Imagine a workplace where you aren’t working as a silo in a hierarchy. Finally, you have variety in your day as you work on different teams with diverse responsibilities. Best of all, you don’t have a manager delegating tasks from a corner office; instead, your team on the frontline solves problems locally without having to inch up the chain of command to reach a resolution. Rules are clear, transparent, and apply to everyone in the company—including the CEO.
You even have freedom in choosing which teams and projects you’d like to be part of so you don’t feel pigeon-holed. This style of business really exists, and large-scale organizations are already implementing it. Welcome to the new frontier: Holacracy.
A Holacratic system is a flat business structure that does away with the traditional hierarchy and instead evokes self-governing and autonomy among employees. The structure prides itself on distributing authority among teams, frequent iterations to keep the company adaptable, and transparency between company and employee.
According to this Dan Pink lecture on motivating staff in creative environments, autonomy and feeling more involved in decision-making within the company are intrinsic motivators that motivate staff more effectively than money. So, why isn’t every business operating as a holacracy?
The dependent variable
When Uncle Ben so eloquently cautioned Peter Parker, “with great power comes great responsibility,” he could have been talking about holacracy. Companies such as Shell Oil and Cummins swept away their frontline managers and distributed decision-making and delegating power among teams. Authority is a shared experience in a holacracy, where teams can solve issues without having to wait for a green light from management. However, the whole structure is built on the assumption that employees will self-govern—and that they can self-govern without management.
Jan Klein, a senior lecturer at the MIT Sloan School of Management who has researched the topic extensively, told Business Insider of all the places that implemented the system, she only knows of one where it was successful long term. In almost all cases, the structure started to “flounder after just six months.”
A misconception of holacracy is that it is completely devoid of management, which creates an image not unlike anarchy in the workplace. In reality, holacracy is just a redistribution of authority, not its elimination entirely. However, when management figures are eliminated, authority is distributed among non-leaders who might not have the ability to self-govern, and former leaders who feel slighted. The result is attrition.
Without a ladder to climb, good talent will most often leave the organization for greener pastures. In fact, that’s just what Klein has observed: companies “bled talent as successful managers jumped ship instead of losing their titles.” Instead of empowering top talent, a holacracy— at least initially— has a side effect of levelling out the workforce and creating a ceiling for top performers. A flat structure gives the perception of flat opportunities. That’s partly to explain why, when the Amazon-owned Zappos offered its employees a severance package if they didn’t agree with the structure change, 14% (in contrast to the traditional 1%) of employees accepted the package. However, attrition isn’t always a bad thing.
Doing it right
Why has the track record for holacracy been underwhelming? Because there is no quick fix in business and succession plans take time. Industry, openness to risk, and organizational goals impact the structure of the business. For this reason, a traditional hierarchy and narrow job bands work in a bank, but not in a startup. The holacratic structure actually closely mimics that of many startup businesses, where adaptability is key to staying relevant, and smaller offices mean flatter structure and fatter job descriptions (if job descriptions even exist).
When holacracy fails, it’s because it wasn’t planned start to finish. Businesses who change their structure to a holacracy must also update the processes of business to empower it to work—and they must also be prepared for hiccups in the first year or two.
Think of it as a car; when it stops working you don’t just buff and wax the body, you lift the hood and rebuild the transmission. That means hiring talent that is strongly team based; excellent multi-taskers with demonstrated initiative. It also means preparing to shed employees who don’t share the company’s vision anymore.
Is Holacracy doable? Yes. Is it the future of business? Only if it’s done right.