Holacracy Under the Scrutiny: When It Works and When It Doesn’t

In the early 2000s, I witnessed a remarkable change within my company. With the introduction of the ‘this is how we do it’ manual, I noticed that employees suddenly only did what was written in black and white. It was the early days after our startup phase when everyone was flexible and did what was necessary. But as we grew, and with approximately 60 employees in our advertising agency, some managers felt there was a need for a clear structure. The hired consultants agreed with this and recommended a clear hierarchy. What a misconception that turned out to be!

It intrigued me that when you don’t give anyone specific tasks, everything still runs smoothly. But as soon as you introduce strict job descriptions and fixed working hours, a mentality of passing the buck arises and people only work strictly within the given frameworks. For the first time, our office was consistently empty at 6:00 PM, despite our previous flexible working culture.

Out of frustration, one afternoon I decided to eliminate all features and burn the manual at the stake. It had to be over. Although I had no idea what the alternative was.

The emergence of a spontaneous Holacracy

When I abandoned all job descriptions and rules, there was initial chaos and resistance. Employees longed for clarity and frameworks. However, as I stuck with my decision, something fascinating started happening in the workplace. Employees organized themselves autonomously into varying teams, based on expertise and skills, and distributed tasks and responsibilities in a natural way. Although the term was not yet common at the time, we had unknowingly created a Holacracy.

However, this process was not without challenges. For example, how do you determine the salary of someone without a clear job description? And who bears ultimate responsibility for a project?

As for the latter, it resolved itself. Without explicitly assigning responsibilities, they took them on themselves. There was a strong sense of pride; no one wanted a project to fail, so within each project team someone always took the lead.

The salary issue was more complicated. Ultimately, we developed a system where employees were rewarded based on their primary and secondary skills, rather than a permanent position.

The pitfalls of Holacracy

Although we operated successfully under our holacratic model for many years, the system was not without its flaws. We encountered challenges, especially when recruiting new employees. Some applicants were only willing to start if they were given a ‘higher’ job title than they previously had. For example, an ‘Art Director’ necessarily wanted to be described as ‘Senior Art Director’ in his contract. This was something we did not do on principle.

When I later left my company and started leading various teams as an ad interim, I came into contact with even more aspects and nuances of the holacratic system. The following things struck me:

Holacracy requires deep trust in each other’s expertise

In my team, which had been working together for years – some even from the very beginning – everyone knew each other’s strengths and weaknesses. As a result, teams naturally formed with people who had complementary skills and knowledge. For example, teams were created with mainly junior employees for simpler projects, while experienced staff were deployed for more strategic assignments. No one had to be explicitly designated for a project; this process was spontaneous.

On one occasion I was involved as Ad-Interim in an innovative project for a Fashion App. The founder of the project mainly wanted to hire young employees. This was partly to save costs but also to benefit from the fresh insights that these young people could offer. While I recognized the value of their fresh perspectives, I believed that they should not be fully involved in strategic decisions. However, the founder thought differently about this, which led to problems.

The young, recently graduated employees came up with many inspiring ideas. However, many of their proposals were not in line with the reality of ‘the real world’. I realized that and so did the founder. But within a Holacracy, everyone is listened to and consensus is strived for. However, when there is a large difference in knowledge levels and experience, this can result in endless and inefficient discussions. There was a lack of mutual trust. Based on my years of experience, I had little confidence in the team’s capabilities. They, in turn, distrusted my approach and insights because of their theoretical background and naivety. This led to conflicts.

Holacracy can hinder the speed of development

Although I know from my own experience and many studies show this, Holacracy is in most cases more efficient and achieves results faster. With a few exceptions.

As Ad-Interium Marketing manager, I was hired together with several others to make a struggling company profitable again within 3 months. For this, a new strategy, logistics operation, a new platform and app, and a new store concept had to be developed and rolled out. 3 months is about 12 months too short, as such a process usually takes 1 to a year and a half.

Although we wanted to work holacratically, in this case, it was impossible. The time pressure and the projects for which choices had to be made – often based on gut feeling – did not allow consultation. In this case, only a directive approach works, without consultation. On all fronts a choice had to be made sooner rather than later and a wrong choice is better than no choice, otherwise the curtain would fall.

Holacracy: a means, not an end

No matter how futuristic companies such as Samsung, HTC, and Apple may appear, some still cling to outdated principles in terms of their management structure and management model. It was therefore not surprising that they often did not understand our approach. “What exactly is the role of that contact person?” was a question we often received. For us, Holacracy was not an end goal, but just a way of working. To provide some clarity to the outside world, we used somewhat general job titles on our website such as ‘Project Leader’, ‘Designer’, and ‘Strategist’. However, these titles were not explicitly mentioned in the employment contracts. It was simply a facade for outsiders.

Holacracy: not for every personality

Every now and then we would hire someone who was very enthusiastic about our holacratic model, but not fully aware of the proactive attitude it required. Very reserved and introverted individuals may find it difficult to discover their place within such a structure. Holacracy requires assertiveness and a strong team spirit. So it quickly became clear that real soloists had difficulty adapting.

In a Holacracy you operate independently, but always in harmony with your changing teammates. This requires social skills that not everyone naturally possesses or acquired during their upbringing.

Holacracy requires ownership that not everyone can handle

In traditional management, certain matters, such as conflicts, conflicts of interest, work attitude, adjusted working hours, and the choice of a workplace, are usually left to the manager. Employees generally do not get involved and see it as their superior’s job to address such issues. However within a holacratic organization, these types of issues are tackled at the team level, and each individual bears significant responsibility in this regard.

Not everyone is able to recognize this responsibility and act on it. Especially if you have been used to a culture for years in which you could pass on your responsibilities to a higher level.

Holacracy is not always the safest choice

Although Holacracy has brought us a lot, I would still not be comfortable if it were applied in a nuclear power plant. I can fly a plane myself, but I don’t see Holacracy in the cockpit either. Imagine: “Hey John, the left engine is on fire and the right wing is off, should we discuss the next steps?”

For professions where security is critical, Holacracy is simply not suitable. You want clear and assertive leadership there. Especially in crisis situations, it is of the utmost importance that everyone knows exactly what his or her tasks are and who is ultimately responsible.

Holacracy and the importance of leadership

In a holacratic system, there is no place for traditional managers; there is a need for real leaders. One of the most appropriate leadership styles within Holacracy is Gentle Leadership. This is because traditional managers, who have a natural need to exercise control, often have difficulty letting go of ingrained processes and procedures. They look for control and security, while Holacracy is all about autonomy, where the different teams assess for themselves what the best approach is in their specific situation.

The roots of Holacracy

Holacracy, a term that came into the spotlight around 2007, was introduced by Brian Robertson. It represents an organic governance model where authority and decision-making are distributed among autonomous, self-managing teams rather than being captured in a traditional management hierarchy. Over the years, this model has gained more and more popularity and today various multinationals and other companies apply it (partially or otherwise) in their organizational structure.

FAQ: Holacracy within companies

What is Holacracy?

Holacracy is an organic governance model in which authority and decision-making are distributed among autonomous, self-managing teams rather than a traditional management hierarchy.

How can salary determination work within a holacratic system?

Salary can be determined based on an employee’s primary and secondary skills, rather than a fixed job description.

What are the challenges of recruiting new employees within a holacratic system?

Some applicants desire clear job titles and may struggle with the lack of traditional hierarchies.

What are the benefits of Holacracy?

Teams organize themselves based on expertise, there is a natural division of tasks, and there is a strong sense of ownership and pride within project teams.

Are there pitfalls within Holacracy?

Yes, Holacracy may not be suitable for every type of personality, can sometimes hinder the speed of development, and is not suitable for professions where safety is crucial.

How does Holacracy fit into the broader spectrum of leadership?

In a holacratic system, there is a need for true leaders who can guide and support teams without exerting excessive control.

Is Holacracy suitable for everyone?

No, some people may find it difficult to adapt to a system that requires assertiveness and a strong team spirit.

Are there situations where Holacracy doesn’t work?

In situations where quick, clear decisions are needed, such as in crisis situations, or where safety is critical, such as in nuclear power plants, Holacracy may not be appropriate.

What is the most important thing to remember about Holacracy?

Holacracy is a means and not an end goal. It requires adaptation, flexibility, and trust, but can be very effective in the right environment.