Holacracy as the Next Startup Corporate Structure

Ev Williams, the co-founder of Twitter, has a new company called Medium where there are no managers. This idea of a leaderless organization isn’t new but it’s also far from commonplace. Perhaps the best known organization without managers is Valve Software, which published an amazing employee handbook that describes how it works. FRC Review has a new post up where they outline how it works at Medium without managers using this idea of a Holacracy approach to corporate structure.

Here are some of the key takeaways for Holacracy from the FRC Review article:

  • No people managers. Maximum autonomy.
  • Organic expansion. When a job gets too big, hire another person.
  • Tension resolution. Identify issues people are facing, write them down, and resolve them systematically.
  • Make everything explicit – from vacation policies to decision makers in each area.
  • Distribute decision-making power and discourage consensus seeking.
  • Eliminate all the extraneous factors that worry people so they can focus on work.

Instead of top-down, command-and-control structure, everything is composed of nested circles. A circle can be one person that owns some aspect of the business or it can be a group of people that own it. If a Holacratic organization sounds familiar, it’s because it’s a blend of two things I’m a big believer in: results only work environments (ROWE) and the value of autonomy, mastery, and purpose. Only, it takes it one step further and gets rid of the concept of a traditional hierarchy and instead makes it so that circles, composed of one or more people, make any and all decisions.

Holacracy is a great idea and I’m looking forward to watching it evolve.

What else? What are your thoughts on Holacracy as a corporate structure?

9 thoughts on “Holacracy as the Next Startup Corporate Structure

  1. Radical ideas change the world. Perhaps this will be one of them. I don’t see it, leadership is so important especially in young inexperienced and growing industries. We shall see!

    1. I believe it just requires a different understanding of what “leadership” is. Great leaders don’t often have to force people to do their bidding — they *convince* people that things are worth doing in the first place. In a flat organization, such leadership can arise naturally anywhere.

      “If you want to build a ship, don’t drum up people to collect wood and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea.” – Antoine de St. Exupéry

    2. I think joelgwebber says it well, it requires a different understanding of “leadership”. Or more accurately — a different understanding of where leadership lives. With Holacracy, there is no single leader. However, the leadership *function* is still here, but distributed throughout the company into different circles and roles.

      With Holacracy, you have very clearly defined roles, (example of our company structure at HolacracyOne: http://j.mp/12VqIOY – click on the circles to open them and see the roles). Employees that fill a role have full authority to act autocratically within the boundaries of their role. There is no boss to tell them to do differently. If someone is unhappy with their actions, they can propose a change to their role in a collective governance process. In many ways, Holacracy doesn’t remove leadership, it distributes it so that every employee is a leader in their role — and also a follower of other roles. Here is a 1-min video that talks about this point: http://youtu.be/QGphlvr4jdE

      Disclosure: I work with HolacracyOne, the company offering Holacracy

  2. Great post. During my years at Google, we operated very similarly to what you describe. It does indeed have a huge positive effect over both the short-term and the long-term. In the short-term, people can maintain a “bias toward action” without feeling throttled by gatekeepers. And over the long-term, because we worked in agile-like iterations, we helped each other improve continuously; invariably, as a group we ended up making smarter decisions than any single “heroic manager” would have. Some of these concepts are also explained well in the book “Team Geek”. (Full-disclosure: the authors are friends of mine, but it’s objectively a great book.)

    To make all of this work, how you communicate is crucially important. I believe that there are two key underpinnings. First is transparency, because people acting autonomously can’t make the best decisions – especially if they lack perspective on how their work fits into the larger picture and what the constraints are. Information silos, even with the best intentions of “keeping people focused”, directly undermine autonomy. The second key is ease of communication, because if there are barriers to lightweight, purposeful communication, people just won’t do it. And when people don’t communicate, you get silos, and that’s bad.

    I’m happy to say that we’ve brought this culture with us to Homebase.io. We practice exactly what you’re describing above, and it’s been amazingly effective. Instead of stepping on each other’s toes, we move like a school of fish. There’s essentially no delay between when something is happening and when the entire team knows about it. We can make thoughtful decisions in minutes, and it’s easy to go back later to see what we decided and why.

    I have to think this way of working is the future. Which is great, because it’s a lot more fun, too.

    1. @Bruce Thanks for the insights! If I may… what tools/processes do you use to ensure there is ‘no delay between when something is happening and when the entire team knows about it’ and ‘make thoughtful decisions in minutes’? How do you get new people up to speed on the culture? Or do you specifically hire people who work this way? Thanks! Adam

      1. Hi Adam! Most importantly, it’s a mindset and the culture it produces. Key concepts include transparency, continuous information flow, respect for data, and just enough of a mission statement to provide a skeleton to which people can spontaneously contribute.

        You have to get the ball rolling before you can realize all the benefits, but once you have those pieces in place, the benefits start to rack up. Communication is easier because the team will already be on the same page (due to transparency) and so only tiny bits of ongoing communication are required to stay on the same page. Making decisions is easier because your team will have a clear, instructive mission statement that you refer to often calibrates the team on how you make decisions, because you have a clear sense of what your goals and priorities are. Clear metrics help cut through lots of time-consuming debate.

        And you’re absolutely right that it does interact with hiring a lot, because you need to hire people who:
        1) Are autonomous – when you leave them alone, will they spontaneously do something useful? Will they learn and improve on their own?
        2) Easily cohere with a team, realizing that when you’re working on something big and meaningful, it necessarily requires team cooperation. This boils down to not being overly self-centered as your normal mode of operation.
        3) Have empathy for people on the receiving end of their work. For software development, great hires are programmers whose definition of success is, “Users loved it and got value out of it”. Surprisingly often, the criterion is, lamentably, “Did I enjoy writing the code?” or “Is the code elegant?” For marketing, the best people have internalized that they have to earn every second of their audience’s limited attention, so make it count.

        There’s lots more to say about concretely about tools, processes (including things like assessing performance, etc.). We never found a great set of tools for these core activities, and so we’re building such a tool, which is what our startup does. I don’t want to waste up too much space on David’s blog here, but we also talk a lot about this sort of stuff on the Homebase.io blog and upcoming Learning Center, so please feel free to browse through that as you’re waiting for David’s next blog post.

  3. If they could develop a ROWE for our education system, the level of intelligence of our country would boom. Everyone wants to win, but when your young and in school, good grades are seen as something that makes you ‘less cool’, therefore minimizing each child’s desire to learn. That needs to change.

  4. SHERPA has followed a ROWE-like, holacracy for nealry 7 years now. Doing so has enabled us to have a team of remote “do-ers”, and keep the management hierarchy flat. Here are some of the challenges:

    1. You have to hire people that understand this approach. It is shockingly new for most, and many can’t adapt. They are used to, and most adept and comfortable with, their measure of performance being showing up from 9-5.

    2. Communication and knowledge sharing is key. They need to be part of the DNA of the organization. For SHERPA, we ensure this with daily huddles with a time-sensitive focus on resolving impediments (vs. updating on progress). We also have monthly brainstorming / knowledge sharing brownbags to keep the communication open.

    3. Think in and track key performance indicators (KPI). Why are we doing what we are doing? What am I working towards? Why is the client having us do this project? These are the questions our individual KPI’s answer, and they usually connect with the organization’s bottom line.

  5. The article touts it as “the next startup corporate structure”, but the principles it espouses have been fully functioning in many well-established companies in all industries, and in very small to very large companies, for 50+ years. It’s not a startup structure, but the future of the way businesses will be successful in what we call The Participation Age.

    Bill Gore built a company in 1959 that has 10,000 people and not a single title or manager – no one works for anyone else – see W. L. Gore (google “The Lattice Organization”). Ricardo Semler did it in 1981 (google “Maverick – Ricardo Semler”). Holacracy is only one form of a movement of methodologies reaching for the same result – workplaces with flattened hierarchices that create ownership and responsibility across the board, where everyone can Make Meaning, not just money.

    See our book, Why Employees Are ALWAYS A Bad Idea on Amazon or at http://WhyEmployeesAreAlwaysABadIdea.com. As with HolacracyOne, we’ve been helping companies do this for years and were not aware of them. When a lot of people are moving in the same direction without coordination, it’s a movement, not a fringe idea.

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