Can an Holacratic Organization Be Successful?

Because of some of the work that I’ve done, one of the things that really interests me is organizational structure. I like peeking into the ways in which an organization functions because I think that we can learn a lot about how and why they succeed. As a result, when I heard that Zappos was going to be transferring over to an holacratic organization, I was very interested:

During the 4-hour meeting, Hsieh talked about how Zappos’ traditional organizational structure is being replaced with Holacracy, a radical “self-governing” operating system where there are no job titles and no managers. The term Holacracy is derived from the Greek word holon, which means a whole that’s part of a greater whole. Instead of a top-down hierarchy, there’s a flatter “holarchy” that distributes power more evenly. The company will be made up of different circles—there will be around 400 circles at Zappos once the rollout is complete in December 2014—and employees can have any number of roles within those circles. This way, there’s no hiding under titles; radical transparency is the goal.

Typically, when people think about organizational structure, three systems come to mind: divisional, functional, and matrix. [Note: as an aside, I wrote an answer for a question on Quora a couple of weeks back about how organizational structure can support an organization’s strategy.] A divisional structure is one in which there is a degree of redundancy to the organization (each division has their own HR, accounting, etc.). A functional structure is one in which there are “shared services,” such that there would be only one HR, accounting, etc. Lastly, a matrix structure is a hybrid of the two.

Now, Zappos is throwing all that out the window and is adopting a new kind of organizational structure: holacracy. To be perfectly honest, I have no idea if they’re going to be successful. I don’t think anyone can honestly say whether Zappos will be successful in this change and in fact, I don’t think we could definitively say that this organizational structure works (or doesn’t) based on how Zappos performs under this structure. However, it’ll certainly give us a window into how a bigger organization (1500+) functions in this kind of structure. From what I’ve read, this is the biggest organization to attempt to use a holacratic system.

One interesting tangent I find to this discussion about holacratic organizational structure is this idea of holons and who’s associated with this idea. I first heard about “holons” in conjunction with Ken Wilber. I’ve written about Wilber only a few times here, but he’s someone who’s certainly worth checking out, if you haven’t already. He presents some fascinating ideas on a number of topics. That’s not to say that he’s right or wrong, but he’ll certainly present a perspective that you likely hadn’t considered. And if you’ve been reading me long enough, you know that I’m a major proponent of perspective. With regard to Wilber, I’m, in particular, thinking about the work he’s done with Spiral Dynamics. That is, I wonder if, in order to ensure that an holacratic organizational structure is successful, would the “participants” of said organizational structure need to be from 2nd or 3rd tier of development or the “yellow” or “green” memes in spiral dynamics.

2 responses to “Can an Holacratic Organization Be Successful?

  1. I shall disclose I’ve been trained in the system.

    Thanks for your article Jeremiah. I’m a major proponent of perspective, and of context, as well.

    There may be one clarification I would like to make. I wouldn’t qualify holacracy as an organizational structure. It doesn’t tell you what kind of structure you should adopt upfront. Rather the system goes meta and provides you a system to evolve the emerging requisite structure – to use Elliot Jaques’s term – over time.

    In Holacracy, the basic organizational unit is the role. A role is made up of three components: a purpose (why it exists; what it aims to manifest) – a domain or scope (what it controls & regulates) – and accountabilities (activities expected of it). Now this might sound like a typical job description but they’re actually very different. People often fill multiple roles in an organization running with Holacracy (conversely several people might fill the same role) and a role is dynamic. It’s a very modular/granular system in that you can reconfigure roles and the relationships between them in real time, based on what is sensed within the organization and its environment.

    You’ll also hear people often speak about circles. But a circle is nothing but a role which results from a process of differentiation and integration. If a role reaches a certain degree of complexity, it will then differentiate into further role(s) which are integrated into a role/cirlce with a wider scope.

    And to answer your last question, I would say Holacracy doesn’t need “participants” to be x, y or, z. Rather , it meets them where they are. But I would use a principle of complexity which says that an intervention in a system needs to be coherent with where the system itself is at. In the case of Zappos, we can safely say that the organization is ready to adopt the system. It is not your everyday company and if I remember correctly, being a little weird is an aspect of their culture. But for other companies, I would say the minimum requirement is for the person who is usually in charge – the CEO, President, MD, etc. – to be willing to experiment with the system.

    • Wow!

      Thanks so much for your thoughtful comment. It seems that what you might read in an article in the Washington Post or Quartz isn’t nearly as descriptive regarding the actual function/makeup of a holacracy. I really appreciate you breaking it down for me/us.

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