There has been a league of digital ink spilled over holacracy since Zappos adopted the practice in 2013, but to summarise, Holacracy is a management style that replaces a traditional, hierarchical organisational structure with role based ‘circles’ based on key functional areas, projects or tasks.
Many think the organisational structure of holacracy is flat. There would be no reason to drastically change rethink org charts if that were true. It is only power distribution in holacracy that is flat, not the structure itself.
The breakdown of teams and departments is complex in holacracy. Employees occupy multiple teams, and restructures are done monthly. There are no departments, let alone managers of departments.
So where did this radical management style come from?
Holacracy was first used by Ternary Software. Founder, Brian Robertson, is also considered the founder of the management style. Holacracy has existed in some form since 2003, but has only gained international headlines in 2013 when Zappos became the largest company to adopt the radical approach to people management.
Today, over 300 organisations are using holacracy. All it takes is one quirky CEO to completely redefine an entire suite of HR tech and theory.
Here is what you need to know about holacracy, and the impact it stands to make on organisational development:
Employees are given more freedom to act as entrepreneurs in their roles, employees work together in circles to complete larger projects, and circles work together to create value for the organisation.
A common analogy for holacracy is cells in an organism. A cell operates independently, but also works with others to create an organ, and then the organs work together to make an organism.
Circles represent complex systems in holacracy. Employees are given more freedom to act as entrepreneurs in their roles, employees work together in circles to complete larger projects, and circles work together to create value for the organisation.
Employees can be in multiple circles working on multiple projects. These circles change as new skills are needed in projects. The restructuring of circles is the equivalent of org restructures in a traditional organisation.
The difference with holacracy is these circle restructures are made monthly, rather than every couple of years.
Your org chart would have to display employees in a honeycomb network, as a series of circles. Org charts would need to show the circles employees belong to, along with the possibility of circles within circles.
The easiest way to do this in a tool like Planning@Work is to setup multiple views for different types of circles. For example, you may have a projects view showing the circles for projects alone, then another view for general functional areas, and perhaps one for skill based charts.
Holacracy would actually make org charts more complex and nuanced, rather than simply flattening out the structure.
Holacracy has been used in Zappos for two years. One of the biggest challenges CEO Tony Hsieh is facing is how to pay people as they grow in the organisation.
Remuneration can’t be based on hierarchy in holacracy, because there is none. Employees can’t be paid based on how high up the org chart they are.
Zappos is considering a badge based remuneration system, similar to what Ternary Software uses for their employees. Badges are awarded to peers based on displayed skills. An employee’s pay increases as they collect sets of badges.
Employees can earn badges in any discipline. The logic is that pay is based on skill, rather than placement in an organisation. Employees can earn any badge, and even the value of badges is open for discussion.
Employees earn badges in areas that interest them, allowing employees to specialise their skill set. Horizontal shifts become easier without restricting employee roles.
The concept of holacracy means employees can grow the way that suits them. Badges are awarded by peers, making skill the key determinant of compensation.
But badges are just one option for succession planning. Brian Robertson has said there are multiple modules for succession planning in holacracy, and at this stage it’s hard to pick a clear favourite.
Perhaps org charts will have to include a section for badges collected by employees, making everyone look like Pokemon Trainers or Olympic Athletes.
Within Planning@Work, any data included in your HRIS can be visualised in your org charts, so you would need to find a way to track which badges have been awarded to each employee.
Holacracy might sound daunting to you. Fortunately, most organisations just need better organisational planning to be more effective.
Check out Planning@Work to see how it could benefit your organisation, and come back here next week for part 2 of our series on holacracy.
You can read part two of our series on holacracy here. Part two covers how accountability and job descriptions work in a holacratic work environment.