Exploring the Pros and Cons of Holacracy

We introduced Holacracy at COBE approximately five years ago. This meant ditching a pyramid organizational structure where all decisions came from the top and welcoming a decentralized, more flexible one. In a holacratic structure, teams (we also call them circles) are formed around specific projects or tasks, working towards a common goal. Within those circles, each team member takes up a certain role and has the autonomy to make decisions within their area of responsibility. 

How Holacracy at COBE Works

• Roles and Circles: Holacracy replaces traditional job titles and hierarchies with flexible, changing roles. Each role is assigned according to the person’s skillset and, of course, the current demands of the company. It’s important to note that roles follow the organization’s purpose and can cover various functions and tasks. Team members can even be nested within broader circles that represent semi-autonomous teams or departments.

• Governance Process: Holacracy uses a defined governance process to create and modify roles, accountabilities, and policies within the organization. This process involves regular governance meetings where participants can propose changes and modifications to their team members. After evaluating those proposals together, we make decisions based on how they affect the organization’s purpose. 

• Tactical Meetings: Tactical meetings, also known as check-ins, are held to address any day-to-day operational issues and to ensure that work is progressing smoothly. All role holders use these meetings to update others on their progress, discuss challenges and seek help, or input, from other team members. All in all, tacticals help the team to synchronize efforts and facilitate coordination. 

• Role Assignments and Accountabilities: Each role in the Holacracy circle has clear accountabilities and expectations associated with it. These accountabilities define the work and responsibilities of each role. Every role assignment is made based on the skills, interests, and capacity of an individual. But, one individual can be assigned multiple roles, simultaneously. This means that a UX/UI designer at COBE can also be a photographer if they are skilled in this area. This allows the organization, as well as the employees, to leverage their full potential – even besides their core skillset.  

• Decision-Making: Holacracy emphasizes a distributed decision-making process. This means that we share authority across roles, rather than concentrate it in a traditional management hierarchy. The role holder that’s closest to the specific issue makes the decisions. The decision-making process is often accompanied by a defined set of rules and procedures, ensuring transparency and fairness at all times.

• Rapid Iteration and Adaptation: Holacracy encourages an iterative approach to organizational development. It promotes experimentation, learning, and continuous improvement. Regular meetings and processes provide opportunities for individuals and teams to propose changes, test new ideas, and make adjustments as needed to improve performance and effectiveness.

Over the years, Holacracy has proven to be very beneficial to COBE. However, like any approach, it has its advantages and disadvantages. So let’s delve into the pros and cons to provide a comprehensive understanding of Holacracy’s benefits and potential challenges.

Pros

1. Enhanced Autonomy and Empowerment

Holacracy distributes authority and decision-making, granting team members more autonomy in their roles. This empowerment can lead to increased job satisfaction and engagement, as individuals feel a sense of ownership and responsibility for their work. By eliminating bureaucratic hurdles, Holacracy encourages team members to take initiative, make decisions, and be innovative. This has shown to work extremely well at COBE. In our internal surveys, our team has shared multiple times that they feel like, this way, they’re making an even bigger impact on the organization.

2. Improved Agility and Adaptability‍

Traditional hierarchical structures can be slow to respond to changes in the market or internal needs. Holacracy’s dynamic nature enables organizations to adapt more rapidly. By decentralizing decision-making, it facilitates faster response times and encourages experimenting. We’ve been practicing Holacracy for over five years now, and one of the important things we learned along the way is to react extremely quickly to changes. Take this example, for instance: if we’re asked to provide an extensive case study about AI, we’ll introduce the role of e.g. “AI Expert” into one of our circles, search for a person who’s already familiar with the topic and wants to learn even more about it and assign it to them. What’s important to note here is that introducing a new role is never a top-down decision. We create them on an “expert level” and they don’t have to get clearance from a higher level. Sometimes, this leads to creating short-term roles, but nevertheless, an iterative approach like this leads to the organization always adapting to new circumstances promptly.    

3. Clarity and Accountability

Holacracy introduces a clear set of rules and processes for defining roles and responsibilities. This clarity helps avoid ambiguity and confusion within an organization, ensuring that everyone understands their individual roles and contributions. At COBE, we have fixed role definitions, but we’re pretty flexible about who fills them. Once we define the role, we search for the best fit for it. For example, if it’s a designer who has always had a thing for copywriting, we know who to assign the role of the copywriter to. The important thing to note here is that the designer doesn’t have to give up their design role for their role in the circle. Most people at COBE have more than one role.

Additionally, Holacracy promotes transparency, as we document all decisions and actions, making it easier to track accountability and measure performance.

4. Increased Innovation and Collaboration

By breaking down silos and fostering cross-functional collaboration, Holacracy facilitates the exchange of ideas and knowledge across teams and departments. With increased autonomy and a focus on self-organization, our team is encouraged to contribute their unique perspectives and expertise at all times. This enables us to tap into the collective intelligence of our workforce, which leads to innovative and creative solutions. Holacracy has made us much more solution-oriented in general; Everyone inside the circle knows their role, they own it, and they understand that they’re in charge of finding solutions for structural problems. Most importantly, Holacracy enables us to optimize our strong COBE potential. In our team, you'll find specialists who are experts in their own areas, while also being highly skilled in handling other tasks. 

Now, let’s examine the cons.

Cons

1. Potential Role Ambiguity

In Holacracy, traditional job titles and hierarchical reporting structures are replaced by roles and circles. While this provides flexibility, it can also lead to confusion and role ambiguity. If your team doesn’t understand their responsibilities, it could easily result in work overlaps. To overcome this challenge (or to prevent it from occurring), it’s important to be transparent about the role inquiries and to provide adequate training if necessary.   

2. Lack of Centralized Decision-Making‍

Having decentralized decision-making has its pros, but sometimes it can prolong the process of coming to a conclusion. Some decisions simply require input from other roles or circles – without a centralized authority, this can lead to delays or blockers. Once again, to avoid this, it’s important to communicate effectively. One way to do this is to introduce a meeting with leaders from different circles into your structure. Then, every once in a while, they can align with each other efficiently. 

3. A Possible Cultural Shift

Implementing Holacracy often faces resistance, skepticism, or lack of understanding from those who are used to a more traditional hierarchical structure. This is why it’s important to invest in comprehensive change management strategies and provide adequate support and training to facilitate the transition. To achieve this, we hired an external consultant who helped us with change management. Other than that, we defined a handful of Holacracy advocates who played a vital role in promoting and implementing the new organizational design.

4. Potential for Increased Workload

Since Holacracy adds responsibility, there’s a possibility it could lead to increased workload or stress. This is why it’s important that everyone has the necessary support, resources, and ability to be transparent about their feelings and needs. On the one hand, we’ve had colleagues that took on too many roles at once, and on the other, ones that didn’t want to fill another role in addition to their core skills. To avoid this, it’s important that the circle leads align on a regular basis and make sure that every team member’s workload allows for a maximum impact. Fostering a culture of authenticity, openness, and encouraging honest discussions about one’s workload is an essential part of managing this issue. 

Final thoughts

Holacracy presents a compelling alternative to traditional hierarchical structures, offering increased autonomy, adaptability, and innovation potential. On the other hand, implementing Holacracy requires careful consideration of its potential weaknesses, such as role ambiguity, cultural shifts, and workload concerns. If you address these challenges effectively, your company can utilize the benefits of holacracy while minimizing any potential downsides. 

For us, it’s an operating system that allows just the right amount of flexibility and adaptability. We realized that following Holocracy by the playbook can lead to a certain overhead of meetings and discussions, which is why we adjusted it to fit our organization’s characteristics and needs. In a way, we have built our very own version of Holacracy, and I’m sure that today, nobody at COBE, could imagine switching back to the traditional pyramid structure anymore.