Organisational structures are being bulldozed in favour of flatter, sleeker systems. But do these minimalist hierarchies actually work? An examination of the most famous example, Holacracy, turns up mixed results.

Up to now, the history of organisational structure has been fairly static. Most systems harken back to the industrial revolution, when top-down approaches solidified and proliferated – the better to control large groups of workers in assembly line fashion. Today, information flows too quickly and skills are too diverse for this to remain effective into the future. As a result, some organisations are casting off these systems all together, and that’s where Holacracy makes its grand debut.  

Holacracy is very much a product of the times, says Michael Porcelli, owner and founder of Authentic Direction Coaching and a Holacracy lead trainer in the US.

“People are hungry for new ways of organising work,” says Porcelli. “So much of the economy is now taken up with people working multiple jobs, people being choosier about the types of work they want to do.”

Holacracy taps into the progression of workplace relationships and expectations, says Cyrille Jegu, managing director of ThrivenAsia, a Hong Kong based consultancy, and certified Holacracy facilitator.

“More people in the workforce want to work for a purpose, they want to work to achieve goals and develop their talents,” he says. “It’s not so much about making money now. People crave change, and Holacracy is booming in places because people are fed up with the standard system.”

Like Porcelli and Jegu, many proponents of Holacracy come from tech sector backgrounds, and it’s easy to understand why. The foundations of Holacracy are built around work flows and time-management frameworks common in IT professions.

Origins of Holacracy

In his early days as a software developer, Brian Robertson, Holacracy’s creator, was increasingly frustrated with his work – not due to lack of interesting projects, but because he didn’t feel he was fully utilising his skills. He also found issues around management and bureaucracy stifling to creativity and innovation. What resulted from this was the ‘operating system’ HolacracyOne.

The term Holacracy was originally coined by Arthur Koestler in his 1967 book on philosophical psychology The Ghost in the Machine. It derives from ‘holon’ and ‘holarchy’. A holon is an element that is part of something larger – like a cell in the body.

Holacracy functions much like this. It’s a series of concentric and overlapping circles where individuals choose the roles and responsibilities they take on, and new circles can form when a project is started and disband at its completion.

However, it’s not as free-flowing and unstructured as some people think, says Porcelli. “It’s very formal in roles and responsibilities,” he says. “No one can just do something and say, ‘Well, that’s Holacracy’.”

“Holacracy bakes in transparency because you have guidelines and clarity around the roles you perform; every player knows their role, their limitations and their power – you can use all of your skills and you aren’t boxed in by a job title,” Jegu says.

If you ask Stephan Jenner, managing director at Telus Partners and Australia’s first certified Holacracy coach, it combines the best of order and chaos.

“Holacracy brings a lot of the polarity you find in workplaces out in the open. Employees have talents and interests to play multiple roles, and because Holacracy is designed to be agile and temporary, it facilitates this.”

Paradoxically, many of these benefits also end up being some of Holacracy’s biggest stumbling blocks. Porcelli acknowledges that while Holacracy is designed to fit any business, it’s easier to implement in smaller, newer organisations.

“Previous decision-making power structures have inertia, and when you have legacy systems in place, people will resist, particularly those who were in positions of authority,” Porcelli says. “Retrofitting is harder. It can be done, but it requires more investment and effort – especially when you bring on more people – and those are the problems that companies are running into.”

Zappos, an e-retailer owned by Amazon, is probably the most recent example of a company struggling to make Holacracy work. Since transitioning to the system in 2015, nearly 20 per cent of its employees have left.

Medium, a blogging platform, is another company that made the switch in 2012 … only to drop the system earlier this year. As Andy Doyle, Medium’s head of operations, wrote in a post on the site: “So we’re off Holacracy. Not because it’s ‘wacky’ or ‘fringe’ … the system had begun to exert a small but persistent tax on both our effectiveness and our sense of connection to each other. For us, Holacracy was getting in the way of work.”

Porcelli insists that an adjustment period is natural. “It will alienate some people, and it’s not an overnight solution,” he says. “You need a critical mass – about 50 per cent of people – to accept it before it gets a foothold.”

The other two musts according to Porcelli are that the highest-level stakeholders need to be behind it, and companies need to invest in training people in the Holacratic system. “It’s not something you can pick up on the go.”

Australia doesn’t have as high a concentration of Holacratic organisations as some other countries, such as the US or France, but Jenner sees it gaining traction.

“It took a while to percolate and get through here,” he says. “I think that it lends itself to the spirit of freedom at work that Aussies like. At the same time, we haven’t gone down a path where we are averse to the, I guess, ruthlessness that’s required from Holacracy.”