Often neglected are things like collective behavior, culture, management and leadership — all of which make up a workplace’s organizational structure. And interestingly enough, they are beginning to see major disruptions as well.
The traditional hierarchical organization structure cannot keep pace in the knowledge age. That is why we see young organizations disrupting large and established organizations at an accelerating frequency. For example, only 12 percent of Fortune 500 Companies from 1955 still remain on the list today. That is no coincidence.
Traditional hierarchical organizations fail to adapt and grow because politics and bureaucracy get in the way. They rely on strong leadership and flawless insight from the top down; the people making important decisions are often completely removed from the actual problem. This leads to ideas that sound good in theory but have no real-world value.
There also is constant pressure to do more with less and keep up with the rapid pace of change. When organizations structure themselves around power and authority, employees do their best to fulfill the organization's mission, but they instead spend all their time reacting to the environment.
It's not difficult to see why the traditional organizational structure is starting to break down, but what exists now does not have to be the reality. And it's driving organizations to look for new ways to be innovative — that's where Holacracy comes into play.
Our story is broken up into five primary sections:
Holacracy 101: An Overview // This section shares the top three ways Holacracy is different from the traditional hierarchical structure, and gives detailed information about roles, circles and governance process.
Holacracy at Zappos // Holacracy has allowed Zappos, an online shoe and clothing shop, to stay agile and innovative in the midst of rapid growth.
Holacracy in Government // Using Holacracy in the public sector is still relatively unexplored, but one government agency is leading the charge.
Holacracy Resources // Check out these resources for additional information on Holacracy.
Final Thoughts // Could giving Holacracy a try change the way your organization operates for the next 100 years?
Holacracy 101: An Overview
Holacracy is not the only systematic change to organizational structure, but it's getting positive traction in the private sector.Currently a few hundred companies are using it, and it's easy to see why: Holacracy provides a unique approach to distributed authority and allows employees to self-organize around the work that needs to be done. It is not a lack of structure, but instead a new way of — and different approach to — structure, and it's one that allows organizations to be more agile and more rapidly adapt to change. Its emergent organizational structure adapts as the business needs change. For organizations that adopt Holacracy, it will be a radical shift — but the benefits may outweigh the pain of the transition.
Let’s take a look at the top three ways Holacracy is different from the traditional hierarchical structure:
- Roles vs. Job Descriptions: The job description becomes obsolete in Holacracy. Instead, individuals are assigned one or more functional roles that outline their responsibilities.
- Circles vs. Departments: Departments no longer exist in Holacracy. Instead, organizational structure is built around the work that needs to be accomplished. These groupings of roles are called circles.
- Governance vs. Bureaucracy: Managers do not exist in Holacracy. Authority is distributed and built into the governance process. Governance builds in many of the responsibilities previously controlled by managers and provides a framework where every employee has the ability to propose necessary changes.
Roles
Let's start by throwing out the job description. (In most organizations it serves little purpose anyway; chances are you rarely look at your job description, and if you did, you would probably spend most of your time in the “other duties as assigned” category.) In Holacracy, this is addressed by separating roles from employees.A role is a specific set of responsibilities that accomplish a set purpose. An employee can have one or multiple roles assigned to them, but the fact that they are separate provides some unique benefits.
First, a role can be easily moved from one person to another. Second, if additional responsibilities need to be assigned to a role, it is handled at the role level and not the individual level. This can reduce some of the tension that comes with assigning new responsibilities. Lastly, if a role has a responsibility that is no longer needed, it can be removed. This provides an accurate reflection of the work being done instead of the catch-all approach used in job descriptions.
There are three primary attributes assigned to each role:
- Purpose: A summary of what the role was created to achieve.
- Domains: A list or property for which the role is responsible and has authority over.
- Accountabilities: A list of responsibilities that are assigned to the role.
When we separate roles like this we can begin to see how they can easily be updated, reassigned to other employees, or even completely removed as necessary. This is powerful because it provides transparency on how work is distributed and who is accountable. You are able to see all of the accountabilities your organization has and distribute them in a way that focuses on the strengths of employees instead of their department or division.
Circles
The transition to roles allows you to break down organizational boundaries. Departments become unnecessary because people are organized around work, not a manager. However, there is still a need for some level of structure. That is where circles come in. Circles allow organizations to group roles that have a similar purpose and focus area. This may be similar to the current department structure or it may look completely different. It depends on what makes sense to each organization based on the type of work that it does.Circles also have a few attributes associated with them:
- Purpose: The purpose for a circle is a summary of what the circle was created to achieve.
- Lead Link: The person in charge of filling its roles, making sure it is meeting its purpose, and overseeing the circle governance process.
- Policies: Constraints or guidelines placed on the circle to further clarify how it will be governed.
- Defined Roles: The roles that are inside of the circle and required to fulfill the circle's purpose.
Top-level managers that currently exist in the organization may find themselves serving as circle lead links. The lead link is responsible for circle governance and making sure all of the roles are filled. They have the ability to remove someone from a role but do not have any control over compensation or the authority to hire or fire. This is because employees may be a part of multiple circles and therefore will have many lead links.
This is a major change from traditional organizational structure. Roles provide clear expectations to employees and a high degree of transparency. Those two reasons alone are enough to keep most employees productive. When it comes to hiring and firing in Holacracy, these decisions would ideally be handled systematically.
Governance Process
Transitioning to Holacracy starts by adopting the Holacracy Constitution. This document outlines the governance process and provides clarity around how the organization will operate. The governance process is probably the biggest difference coming from a traditional organizational structure. It outlines how roles are created, modified and removed; how circles are formed and managed; and how policies are adopted.When an organization first transitions to Holacracy, it creates what is called the anchor circle. This is the topmost circle in the organization where high-level strategy is set. When additional circles are created, some roles must be filled in addition to the lead link. These roles are:
- Rep Link: This individual maintains relationships across circles and between sub-circles. If there are conflicts or tensions, the rep link is in charge of seeing that they get resolved.
- Facilitator: This individual makes sure that the circle is operating in accordance with the constitution. This person also is responsible for making sure the governance process is upheld inside the circle.
- Secretary: This individual is in charge of keeping all of the records for the circle in order. He or she is also in charge of setting up circle meetings and making sure any changes made during the meeting are communicated to other circle members.
Introduction | Holacracy at Zappos | Holacracy in Government | Holacracy Resources | Final Thoughts
Holacracy at Zappos
Zappos was founded in 1999 and is now one of the largest online clothing and shoe stores in the world, with over 50,000 options to choose from. Acquired by Amazon in 2008, it now employs more than 1,500 people and has an annual revenue of over $1 billion, up from only $8.6 million in 2001. The astronomical growth that has taken place within the company is apparent.But this growth worried CEO Tony Hsieh because he understood that as companies grow in size, bureaucracy and politics start to set in. He wanted a new way to run the company — one that would allow Zappos to stay agile and innovative in the midst of the rapid growth it was experiencing. That is when he discovered Holacracy.
Hsieh announced in December 2013 that the company would switch to Holacracy. This change included flattening the organization by removing all job titles and making managers obsolete. Individuals would self-organize by operating within a new framework and adopting a set of roles that would allow them to adapt and change more quickly. In short, they would operate under the Holacracy Constitution.
Everyone took notice as Zappos began making its transition. Along with the help of HolacracyOne LLC, Zappos began the rollout — and the world watched. As with most transitions, not everything has gone according to plan. But nearly two years later, Zappos is still committed to Holacracy and offers some great insight into how it can be adopted into other organizations.
Zappos understood that not everyone would buy in to the new system, so it offered employees who chose to leave a severance option of three months. Most people will focus on the 14 percent who decided to take the severance, but Zappos understood that change is difficult. It takes a strong leader to make such a bold decision — but Hsieh knew it was necessary to make the transition successful.
Zappos started out with a controlled group so it had a good understanding of how the system would work for the company. This is an important step for any organization looking at Holacracy. It is still early in the story for Zappos, but given how adaptable Holacracy is, good things are likely to come. There will always be growing pains in changes as big as this one. But as Holacracy becomes fully ingrained into the company's organizational culture, we will really begin to see its benefits.
Introduction | Holacracy 101: An Overview | Holacracy in Government | Holacracy Resources | Final Thoughts
Holacracy in Government
The idea of using Holacracy in government is still relatively unexplored. Government agencies face some obvious barriers to adoption that private-sector companies do not — but that doesn't mean it's impossible to make the switch. In fact, one government agency is leading the charge.Washington Technology Solutions, commonly referred to as WaTech, adopted Holacracy in early 2015. This project has received a lot of attention, and we are beginning to see a framework that other government agencies can use. To get an idea of how officials at the agency have approached Holacracy, we sat down with E-Government Director Michael DeAngelo, who is spearheading the experiment. Here are some takeaways from our discussion.
WaTech is the central technology department for the state of Washington. Located in an extremely competitive marketplace, officials were looking for new ways to recruit and retain IT talent — something government typically has a hard time doing because of bureaucracy, politics and the slow pace of change. They hope to adjust that by adopting Holacracy.
When the experiment began, officials had no idea what types of roadblocks they would face. Fortunately neither the legal nor labor departments could find any reason why Holacracy could not be implemented in government. That was a huge win, because nothing can squash change more rapidly than legal concerns.
To ease the transition, WaTech focused on a phased approach. Officials started with an opt-in phase where those who embraced the idea participated. Then they focused on educating those employees on Holacracy. With the help of HolacracyOne LLC, they rolled Holacracy out to the phase-one participants. They expressed the importance of working with a coach and facilitator when implementing Holacracy — it's a big change from a traditional hierarchical structure and something that only becomes familiar with experience.
Resources to implement Holacracy at WaTech were limited. The primary expenses were training, coaching and facilitation, followed by software to help manage the Holacracy governance. Both of these costs were low enough that it should not serve as a barrier to other organizations looking to adopt the structure.
The biggest struggle for WaTech during the implementation was learning to operate under Holacracy governance. The transition to governance replaces the executive- or manager-led organization. This is referred to as intelligent design. Instead, Holacracy uses what is called evolutionary design. This is when you design the organization in response to experiences and customer needs. In Holacracy, you manage the work, not the people. This is a big change from what organizations are typically used to.
Once Holacracy is up and running, the day-to-day management becomes second nature. WaTech has both governance and tactical meetings. Governance meetings address the organizational structure while tactical meetings focus on the operational issues. Tactical meetings will be familiar to many organizations, but governance will be something entirely new. While that does make them difficult, WaTech believes that the benefits outweigh the challenges to making the transition.
After running under Holacracy for seven months in a controlled group, WaTech is starting to see some of the benefits. Currently most of the data is anecdotal, but officials have been quantified a 20 percent increase in the confidence that employees have around resolving organizational issues. WaTech is currently working with Harvard Business School (HBS) on the second phase of its Holacracy transition.
By working with HBS, WaTech hopes to test more conclusively whether self-organization creates different employee outcomes. HBS will conduct a study that will include both a controlled group and Holacracy group. The study will last one year and HBS will gather a significant amount of data from both groups throughout.
"Regardless of how it ends for us, the fact that we got the ball rolling has really helped other governments think about a different way of organizing," DeAngelo said.
If you are currently looking at Holacracy, here are three tips that DeAngelo provided to government agencies looking at adopting the governance structure:
- Just do it! The worst case scenario is you go back to the way you have always done things.
- Be careful how you talk about it, because people get hung up on the term. Instead use terminology like "self-organization" and "empowering employees." After that, if they show further interest you can get into the actual system of Holacracy.
- Get facilitation and coaching. This is not something you can just pick up a few books about and then go out and do.
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logo-0-0.pngWatch the full interview with WaTech's Michael DeAngelo |
Where Do You Go from Here?
Just because examples of Holacracy in government are limited doesn't mean it's not a good fit. Holacracy could allow government organizations to adapt to the growing demands of its constituents more quickly and help prevent some of the politics and bureaucracy that plagues just about every government agency. Holacracy could be the future structure of government organizations — but we won’t know unless we try.For organizations interested in moving forward with Holacracy, DeAngelo provides some steps to help you get started:
- Re-evaluate your next couple of years. It takes time, so you must be committed.
- Educate yourself and get the necessary training.
- Have conversations with other organizations and experts.
- Pick a division or team to start with.
- Hold your nose, close your eyes and jump in the water. You will figure out how to swim.
Introduction | Holacracy 101: An Overview | Holacracy at Zappos | Holacracy Resources | Final Thoughts
Holacracy Resources
Looking for more? Check out these resources for additional information on Holacracy.Holacracy Website // Holacracy is a set of best practices created by Brian Robertson and is a registered trademark of HolacracyOne LLC. You can find all kinds of information on the Holacracy website.
- Holacracy Constitution
- Training & Events
- Resources
- Professional Services
GlassFrog Software // GlassFrog Software is a cloud-based solution for managing a Holacracy organization. The software was designed by working directly with the creators of Holacracy and is a simple tool to keep track of your organization.
Sample Holacracy Organization // HolacracyOne provides a sample organization using the GlassFrog software. This will allow you to explore Holacracy in greater detail to get an idea of how it would work in your organization.
WaTech Blog // Follow WaTech's experiment with Holacracy. This blog provides a front row seat to what is happening at the agency and an in-depth look at how the transition is going.
Introduction | Holacracy 101: An Overview | Holacracy at Zappos | Holacracy in Government | Final Thoughts
Final Thoughts
It is very rare that you will find someone who likes bureaucracy and politics. Unfortunately those are necessary evils in a traditional organizational structure. When authority is seeded from the top down, you will always have the risk of egos, emotions and personal agendas getting in the way of progress. That is unfortunate because most people just want to do meaningful work. Accomplishing that is very difficult when you have to go through layers of authority. So instead, many people just give up and only do what they are told. There has to be a better way, and maybe Holacracy is the answer.Give it a try. What do you have to lose? Start small and collect as much data as you can. Just make sure and give it a good, honest effort. Operate completely under Holacracy in one small part of your organization — don’t just pick and choose the easy stuff. Who knows, it may change the way your organization operates for the next 100 years.
