Holacracy: pros and cons of a radical challenge to the traditional organisation

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Zappo’s recent decision of changing its organisational structure and embrace holacracy (no job titles, no managers, no hierachy), as reported by Quartz, has generated a stimulating debate in the business press. The online retailer, known for its remarkable business achievements and its unconventional culture, decided last November to adopt an operating system which will reset all job roles and redistribute power evenly among its workforce. The transition, which will be completed next April, will supposedly bring long term benefits and increase the competitiveness of the firm.  Although not the first example of a business seeking alternative solutions to the traditional, top-down hierarchical organisation, Zappos’ revolution raises interest as one of the few (if not the only) instances of a medium-large firm transitioning to a flatter organisational structure.

Defined as a setup where authority and decision-making are decentralised to self-managing units, holacracy borrows its name from a Greek term (holons) meaning “whole”. The units above are composed of overlapping groups of employees which hold periodic meetings and assume direct responsibility of leading the company and ensuring its governance. Inspired by Arthur Koestler’s works and endorsed by Brian Robertson (founder of Ternary Software), holacracy envisions a scenario where accountability and leadership are equally distributed among the workforce. Despite its open challenge to the traditional form of organisation, holacracy is not a novel concept; in the last decades, the business world has seen several attempts to replace bureaucracy, often with different results.

So far, a number of firms across US and Europe, mainly small to medium-sized, have decided to go holacratic. To what end? Its supporters argue that the transition to a flatter structure is not only beneficial but inevitable. In their view, holacracy is seen as the ideal response to the ever-changing business environment, where the organisations that survive, like in Darwin, are the ones that adapt more quickly to change. This point has been illustrated by Robertson, who used the analogy of the human body where the employees represent the cells, each one with a specific task and in touch with the rest of body. According to Robertson, this role gives employees a natural advantage on senior managers who, being concerned with the broader picture, miss the vital details and are out of joint.

Other alleged advantages of the holacratic model are increased transparency and fewer conflicts in the organisation. Removing all job titles, for instance, will prevent the risk of clashes between employees and managers, which is cause of tensions and inefficiencies into a company. A further benefit that advocates of holacracy tend to stress is higher staff commitment. In their view, the engagement levels of the workforce will be higher if all the employees are equally responsible and empowered. This will in turn lead to increased productivity and competitiveness.

The transition to a holacracy, however, does not come without challenges. A number of concerns have been raised by business commentators, among which, its applicability on a large scale. Learning a lesson from the past, some have debated the need of ideal pre-conditions for the experiment to take off, such as companies located in small areas where communities have tight bonds. Others have remarked that so far holacracy has been adopted only by fast-growing businesses, which make us question how this model would react to an economic downturn.

There is also room for cultural considerations. The act of empowering the workforce is in itself admirable, but it also brings an increased dose of responsibility which some employees might not want. What about the individuals that do not fit in the picture? Is the holacratic culture inclusive enough to accept diversity?

Nonetheless, the hardest challenge that holacracy (as other alternative setups) needs to face is possibly its sustainability. According to Janice Klein, senior lecturer at MIT, similar experiments have already been tried in the past (even by large-scale businesses) without bringing significant advantages. As a result, the revolution did not survive a few months. The problem, in Klein’s view, arises when the incapacity of the teams to self-regulate becomes evident. As human being, we tend not to have the necessary discipline required to manage ourselves, which invalidates the self-management effort at the base of the holacratic revolution.

Tackling the above challenges is neither easy nor straightforward and, most importantly, requires time. In this regard, examining the outcome of Zappos’ transition will stimulate further discussion and help determine whether holacracy is a sustainable alternative to the traditional organisation, or an interesting experiment which does not necessarily fit every case.

What are your thoughts on holacracy, please add your comments below?

Article by Sergio Russo, HRreview journalist