Holacracy

Updated on March 20, 2024
Article byPrakhar Gajendrakar
Edited byPrakhar Gajendrakar
Reviewed byDheeraj Vaidya, CFA, FRM

Holacracy Meaning

Holacracy refers to a structure of governance in which every team, group, or member can lead, assist, work and make critical decisions within their organizational authority. It is the opposite of traditional hierarchy and discards the concept of following a single chain of command.

Holacracy

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It is called self-management and exercising a fluid organizational structure in which employees do not wait for orders or remain bound by a hierarchy. Instead, they come forward, taking multiple roles against rigid structures, and start making decisions within their area of responsibility, which is best for the organization.

Key Takeaways

  • Holacracy is a decentralized governance structure where employees exercise equal responsibilities to take multiple roles and make key decisions in their work areas.
  • It is the opposite of the traditional hierarchy-based governance system, which is rigid and follows a single chain of command.
  • The internal issues and problems faced by groups and raised in governance meetings held at regular intervals.
  • It aims to achieve higher productivity and less time spent following a chain of command, declining a system where no voice is given to individual groups and employees.

Holacracy Structure Explained

Holacracy is a decentralized governance structure used in offices and corporate setups in which each department is responsible for its area of work and operations with the ability to make key decisions and not wait for a hierarchy-based long chain of command to follow. It is the opposite of the traditional hierarchical management structure in which the top makes decisions and passes them down. In contrast, holacracy exercises autonomous authority.

Holacracy structure defines one set of rules for everyone in the organization. Arthur Koestler first introduced it in 1967 in his book published by the name “The Ghost in the Machine.” The term describes connections between holons, which are whole and also part of a whole. In a nutshell, holacracy is departments and groups within the organization self-managing themselves with a shared authority to operate and execute limited only to their responsibilities.

Holacracy states that each circle, group, or team has its importance and authority within the organization. They conduct their meetings, set their targets, self-organize, administrate, manage, and work on their tasks with minimal or no supervision from other groups. Although every department is linked and sometimes depends on each other’s work, they cannot make decisions outside their domain of responsibility. Over time, many new-age companies have adopted this style of governance, yet it has limitations and cannot be transited easily.

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Examples

Here are two distinct examples of Holacracy –

Example #1

Imagine a new startup company that deals in ethnic clothes and apparel. Since it is a new company and there is too much work in every department, the founder adopted holacracy for governance. It means that each department has certain teams with their area of work and responsibilities. No traditional hierarchy exists; therefore, the departments do not have to wait for orders and implementation.

The founder made each team responsible for their work, allowing them to take action swiftly and make key decisions inside their authority to ensure maximized productivity. The sales team has authority in the sales department, the marketing team manages the marketing, the accounting department looks after the accounting, and so forth.

This way, the managers and other employees get responsibility and permission to act according to the gravity of the situation. No team has to wait for policy amendments and a chain of command to initiate a decision. It is decentralized yet perfectly operational and successful. It is a simple example of a holacracy structure, but in the real world, it has its limitations, and not every organization can adopt it.

Example #2

In an insightful interview, John Bunch, a key advisor to the CEO of Zappos, the largest US-based online and retail shoe and clothing store, shared the story of how, in 2013, the company announced its transition to the holacracy administration system. The advisor recalled that during that time, many internal changes were happening in the company and how Holacracy at Zappos helped it restructure itself to become more efficient and productive.

He explained that the company was not a startup anymore and was operating with a workforce of 1,500 plus employees. They were looking for transition and came across holacracy, which he described as a distributed authority. He narrated the story of how he first did a test with the pilot group to test its results, and after they were satisfied with it, it took him almost two and a half years to educate, train, and support holacracy internally.

Advantages And Disadvantages

The advantages of holacracy are –

  • Induces an autonomous power to make key decisions within the authority.
  • Encourages self-management along with increased employee engagement.
  • Compared to a traditional hierarchical structure, better communication, transparency and quick actions are taken.
  • Every employee feels a sense of responsibility and accountability on their shoulders.
  • Saves time and effort due to less rigidity and waiting time to take action.

The disadvantages of holacracy are –

  • Transitioning from a hierarchical to a holacracy structure is complex and time-consuming.
  • Every company can’t follow holacracy, especially big multinational corporations.
  • To be able to self-manage, lead and make important decisions along with responsibility is not in the capacity of every employee.
  • It requires expertise and a framework to run holacracy at different levels successfully.

Holacracy vs Hierarchy

Here are the main differences between the two:

  • In holacracy, there is a decentralized authority with autonomous power. In contrast, hierarchy is based on a centralized authority system.
  • In the holacracy model, decision-making relies on teams and circles responsible for the work area. On the other hand, in the hierarchy, the top management level takes decisions, and they pass to other levels downwards.
  • A holacracy is more adaptive and flexible compared to a rigid hierarchy-based governance system.
  • Holacracy represents a circle-shaped system comprising different groups and teams. In comparison, hierarchy is depicted by a triangle divided into sections.
  • In holacracy, roles are based on tasks and operations, but in a hierarchy, the roles and responsibilities are given based on positions and job titles.

Holacracy vs Sociocracy vs Adhocracy

Here are the main differences between the three:

  • Holacracy has a defined system of validating objections, which is absent in both sociocracy and adhocracy.
  • Holacracy and sociocracy are for all organizations, but adhocracy is for workspaces with rapid change, requiring swift decision-making.
  • Companies like Wikipedia exhibit a holacracy model, whereas non-profit organizations, schools, etc., observe sociocracy. And NASA is a good example of adhocracy.

Frequently Asked Questions (FAQs)

1. What shape can holacracy be compared to?

Holacracy is compared and showcased in the form of a circle comprising many different small circles within it. Each circle represents small groups and teams representing different departments and areas of responsibility like marketing, sales, accounting, etc. Additionally, each circle is responsible for its work and organizes internally to achieve goals.

2. How to successfully implement holacracy?

To implement holacracy –
– Understand the rules and the changes they will bring
– Start with getting managers and team leaders on board
– Make realistic goals and expectations
– Start slow and focus on building responsible teams and employees who can act as leaders.

3. What is the golden rule of holacracy?

The golden rule of holacracy is simple: employees and teams get a distributed authority, allowing them to make decisions and changes within their area of responsibility. However, they do not break or bend any rules defined by the company’s guidelines or standard framework protocols. Additionally, it should sabotage the organization’s reputation and go against standard procedures.

This article has been a guide to Holacracy & its meaning. We compare it with sociocracy, adhocracy, and hierarchy, explain its examples, advantages & disadvantages. You may also find some useful articles here –

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