Holacracy: Beyond the Hype

CoachHub · 14 May 2021 · 10 min read

Holacracy is a unique way of working, a practice, and a complete system of organizing work. The management approach contains processes and rules that guide an organization towards making better decisions. Being a goal-oriented approach, it is commonly referred to as the boss of the organization.

1. What is Holacracy?

Holacracy refers to an organizational structure, which guides a company towards a decentralized management system where teams work autonomously and all employees get to engage in their work as leaders.

Holacracy constitutes a set of rules that aid in shaping an organization towards better performance. Because of its democratic nature, the rules apply to everyone at the workplace in the same way. No one is above or below the rules, which makes it the best approach to promote agility, humility, responsiveness, adaptability, and flexibility. Holacracy supports the distribution of roles based on experience and skills rather than strength, seniority, or ambition.

The management approach is, therefore, a reinvention of human resource management that has been known by the corporate world. It distributes leadership in an organization, which no longer belongs to the executive team alone. Thus, the consequences of holacracy include:

  • Transparency
  • HR Innovation
  • Greater flexibility
  • New roles for all employees

2. The key Elements of Holacracy

Managers argue that holacracy empowers the workforce to contribute to the organization’s growth. It is possible because the concept supports autonomy and freedom of sharing ideas. The key components of holacracy include:

Purposeful— How can a whole organization stay aligned around its mission? Adopting holacracy makes this achievable by ensuring that there is a focus on purpose at the organization team, and individual levels.

Responsive— Many organizations struggle to adjust to internal and external shifts. Holacracy solves these HR trends by empowering everyone to respond fast to any changes It creates a clear pathway to address challenges and create opportunities for improvement.

Clear— Office politics and guessing games can be draining. With holacracy, a manager can foster clear expectations and transparent authority. The approach surfaces and resolves hidden power dynamics, enabling everyone to be bound by similar rules and digital culture.

Dynamic— Holacracy framework builds dynamic roles. In a single conventional job, the approach can enable tactful managers to scale several discrete roles efficiently, thereby streamlining the work and allowing for accountability.

Antifragile — Resilience, agility, and robustness are all critical features of a successful organization. Holacracy ensures that an organization becomes anti-fragile, making it possible to learn and develop from every experience. With challenging events, an organization can decide on the best solutions to grow itself.

Engagement and motivation — Currently, organizations experience low levels of engagement and motivation among employees. What commonly motivates the workforce include mastery, autonomy, and meaning. These three aspects can be achieved through holacracy. The approach is aimed at promoting autonomy, and it enables employees to improve their mastery of roles and become more dedicated. In addition, holacracy ingrains meaning at all levels, ensuring that every circle makes an explicit contribution to the organization.

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3. Difference between Holacracy and Liberated Enterprise

Organizations with matrix management currently adopt either a holacracy or liberated company management approach. While holacracy refers to the redistribution of powers that are meant to transform the ways a company operates, the liberated company refers to an employee-centric structure that gives employees autonomy and empowerment in making decisions. This makes the latter a state of mind that changes the mentality of management. Holacracy is considered a strategy that integrates different agile methods in order to create a strong performance culture.

4. Holacracy Advantages and Disadvantages

The conventional work environment no longer serves the needs of modern companies, particularly the larger ones. The classical hierarchy or pyramid structure creates challenging decisions that frustrate workers while also promoting power struggle, which hinders frugal innovation and teamwork. The traditional performance management style is also obsolete and promotes disengagement.

Holacracy works the opposite way. Unlike traditional management trends, it considers the well-being of employees. Some of the holacracy pros and cons include:

A. Advantages

  • Gives the organization a purpose

Most companies do not have a specific focus. Medium and small organizations try to do everything with a few staff with a low budget. Large companies, on the other hand, forget their purpose in the long run.

A solution to this lack of focus is through the setting of clear goals. Holacracy is the only means to place purpose in the center of the organization. The approach will consider purpose in every step, from creating the organization to creating new circles and making decisions. Holacratic organizations will first evaluate their purpose before making any decisions.

  • Enhances swift response to change

One of the holacracy benefits is that it enables organizations to respond swiftly to unavoidable scenarios. For example, if a new employee is good at a particular role that is not in their job description, the company will be swift to create a new role to utilize the skill. This way, the employee will get the opportunity to grow professionally, while also imparting positive energy at the organization.

The strength of holacracy has been associated with the ease of a business adapting to new ideas. As such, any business type, whether SMEs or start-ups, can adopt this mode of transparent and agile project management to create a lucrative brand.

With frequent meetings, organizations using the holacratic approach can create a perfect structure for fast decision-making. Conflicts do not have to manifest into bigger problems; the management can easily swift to better solutions.

  • Establish loyalty

With holacracy organizational structure, managers can confidently give a voice to their followers and trust their right to engage in roles without supervision. Additionally, it is a process that addresses tensions before they become major conflicts as well as places the purpose of the organization as a key priority. These core holacracy characteristics help customers and employees to feel valued, comfortable, and understood.

B. Holacratic disadvantages

In a normal workplace setting, employees are used to being guided by the managers. Holacratic innovation management encourages a liberated corporate culture where employees are encouraged to be more responsible and be autonomous in thinking. Indeed, most employees are not ready for this task, and managers are never ready to delegate their powers. This makes the change management process challenging.

In addition, the management approach requires multiple decision-makers, which makes it a long process, especially when there is an emergency. The ‘several persons’ approach makes it a codified mode of governance, thus, time-consuming. This is the reason why the flexible managerial model is recommended for small companies in activity sectors like services and industry.

Another disadvantage associated with holacracy is the lack of consideration of empathy, guidance, and validation. The management approach is often criticized for paying more attention to the production process while neglecting the human resource. While giving workers autonomy is important, it may leave some of them helpless and abandoned if not guided. Humans often feel safe when validated; the lack of guidance may lead to demoralization.

The most difficult aspect of holacracy is the fact that it requires more than just change. A company is expected to make a complete shift in its culture and mentality in order to benefit from the strategy. Keeping this in mind, holacracy may seem a daunting task. However, if the company is able to implement cultural changes swiftly, then it can transform successfully.

5. Holacracy and Organizational Diversity Management

Managing diversity in the workplace is an important aspect of innovation management. Holacracy encourages companies to introduce building workshops to strengthen teamwork. Some of the common activities introduced include escape games, blindfold courses, murder parties, and treasure hunts.

The world is rapidly becoming ambiguous, uncertain, and complex. In the management scene, female leadership is becoming a common phenomenon. Workplace diversity is also popular as most companies are encouraging multicultural working grounds. Holacracy is, therefore, important in organizing the team to be open and agile to integrate these new perspectives to promote diversity and inclusion.

Furthermore, holacratic leadership is associated with remote management. Since the system promotes teamwork in a well-established performance culture, it can guide leaders in managing remote employees.

6. Steps towards a Successful Holacracy Implementation

Not all organizations can be fit to adopt holacracy. Here are some of the key factors to consider when choosing the innovation management approach:

  • What is your company type and size?

Some industries and companies are more suitable for the holacracy management approach compared to others. Organizations that are operating in fast-changing environments are bound to make quick changes, so the need for holacracy is very critical to promote fast decision-making. However, in reliability-driven sectors like defense contracting and retail banking, the common leadership approach used is hierarchical, although some units can implement a holacratic approach.

Smaller companies are the most ideal for holacracy. However, all types of organizations may find it great to implement the strategy.

  • Who are the right people to employ?

Holacracy supports self-management, which is great for every organization. However, the approach is not effective for everyone because it requires minimal supervision and a lot of flexibility to adapt to changes. A lot of people prefer a hierarchical structure where there is someone who guides them on what to do, when to do it, and how to do it. This is, however, different from individuals with an entrepreneurial mindset. Such people prefer a holacratic approach because they are used to autonomy and independent thinking.

Before deciding on whether to adopt the holacracy approach, it is important to understand the type of team you work with. Some of the questions to ask include:

  1. What do the employees need?
  2. How would they benefit from autonomy?
  3. Would they be scared of change?
  4. Is it possible that you will lose great people?
  5. How will you ensure that all employees are treated well?
  • Considering leaders with vision

Self-organization requires the full support of the management team. One way to ensure self-organization is holacracy. A project requires vision and direction, and just like neuromanagement, a Holacratic approach will ensure that the autonomous employees take up their roles and understand why they are important.

  • Communication and training

If your company decides to adopt a holacracy approach, be prepared to face resistance among some employees. Changing to self-management is not easy; it will need a lot of time to adapt. To facilitate a successful process, communication is important. The managers should keenly listen to the people, take their feedback, and address any raised concerns.

7. Holacracy and Transversal Management

Holacracy is based on the principle of autonomy and redistributive power, which makes every employee motivated. Companies that adopt the leadership style give everyone the opportunity to equally engage in project management. The traditional pyramid system that was majorly run by toxic managers has now been replaced by new systems of circles that co-exist among themselves. In such a system, the power given to the management and team heads is minimized so that every employee can take charge of his or her role and mission. As such, holacracy enhances decision-making through frequent circle meetings that allow everyone to express their views.

The act of project management is, thus, a business for the whole team rather than a few leaders. The participatory management technique distributes responsibilities equitably and thus promotes the autonomy of organizations, while creating a real awareness of the company in everyone’s mind. Each employee manager better understands his role and function within the company. He is, therefore, more invested and derives more fulfillment in his work. Furthermore, the team manager acts as a facilitator, ensuring that decisions made are in line with the company’s mission and goals.

If the holacracy completely reinvents the directive and authoritarian management model, it does not endanger the managerial posture for all that. However, the entire company accepts to change its mores and the way it operates. To do this, professional coaching can be of real help. At CoachHub, we empower your teams through a personalized and proven approach that allows you to acquire new managerial skills, strengthen your leadership and create real team cohesion. And all these thanks to group coaching via the most advanced digital coaching platform in the market. What are you waiting for to set up this new horizontal organization?

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