Holacracy: The Revolutionary Management System that Abolishes Hierarchy

by Brian J. Robertson

As I write this, we are three-plus years into Holacracy implementation, and it seems my five-year projection may be accurate. To change the operating system of an organization is a daunting endeavor. We had prided ourselves on being a relatively with-it company—flexible, open, transparent … But as soon as we implemented some of the Holacracy processes, it became evident that some of our best-intentioned habits and practices would need to be transformed.

Holacracy is not a panacea: it won’t resolve all of an organization’s tensions and dilemmas. But, in my experience, it does provide the most stable ground from which to recognize, frame, and address them.

There are times when many of us would love to prove Holacracy doesn’t work. It’s easy to blame the process as the perpetrator of our discomforts. But trying to poke a hole in the model is harder than implementing it! And in resolving the tensions that it has brought to the fore, it has also deepened our awareness of its practice and implications.

All seemed well just after takeoff, but before long I noticed an unfamiliar light on the instrument panel. “Low Voltage,” it said. I wasn’t sure what that meant—they don’t teach new pilots much about the plane’s mechanics. I tapped the light, hoping it was just a glitch, but nothing changed. Unsure how to respond, I did what seemed natural at the time: I checked every other instrument for anomalies. My airspeed and altitude were good. The navigation aid told me I was perfectly on course. The fuel gauge showed plenty of gas. All these instruments were telling me I had nothing to worry about. So I accepted that consensus and effectively let the other instruments outvote the low-voltage light. I ignored it. It couldn’t be too serious if nothing else was amiss, right? This proved to be a very bad decision. It eventually left me completely lost, in a storm, with no lights and no radio, nearly out of gas, and violating controlled airspace near an international airport. And this near catastrophe started when I outvoted the low-voltage light, which, it turns out, was tuned in to different information than all the other instruments. Even though it was a minority voice, it was one I really needed to listen to at that moment. Dismissing its wisdom just because my other instruments didn’t see any trouble was a shortsighted decision that could have cost me my life.

An organization, like a plane, is equipped with sensors—not lights and gauges, but the human beings who energize its roles and sense reality on its behalf. Too often, an organization’s “sensor” has critical information that is ignored and therefore goes unprocessed. One individual notices something important, but no one else sees it and no channels are available to process that insight into meaningful change. In this way, we often outvote the low-voltage lights of our organizations.

Our organizations become aware of whatever they need to respond to in their world through our human capacity to sense the reality around us. And we humans are all different—we have different talents, backgrounds, roles, fields of expertise, and so on—so we naturally sense different things. Where there are multiple people, there are multiple perspectives. Yet, on most teams, critical perspectives that aren’t shared by the leader or by the majority are often ignored or dismissed. Even when we intend to do otherwise, we don’t have a way to integrate differing perspectives, so we end up falling back in line with the leader or the majority. We outvote the person who may have key information we need to keep on course or move forward.

The human capacity to sense dissonance in the present moment and see the potential for change strikes me as one of our most extraordinary gifts—our restless, never-satisfied, creative spirit that keeps us always reaching beyond where we are.

When we feel that sense of frustration at a system that’s not working, or a mistake that keeps getting repeated, or a process that seems inefficient and cumbersome, we are tuning in to a gap between how things are and how they could be. I call this a tension, because that’s often how it is experienced, but I don’t mean the word in a negative way. We might label this state a “problem” that “should” be fixed, or we might label it an “opportunity” to harness. Either way, that’s just us projecting our meaning-making on the raw experience I’m calling a tension—the perception of a specific gap between current reality and a sensed potential.

how many organizations can you genuinely say that any tension sensed by anyone, anywhere in the company, can be rapidly and reliably processed into meaningful change?

if our sensors had the capacity to dynamically update workflows, expectations, and even the very structure of the organization, in light of whatever tensions arise while getting the work done, without causing harm elsewhere in the process.

That’s a tall order, yet I’ve seen firsthand what can happen in an organization when its systems can do that, and the change goes well beyond creating better work environments or more effective processes. It can catalyze a much deeper transformation by unleashing the power of evolutionary design on the organization itself.

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Organizations have very little capacity to evolve and adapt. They are subject to evolution’s process at the market level and may survive or die as a result, but they are rarely adaptive organisms themselves, at least on more than a superficial level.

Each tension human beings sense is a signpost telling us how the organization could evolve to better express its purpose.

When those tensions can be processed quickly and effectively, at least to the extent that they relate to the organization’s work, then the organization can benefit from an enhanced capacity to dynamically and continually evolve.

This industrial-age paradigm operates on a principle I call “predict and control”: they seek to achieve stability and success through up-front planning, centralized control, and preventing deviation. Rather than continually evolving an organization’s design on the basis of real tensions sensed by real people, the predict-and-control approach focuses on designing the “perfect” system up front to prevent tensions (and then on reorganizing once those at the top realize they didn’t quite get it right).

“The world is becoming more turbulent than organizations are becoming adaptable. Organizations were not built for these kinds of changes.”4

I found this out the hard way in my early experience working in organizations. Most tensions sensed by individuals, including me, simply had nowhere to go. Tensions are just not recognized as among the organization’s greatest resources.

But I soon discovered that even as the CEO of my own software company I was limited. The organizational structure and management system itself became a bottleneck for processing everything I sensed, and the sheer lack of hours in a day became a limiting factor: there was far too much complexity landing on my desk for the organization to fully harness even my own consciousness as its CEO.

The underlying structure, systems, and culture of a modern corporation do not allow for the rapid processing and responsiveness necessary to fully harness the power of every human sensor, no matter what I did as a leader.

despite the power of these new-paradigm ideas and techniques, I routinely see a huge obstacle to their deployment: when they’re applied in an organizational system that’s still conventionally structured, there’s a major paradigm clash. At best, the novel techniques become a “bolt-on”—something that affects just one aspect of the organization and remains in continual conflict with the other systems around it.

At worst, the “corporate antibodies” come out and reject the bolted-on technique, a foreign entity that doesn’t quite fit the predominant mental model of how an organization should be structured and run. In either case, the novel practice fails to realize its full potential, however promising, and we don’t get much of a paradigm shift in the organizational system.

This is a major challenge for anyone applying leading-edge ideas and techniques in conventional systems. How can we evolve some aspect of how we organize, when the innovations we try to use clash with the older paradigm still at play? Everything I’ve experienced continually points back to this conclusion: to really transform an organization, we must move beyond bolting on changes and instead focus on upgrading the most foundational aspects of the way the organization functions.

For example, consider the way power and authority are formally defined and exercised, the way the organization is structured, and the way we establish who can expect what, and from whom—or who can make which decisions, and within what limits. When we change things at this level, we are effectively installing a new organizational operating system, infusing new capacities into the core of how the organization functions, so that we ...

the operating system underpinning an organization is easy to ignore, yet it’s the foundation on which we build our business processes (the “apps” of organization), and it shapes the human culture as well. Perhaps because of its invisibility, we haven’t seen many robust alternatives or significant improvements to our modern top-down, predict-and-control, “CEO is in charge” OS. When we unconsciously accept that as our only choice, the best we can do is counteract some of its fundamental weaknesses by bolting on new processes or trying to improve organization-wide culture. But just as many of our current software applications wouldn’t run well on MS-DOS, the new processes, techniques, or cultural changes we might try to adopt simply won’t run well on an operating system built around an older paradigm.

“social technology”

it’s a new social technology for governing and operating an organization, defined by a set of core rules distinctly different from those of a conventionally governed organization. Holacracy includes the following elements: a constitution, which sets out the “rules of the game” and redistributes authority a new way to structure an organization and define people’s roles and spheres of authority within it a unique decision-making process for updating those roles and authorities a meeting process for keeping teams in sync and getting work done together

A good constitution is infinitely better than the best despot. —THOMAS BABINGTON MACAULAY, Milton

“Research shows that every time the size of a city doubles, innovation or productivity per resident increases by 15 percent. But when companies get bigger, innovation or productivity per employee generally goes down.”

“I’m interested in how we can create organizations that are more like cities and less like bureaucratic corporations.”

we need to scale without losing our entrepreneurial culture or getting bogged down in bureaucracy. So I’m trying to find a way to run Zappos more like a city.”

metaphors for what I’m looking to achieve in an organization is a system we are all very familiar with: the human body. The rather miraculous human body functions efficiently and effectively not with a top-down command system but with a distributed system—a network of autonomous self-organizing entities distributed throughout the body.

Imagine, for example, if your white blood cells, when sensing a disease, had to send the information to your conscious mind and wait for you to sign off on the production of antibodies.

Or if your adrenal glands, sensing that you are reacting to danger, had to wait for your orders before producing adrenaline to give you the energy for fight or flight? This wouldn’t work well at all. And yet it’s how we expect our organizations to function.

top-down, predict-and-control paradigm.

Often, they attempt to empower others, like good parents seeking to empower their children. There’s a predominant view today that improving organizations means getting highly developed, wise, conscious leaders in power to serve as “good parents.”

put others in the role of victims.

reliance on the CEO or equivalent limits the capacity to harness all tensions sensed throughout an organization, and creates a potential single point of failure in the organization’s capacity to effectively govern itself.

What are we to do if we want to move beyond an autocratic management model and the need for empowerment within a disempowering system? How can we reap the benefits of true autonomy, as we do in a city or in our own bodies, while also meeting genuine needs for organizational alignment and control?

danger: if no explicit power structure is in place, an implicit structure will emerge.

I discovered, between having a voice and being able to do something with your voice—being able to actually process what you sense into meaningful change. Consensus didn’t accomplish that. In fact, all it resulted in was long painful meetings where we would try to force everyone to see things the same way. That isn’t helpful or healthy, and it only gets worse as an organization grows.

This is the shift at the heart of Holacracy: the recognition that when the core authority structure and processes of an organization fundamentally hold space for everyone to have and use power, and do not allow anyone—even a leader—to co-opt the power of others, then we no longer need to rely on leaders who empower others. Instead we have something much more powerful: a space where we can all find our own empowerment, and a system that protects that space regardless of the actions of any one individual, whatever his or her position.

on the path of implementing Holacracy, the very first step is for the CEO to formally adopt the Holacracy constitution and cede his or her power into its rule system. By heroically releasing authority into the system’s embrace, the leader paves the way for an authentic distribution of power through every level of the organization.

Even with the best of intentions and great leaders, a top-down authority system leads almost inevitably to a parent-child dynamic between the boss and the employee.

Familiar archetypes are almost impossible to avoid; the result is that workers feel disempowered and victimized, and managers feel overwhelmed by the sense that it is up to them to take on all the responsibility and deal with everyone’s tensions.

When this shift happens in the companies I’ve worked with, it comes as a revelation and a challenge for everyone involved. The workers realize that they are no longer just employees following orders. They have real power and authority—and with those comes responsibility. They no longer have a parentlike manager to solve their problems. The managers, on the other hand, often feel liberated from the burden of management, but have to find a new sense of their own value and contribution, and shift how they’re accustomed to using and holding authority. One of the more interesting parts of my job is to remind CEOs who have recently adopted Holacracy, “You no longer have the authority to make that decision.” And, on the flip side, I also have to remind others that “you have the accountability and authority to make that decision; it’s yours to own, and it’s not the boss’s job to tell you what to do or bless your decision.”

promise of a safe and practical way to distribute real power and therefore allow for self-organization, through a constitutionally defined governance process.

Making the shift wasn’t easy—“It’s training managers to step back and people to step forward that’s really difficult,”

This frees people to take action confidently, knowing that a legislative process has granted them that authority with due input and consideration.