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Holacracy's Role in the Future of Work

In Human Resources — by Nicholas R. Larche, Esq.

holocracy future of work

Bureaucracy.

It’s a one-word response to many workplace frustrations. The top-down, hierarchical organization dates back to the Industrial Revolution. It was a method of organizing labor to more efficiently execute repeated tasks with highly predictable outcomes. While the workplace has changed significantly from the assembly line era to the information era, bureaucracy has proved resilient. But is it still the system that organizations should rely on in the years to come?

Certainly, bureaucracy serves a purpose. It’s familiar. It works (mostly), and millions of managers and supervisors have a vested interest in its continuation.

And yet, if a 2015 Deloitte survey is any indication, the future of work is headed in a different direction. Most of the 7,000-plus organizations polled indicated they are shifting away from top-down, hierarchical structures towards more agile systems where individual teams will play critical roles. Of those retaining a traditional organizational structure, a staggering 92 percent cited organizational redesign as a top priority.

So if organizations are moving away from bureaucracy, what are they moving toward? One prominent alternative that has emerged is holacracy.

What is Holacracy?

Holacracy rejects the formal structure of management on which the vast majority of organizations today, and those over the past century and a half, were built. Instead, authority is distributed across interconnected, self-organizing teams (called “circles”) with clearly defined roles.

Shedding the traditional hierarchy in favor of self-organizing teams is thought to promote a culture of continuous improvement. By skirting the approval process that permeates highly bureaucratic organizations, holacratic organizations are, in theory, able to test, implement, and adapt with haste. But how?

While the org chart may be more nebulous in a holocracy, the work itself is more structured. The roles within the organization are vested with authority, not the people who work for it. At any given point in time, it’s not uncommon for people to have multiple roles across different teams. Teams are given a purpose, but decide internally on how to best accomplish it. Since roles are not directly tied to the individuals filling them, roles can be redefined as necessary to achieve key business objectives or adapt to challenges as they arise.

The structure of a holacracy is fluid. Employees don’t have titles. There are no managers, but each circle has a leadership role. Not all decisions have to be approved by that individual and, since it is a role, the individual in that role can change. Seems pretty ad lib, right? While it seems informal, each holacratic organization has a clear set of rules (know as a “constitution”) governing how circles are created, how the work is distributed, and how roles are to be defined.

The Challenges of Holacracy

The core tenet of holacracy is that empowering employees to make their own decisions and execute on them leads to better business results. Decision-making is not a democratic process, but, as everyone has a voice, no one is presumed to have the final word on all matters impacting the business – not even the CEO.

Critical functions like hiring, firing, and compensation have yet to be comprehensively defined.

Not everyone in your workforce wants to make tough business decisions. While that might be the workforce you aspire to attain or develop, some employees would simply rather be delegated work. That turned out to be the case at Zappos, probably the most high-profile practitioner of holocracy. When CEO Tony Hsieh implemented holocracy at the online shoe retailer in 2014, he offered employees the chance to either adopt the policy or take a generous severance package. Eighteen percent of the workforce opted for the buyout, resulting in a 30 percent turnover rate in 2015 (the turnover rate was 20 percent the previous two years).

In a holocracy, each circle is given autonomy to make decisions “within its sphere of responsibility,” provided the circle’s decision does not adversely impact other circles or the business as a whole. You can see how that might be problematic, especially in businesses where functions are often interconnected, yet siloed and perhaps even tasked with competing objectives (e.g., companies that operate on both a B2B and B2C business model).

Certainly, there are cultural and business benefits to the holacratic process, but in a holacracy, process reigns supreme. It is purposed to be an all-or-nothing game… but maybe it doesn’t have to be.

Why Holocracy Just Might Work for Human Resources

Human resources is a function that serves the needs of the entire business. Practitioners have clamored for a seat at the executive table for decades, and not without merit. So, consider the counterargument: Maybe not all organizations need an executive over human resources. Maybe generalists, specialists and coordinators are unnecessary. Maybe holacratic resources becomes the new HR.

The philosophy of holacracy is to “structure the business around the work that needs be done rather than the people who do it.” The separation of role and responsibility leaves you with the work that needs to be accomplished. Once severed, more than one individual contributor can fill the role, together leveraging their talents and their strengths in dividing the work.

A circle of practitioners just might be able to competently execute the broad function that is human resources without titles and without hierarchical management, so long as there are clearly defined processes for the organization of the function or department, how the work is to be distributed, and how roles within the department can be redefined.

Just as with a modern holacracy, the fundamental rules may be made accessible, but perhaps limited to a diverse circle of key stakeholders. That circle, which should be representative of the business, would be able to determine who owns what, what decisions he or she can make, and who to hold accountable for which function. The justification would follow that if you work in a capacity that serves the entire business, then you should be able to be held accountable to it.

A culture of continuous improvement and innovation is just what human resources needs to cease being the dead weight that many people, often unjustifiably, view it to be. It’s what the industry needs to serve the organizations of the future.

Final Thoughts

Holocracy is currently practiced by approximately 70 companies worldwide. Zappos has been incredibly transparent about its struggle with the transition to the new organizational system, to the benefit of other companies that are contemplating making the move. Holacracy, after all, is an experiment, and it’s the nature of experiments that they sometimes fail.

We’re in an era of unprecedented advancement. The competitive landscape of any given industry can alter dramatically with an unforeseen disruption. Any organization hoping to navigate our increasingly uncertain world should explore experimenting with new organizational systems. It’s in this exploration that human resources can play a pivotal role in the future of work.

A version of this post originally appeared on LinkedIn.

Photo: Steve Snodgrass

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