1. Reads
  2. Lite

Holacracy: The Promise of Self Governance for New Startups

Intern, Transfin.
Apr 6, 2019 9:48 PM 5 min read

Have you ever imagined being your own boss? Working at your own leisure, doing the things you like, having your voice heard in the decision-making process, and… not being limited to just one task that suits your profile. Well, now you don’t need to start a business to feel that way. You can be your own boss while working as an employee, at least that’s is what Holacracy is supposed to do.


Holacracy is an alternate management system for companies that replace the traditional structures by self-sufficient and self-governed groups, which are supposed to operate without a management team watching over them.


Holacracy has a 31-page Constitution - a list of do’s and don’ts. The system has been around for a while and has undergone several iterations over the years, but the one thing that has remained constant - its aim to empower employees by ensuring minimum interference and restrictions, thereby granting a greater sense of freedom.


Different sections of the company are divided into small groups known as circles. Each circle has a lead link who oversees the operations of the group. Employees are not restricted to a single circle and can switch between them depending on their talents and capabilities. The lead link also oversees this switching. Conflicts and decision making are resolved through tactical meetings where all members of the team have a say in the decision-making process. Thus ensuring that no employee is left out.


An interesting experiment relating to Holacracy was conducted by the e-gov division of the State-run Washington Technology Solutions. The aim of the experiment was to find if adopting Holacracy yielded any observable results at an organizational level. The results observed on completion of the experiment spoke for themselves. The employee empowerment metric had climbed to 90% from 60% by the time the experiment had ended. The processing and decision making speed of operational issues had also dramatically decreased from 20 minutes to an average of 2 minutes. Here the “Tactical Meetings” introduced under Holacracy were observed to play a crucial role in resolving issues quickly.


This experiment’s findings, however, is only valid for small to medium scale organizations. No concrete data exists for the success of such a system in large scale organizations and as such cannot be commented upon. What we can do however is picking up cues from the employees who work in such companies. Let us take on an example.


Zappos is the most prominent and well-known adopters of Holacracy. Zappos employees more than 2000 individuals and has an annual revenue of over $2bn as of 2018. The company adopted Holacracy in 2014 and continues following it to this day. When it came to the opinion of its employees on Holacracy they were split in the middle with some for and some against the system.


This story by Quartz covers the plight of Zappos employees especially when the system is applied on a large scale. The employees were reportedly facing trouble getting acclimatized to the system especially with the tactical meetings that were held every week. These meetings consists of check in round followed by a dive into checklists and metrics. In these meeting only one individual is allowed to talk at a time meaning that no back and forth discussion is allowed between individuals. Any discussions regarding issues have to be addressed in the time allotted to each employee. This left many employees feeling like machines rather than like actual human beings. Another interesting thing to note is that the company also dropped out of the Fortunes list of best companies to work for the first time in its history the year it adopted the system.


One has to wonder - why is such a large observable difference noticed in operations between small and large businesses that follow Holacracy? To understand the disparity it is essential to accept the notion that Holacracy was implemented to simplify the system. In a small scale setup it is possible to do so as there are lesser moving pieces. But as the size of the organization increases, the number of components also increases, and since there are no managers to oversee the overall functioning of different groups, communication between groups could become an issue and thus lead to decrease in efficiency.


This is why more and more companies have expressed reluctance to integrate the system into their framework. Let’s take a look at some other factors holding the system back:


Holacracy: The Promise of Self Governance for New Startups


Size Matters


  • A startup or a smaller system will find integration easier as compared to a bigger one. Suppose you are part of a company who has adopted Holacracy. Most of your time will be spent convincing others who have little knowledge on the matter that lies outside the domain of their expertise, as the system is designed to allow employees from different backgrounds to be able to contribute on all matters pertaining to a set profile.


Rewards Matter


  • Another thing to keep in mind is employee compensation. Since the job roles are not completely defined, it becomes difficult to estimate the worth of work done by an individual employee at any given point of time. In a team, an individual might be doing more work than another individual for the same pay.


Accountability Matters


  • For all the non-governance Holacracy teaches, some level of management will always be required in companies. Without this management, there will be no system to hold the employees accountable.


Despite these drawbacks Holacracy has found a home in hundreds of businesses across the world. This may not be necessarily a bad thing as, when Holacracy works, it works well. But instances where it does not employees often end up feeling left out and disempowered, which is the exact opposite of what the system sets out to achieve.


Such is the appeal of freedom and self-governance that companies fail to see the potential drawbacks of the system and suffer as a result of subsequent incompatibility. Hopefully one day all misconceptions regarding the system can be resolved and maybe even a future iteration of the system may incorporate new changes that might help it become what it set out to be in the first place.


(We are now on your favourite messaging app – WhatsApp. We strongly recommend you SUBSCRIBE to start receiving your Fresh, Homegrown and Handpicked News Feed.)