustrated with the way companies were run and I just felt like there’s got to be a better way. So what I did was start a company intentionally as an experiment ground, and over years we would just try things. I went out, I read about theories, I read about ideas, and we brought in little pieces of many different ones and just tried them in practice and kept what worked, changed what didn’t, and so over the years we discovered this new general way of organizing.

It was never the intention to set out to remove managers or anything like that—I still think managers serve a really important function in businesses. You can’t just throw out that function, you have to replace it with something, so it was actually accidental that we discovered a process that ended up doing what managers do [but] usually better than managers do it. So it was all through experimentation, just searching for “there’s got to be a better way”. And specifically, we were also looking for a better way that unlocks human potential and creativity. I saw so many cases of people not really using their talents for one reason or another. Either they felt like they couldn’t because they didn’t know how to change the system they’re in—a lot of people beat their head up against the long, painful meetings and then eventually get tired of trying to change things—or have a boss that just doesn’t see it their way and then they get tired of trying to change things or whatever it is, there’s a lot of obstacles. So we were also looking for how do we remove every possible obstacle from somebody who senses something could be better in the company from acting on it and improving something.

Q. How does Holacracy compare to other self-management systems?

A. One distinction I would make is if you look at other approaches in the world to self-management, you actually don’t see any other whole packed systems like Holacracy; what you see is individual home-grown approaches. So, Morning Star has a really cool approach to self-management that works really well for Morning Star, but it’s custom designed for them, it fits their culture—it’s really hard to replicate because it’s not a generic, portable system. Same with so many of the others around and there’s a lot of companies doing really cool work home growing and custom inventing their own approaches to self-management. It’s kind of like the really early days of the computer revolution, the micro-computer revolution, where you had individual technology enthusiasts who were hacking together their own computers, you know which is great for them and they can make some really cool devices that way, but what really ignited the micro-computer revolution was when standard platforms came on that anyone could use and benefit from without taking years to piece together their own approach. Computers like Apple came in and revolutionized the whole industry, so I think we’re going to see the same thing, whether it’s Holacracy or not, I think we’re going to see the same thing for self-management. Holacracy is the first attempt to create a generic, replicateable system, a platform, that any company at anywhere no matter what size, shape, industry, whatever can adopt and then build on top of.

Q. For a company that’s considering adopting Holacracy, what are the first things that they need to think about, what are the first steps in the process?

A. The first step, even before you commit to doing it, is to get a taste of it. This is a really big change and it’s not just a layer on some new tool, it’s a fundamental change to your operating system. You can do that in a number of ways. So we do little two-day workshops for example with executive teams where we for two days take them through Holacracy’s way to address their real issues. So they kind of get a sense of what would this mean, what would this look like. Some people instead will send people to a public training. Go to a training and get an experience, especially an experiential training that uses a lot of simulations and hands-on experience, will give you a feeling, a sense of what this is all about.

Once you decide it is the right thing to at least try and move forward with, the next best thing I can say is think of it like learning a new sport. The worst thing you can do if you want to learn a new sport is to read the rulebook. There is a rulebook in Holacracy, it’s called the Constitution, it spells out the basic rules of the system, and it’s a terrible, terrible way to learn the game. Just like a sport or a board game, it’s there as a reference for people that already kind of know the game and they need to look up a nuance every now and then, but the best way to learn a game is by playing it, and ideally playing it with a good coach. So the other thing I’d say is expect the learning process to be a lot longer than most people think, but also often easier. It is a big change, but like any big change it starts one step at a time. So my next message: get a good coach. If at all possible, get a coach to help you with the journey, someone who’s been there before, who knows the method well and then learn by playing. Don’t wait for the perfect time—there is never one, it’s always a bad time to change your fundamental operating system.

Q. To what extent is Holacracy better suited to new or young companies as opposed to those large ones that have a legacy of traditional management structures?

A. I think the larger firms actually have more to gain potentially, but a much, much harder transition. If you’re trying to adopt this in a 30-person company or a 100-person company you can gather everyone in the same room, give them the same coaching, training, experience, whatever, and knowledge of the new methods will spread in the culture much quicker as you have fewer layers of management to shift and work through—it’s just easier to make the change. It’s still hard, but it’s easier. For a company like Zappos’ size, they’ve almost 2,000 employees now, so for them to make the change is a daunting endeavor, it’s much bigger, but at the same time, they’ve probably got more to gain from it—they’re probably suffering more from the downsides of a management hierarchy, which is as a company grows it tends to get less innovative, more bureaucratic, things slow down, you get more waste in the layers of management. So in some ways there’s more to gain than a start-up that’s already entrepreneurial. I think Holacracy still enhances that [for start-ups], but the challenge is maintaining that as you grow.

Q. Are any industries or sectors where companies are perhaps better suited to Holacracy or even any where you’d say it’s perhaps not right for them?

A. I usually turn that around by saying what industry would the management hierarchy be right for? Are there any industries that the management hierarchy might not be the right fit for? When you look at it that way, the management hierarchy is just a basic underlying system—you can run any company in any industry using a management hierarchy, and the same is true for Holacracy. It’s just a basic underlying way of breaking down work, making sure you clarify who’s going to do what and who’s accountable for what. So it’s just as generically and broadly applicable as the management hierarchy that is replaces.

So I think a slight shift on the question is more what kinds of companies is it more worth the investment to change their approach? If a company is really not facing much external pressure at all, if they’re in a very static, slow-moving market and everything they’re doing is working really, really well, they don’t face the kind of competitive pressures to be really innovative and dynamic and agile, they have a workforce that isn’t demanding new things from them, that doesn’t describe many companies today, but it might describe a few, especially in protected industries of sorts that really don’t have to worry as much about the changing world around them—those companies might not find it worth the investment.

Likewise, sometimes there’s an assumption that it’s companies that are struggling with something they’ve adopted from Holacracy, [but] it’s actually the opposite—it’s the companies that are actually doing really well with management hierarchy, they’ve almost reached the limits of it. Like Zappos was an incredibly healthy company in every way—their culture was healthy, their performance was incredible, they had really, really good managers in that company compared to most I’ve experienced—so you look at a company like that, it’s those companies that are actually saying, what’s next? They got that way for a reason, they’re thriving in their competitive environment, [but] because they’re outperforming others and they’re not going to just rest on that, they’re going to say how can we do even better and [ask] what other platforms or processes might be even better than what we’re doing. So I think it’s any company that has an advantage to do that kind of innovation and that is in a world where they can actually find some benefit by being a little more dynamic, by being a little more agile, a little more purpose driven or whatever the case may be.

Q. What are the practicalities of implementing Holacracy on a day-to-day level? What does it mean for your average employee?

A. There’s several shifts. One is they have more autonomy and they know it—they know the boundaries of their autonomy, which means they also know their freedom. They know when they don’t have authority and they need to go integrate somebody else, and they know when they do, which means they don’t need to make sure their team is bought in, they don’t need to make sure a manager is happy, they know this is their purpose to serve, these are their responsibilities along the way and they have the freedom to go do whatever they need to to get those done within clear constraints.

So the first huge shift is stepping up and owning that authority—one of the challenges when you first adopt this [is] you give people authority and then they don’t change their behavior. A lot of people don’t want authority, they don’t want to step into that light of leadership, it’s uncomfortable to really step up and say, “I am responsible for this and no one else is and I’m going to lead it.” [Holacracy] doesn’t just hope that happens, it has ways of pushing it, reinforcing it, encouraging it, making people really uncomfortable when they don’t do it. And then part of that, another interesting day-to-day shift is in a typical management hierarchy when you run into challenges or obstacles that you can’t yourself easily solve, you often toss them up the management hierarchy. You look to your boss and you say, “Hey, I’m stuck” and the boss says, “Ok, it’s my job to solve that for you”. It almost encodes a parent-child dynamic—the child can’t take care of themselves so it’s the parent’s job to take care of them. It’s no wonder we end up with companies where people act like children sometimes—they’re in a system that sets up the structure that way.

So instead with Holacracy you now do have the ability to solve whatever Tension, as we [call it], whatever issues you are running into that are in the way of your work, there are pathways for you to resolve it. You have the right to go to various processes, there’s a governance process you can contribute to where you can change anything in the company. You need to learn how to use it, how to get there, how to make it happen, it’s not easy, but you have access to it, which means the other part is taking your Tensions and instead of looking to someone else to save you, it’s taking care of your own stuff. It’s being more entrepreneurial. As an entrepreneur and a business leader, I don’t get to sit back and say, “There’s something about the company I don’t like, they should solve it”. I am the ‘they’. And this puts everyone in that same boat. People are very comfortable with management hierarchies, if they’ve been in them for awhile—they know you go to the boss for these things, you call a meeting for these things and now those rules are kind of changed. Now there’s other processes, there’s other options besides ‘go to the boss’ or ‘go to the meeting’—there’s other channels, there’s different types of meetings, there’s things you can do on your own without any meetings, so you just have to kind of learn.

It’s as much about unlearning all of the patterns and the ways and the habits that have worked well in management hierarchy, but ultimately limit us. Like if you have to a call a big group meeting to get your colleagues buy-in on any major decision, that just slows things down. And with Holacracy you see a lot less of that big consensus-seeking meetings and a lot more clarifying who has the authority to make which decisions so that you don’t need a big meeting to decide things. So it’s like shifting habits and behaviors and unlearning old ones and replacing them with new ones. That is a multi-year journey, it’s not quick.

Q. Can Holacracy serve as a bit of a distraction and perhaps affect productivity as employees are constantly having to figure out their roles?

A. Well it definitely does when it’s new—it’s absolutely a hit. You can expect a dip in performance when you adopt it over the short term. Over the long term, it’s a very different story. In fact, there was a study on this I read about recently that wasn’t looking at Holacracy specifically but it was looking at self-leadership, self-organizing, self-managing systems, and what they found was exactly that. They found in the short term, those systems when they’re first adopted underperform a good directing boss. But over the long term they significantly outperform that directive leader, even a good one. And that matches exactly the experience I’ve seen with Holacracy. It is an investment and there is a productivity hit in the beginning.

Now at the same time, with practice they’ll get good at the new one and if the new one better serves the needs of the business, that’s going to translate. So in the long term, companies running with Holacracy spend so much less time in wasteful trying to figure out who does what, trying to make group decisions—all that stuff goes way down—and you end up with just lean, efficient, focused operations, but it takes building a lot of new habits and disciplines to get there.

Q. Given the fluidity of roles in Holacracy, how then should Holacratic companies tackle the issue of compensation given that there’s not the kind of benchmarks that companies would normally look to?

A. So Holacracy doesn’t give you one prescribed approach—it’s up to each company to find an approach for them and their culture and all that. But we do have at least one generic system the companies can consider and start from or adapt or decide it’s not for them. And what you’ll see in our generic system that we offer is compensation, instead of being tied to the job, which creates problems when you have all these shifting roles, instead it’s tied to the skills and talents that the person is bringing even as they adopt different roles. So we have a much more fluid way of progressing instead of it being about moving up the management hierarchy. Instead, you have a profile of different skills and that’s worth something. And as you add new skills to it you can get more pay. We have a badging system, so in our approach skills are represented by badges that people can earn and your pay is a function of all of the badges or skills that you demonstrated value in. So it’s disconnected directly from the roles, although obviously it’s related—they’re what use the skills and how you develop skills. So that’s just one approach. I think the key though is to just separate it from just climbing a hierarchy of pay, increasing positional status, and instead look at the value people are bringing based on the skills and somehow finding a way to capture pay to that.

Q. What is it about Holacracy that makes it better at ensuring roles are filled based on competency as opposed to other factors?

A. So one, Holacracy just brings more transparency, much more clarity of here’s what the role actually is and here’s what it needs, here’s the responsibilities of the role, the authorities of the role, the purpose it’s serving and you have a process then of people, not that dissimilar from the management hierarchy, pitching themselves for roles. So if I want a new role I have to convince someone else who has the authority of assigning that role I’m the best fit among all available talents. What develops is like a role marketplace almost where everyone can go and see here’s all the roles that need talent and somebody that’s trying to get a role filled can go in and see here’s all the talent looking for roles and then from there there’s a process of trying to find the best fit.

In companies that we’re working with we’ll see cases where, maybe at Zappos [for example], somebody that is mostly answering the phone, that’s their main work, but now they’re free to go pitch themselves for other interesting roles, small roles in other parts of the company and try to convince them look give me a shot at this I can add a lot of value. And it’s much easier for them to see all these roles and it’s not a huge change in their job, it might just be something they 10% of their time, 20% of their time. So there’s more fluidity in that and I think that allows more experimentation and if you want to find the optimal fit of people to roles, which I think any company does of any structure, one of the best things you can do is iterate faster and let experiments happen. Try it out for awhile and then change it if it’s not a good thing. Holacracy just enables more rapid experimentation to find that fit as well as a whole marketplace, the transparency, to find the match.

Q. What is your take on the experience of Zappos and their transition to Holacracy?

A. I think a lot of the press coverage has been dead wrong or just a misunderstanding. You see articles in the press that talk about how they’ve gone to structurelessness or totally flat and I think those are completely missing the point—Holacracy is more structured, not less. And it’s more ordered as well, it’s not chaos. There’s also more flexibility, more change, but more order to go with it and support the [increase in] change. So some of it is just trying to collapse things to short, little sound bites or oversimplified presentations of it and misses the richness and the complexity of what they’re really doing, which is not just throwing out management hierarchy, it’s replacing it with a different way to get the same needs met.

The other common misconception is, “Oh my god, it’s been a year or whatever and they’re still wrestling with it so things must be completely wrong”. This is a five-year journey—they’re doing awesome for where they are. You don’t learn to master the management hierarchy in a year and the same is true with Holacracy. This is something that takes years and years of experimentation and learning. They are committed, they are shifting their power structure for a near-2,000 employee company to be actually changing the way power works, and then every system around it—they’re changing their compensation system, they’re changing their ways of hiring and firing, they’re changing their performance management, they’re revisiting every aspect of their business that was built on management hierarchy and saying how do we enable more flexibility, adaptability in a peer-to-peer distributed system. That’s a huge effort.

They’re moving down that road with conviction, they’re learning, it looks like it’s going great to me. And not without challenges, they’ve got tons of challenges, they will have tons of challenges for years to come, but they’re pioneers. You don’t just expect a breezy walk in the new territory, you expect to be chopping through forest and jungle sometimes, laying new tracks and that’s what they’re doing.

[This article has been reproduced with permission from CKGSB Knowledge, the online research journal of the Cheung Kong Graduate School of Business (CKGSB), China's leading independent business school. For more articles on China business strategy, please visit CKGSB Knowledge.]