For a couple of years now, traditional hierarchical structures have faced criticism for their lack of adaptability and slow decision-making processes. Holacracy, a management philosophy that distributes authority and decision-making throughout an organization, has gained attention as a potential solution. By granting individuals autonomy and promoting self-organization, Holacracy aims to foster innovation, improve employee engagement, and drive organizational growth.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.