Holacracy
The answer to the “meaningfulness” emerging professionals seek?
Abstract
Gone are the days when your job meant an exchange of time and effort for resources for a decent living standard. Millennials are desperate to find meaning in their day to day jobs, with an urge to make a positive impact in the world and Gen Z’s are bringing the full force to move beyond existing structures, looking for creative alternatives to the nine to five office job and to resolve social issues. Through social media platforms, Gen Zs and millennials have redefined the meaning of what a professional job looks like, the age at which you start being taken seriously, and their capacity and resourcefulness regardless of the educational background. When Brian Robertson, the founder of Ternary, was looking for ways to evolve his own company’s management structure, he adopted and implemented practices that together created a new management structure called holacracy. In simple words, holacracy is an organizational structure based on self-management. On a day to day basis working in a self-managed company means to show up to work and lead through your roles, own the decisions that come with those roles and never lose sight of your team’s purpose and the organization’s mission. Could this be the answer millennials and Gen Z’s look for when searching for meaningfulness in their jobs? Hundreds of companies have and are implementing holacracy believing the corporate world is due for change. Zappos, Royal Imtech and Medium are some of the major companies that are analyzed to discover how holacracy has or hasn’t worked when adopted to their existing structures. Regardless of the range of findings, holacracy has made an impact by proposing an evolved corporate culture with key practices based on its principles that contribute greatly in organizational culture change within existing management structures. The fact that hundreds of companies have chosen to implement holacracy speaks to the strength of the concept, however even without a full adoption of holacracy these practices are strongly recommended when looking for an organization’s cultural change towards meaningfulness.
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What generations today look for in a job
Gone are the days when your job meant an exchange of time and effort for resources for a decent living standard. Like Barry Schwartz says in his “The way we work” TED Talk, as capitalism developed an abundance of job opportunities were created to produce goods and services (TED, 2015). However, along with its development gone were the opportunities of job satisfaction beyond the material gain. And generations today want it more than the monetary glory of a successful career. As a millennial myself I can vouch for my own generation’s awakening to the mental toll meaningless jobs can cause. It’s hard to imagine doing this for 30 or 40 years until retirement. Millennials are desperate to find meaning in their day to day jobs, with an urge to make a positive impact in the world. But Gen Z’s are the ones bringing the full force to move beyond existing structures, look for creative alternatives to the nine to five office job and resolve social issues.
Through social media platforms, Gen Zs and millennials have redefined the meaning of what a professional job looks like, the age at which you start being taken seriously, and their capacity and resourcefulness regardless of the educational background. Let's brace ourselves for what generation Alpha will bring in a few years. It’s all about finding meaning in the work we do by creating value with it for others, and being free to work in many roles, not just one definition of the profession we chose.
When I learned about holacracy I was impressed. It seemed like a futuristic idea of how organizations should evolve from their traditional hierarchy structure into this biologic concept that seems to touch on the points our generations demand. Only this idea has actually been around for more than a decade. Perhaps a red flag on the idea itself or current leaders’ willingness to consider it… And this is what I am looking to find out. Does holacracy work? Could it be the answer millennials, and Gen Zs are looking for?
Holacracy, what is it?
In 2007, a need to evolve the traditional hierarchy structure of companies was already pulsating. It was then when the idea of holacracy was created by Brian Robertson, the founder of Ternary. Robertson was looking for ways to evolve his own company’s management structure when he adopted and implemented the practices that together became known as holacracy. In simple terms, it redistributes the hierarchy pyramid into a set of circles interlacing each other, and holding smaller circles within. For example, in a design company a team working on a new educational building is a circle. Now, that circle may need to collaborate with other circles which is where the “lead link” comes in, a role specialized in connecting teams and guiding coordination. Finally, that circle belongs to a larger circle, which in the traditional structure are known as departments or areas, in this example could be “campus projects” or “architecture” if it’s an interdisciplinary design company.
The idea is based on the following five principles, purposeful, clear, responsive, dynamic and modular. Holacracy on a day to day basis means to show up to work and be your own manager, lead through your roles, and keep the focus on the project’s purpose and organization’s mission. (Explore Holacracy - Holacracy, n.d.) Returning to the example above, that circle working on that new educational building governs itself, meaning it is free to make any decisions necessary to achieve the goals of the project and contribute to the company’s mission. The roles within that circle also govern themselves and have equal authority and decision weight within the team. Equally, the larger circle doesn’t have authority on the smaller circles it hosts but is rather a representative for marketing and business development purposes and a category to use for metrics.
Embedded in these practices also lies a strongly grounded set of company rules, that involve strict report keeping and reviews. These rules contribute to holacracy being a modular structure that can be adopted at the pace that serves best. At the same time, all documentation is permanently available to all of the employees who are also required to write their own document called CLOU, which stands for Colleague Letter of Understanding. Every time they start on a new role of a project they submit their CLOU in which they outline their tasks and responsibilities, timeline, need for resources such as budget, training, collaboration etc., and individual target metrics. These, too, are available for anyone in the company to read and review. The importance of clarity in holacracy comes from removing the office politics which commonly make the path to success confusing, unclear and at times even biased and unfair.
Rossi, 2022
It goes so far as to even being transparent about the availability of open roles in different areas within the organization, allowing anyone to choose which ones to apply for. By allowing employees to apply for the roles they want to work in the company gains from having people work exactly in what they want, therefore increasing expertise, efficiency, productivity levels as well as loyalty. Employees gain from developing their leadership and negotiation skills, especially when competing for a role someone else wants too and from creating a wide range portfolio that propels their growth.
Holacracy can bring these and many other advantages when all the factors within the company contribute to its success, however, it has its limitations.
One has been “holacracy” as a word has become a buzzword, which means there are a lot of skeptics that simply do not believe it would work and are not willing to risk it. Usually these opinions come from senior managers and executives. Another limitation is its adaptability to the company’s growth, the larger it gets the more difficult it is to make sure holacracy is running smoothly. There also seems to be a gap between self-management and coordination at scale, it becomes very challenging to plan efforts at a large scale when decisions are being made at local scale in real time.
Meaningfulness, in what way?
Holacracy started in 2007, which means the generation driving it might have been the millennials. To understand if holacracy is a direct answer to millennials’ and Gen Z’s needs, let’s deconstruct who these generations are and what drives them. Simon Sinek’s episode on Inside Quest says millennials are tough to manage, idealistic, entitled, driven by purpose and, in his words, always looking for “free food and bean bags” (Sinek, 2016). When discussing what made this generation behave this way he identifies four key factors affecting their behavior. Failed parenting, technology, impatience and environment.
Sinek refers to failed parenting as the overprotective way millennials were raised. He mentions schools giving medals to everyone including the kid that finished last, and being raised with the constant phrases of “you’re special” and “you can have whatever you want”. Turns out, that medal given out at school lost all its value when handed out to everyone. That kid that finished last felt worse by being handed a pity medal, and the one that finished first felt like it didn’t matter. It also turns out that after being raised thinking they’re special and starting their first job, they immediately found out how not special they are.
The next factor, technology according to Sinek’s review, became the release of millennials’ anxiety for realizing they are not special and not knowing how accomplishment really feels like. Technology became the platform where millennials could apply a filter to their lives and show a fake overview full of positivity, happiness and success when in reality they are lost and depressed.
Which results in the third factor, impatience. Millennials get instant gratification from growing up with services like Amazon that were able to deliver their urgent need for an aromatic diffuser overnight. As Sinek mentions, this instant gratification hits a wall when looking for job satisfaction, joy, meaning, and making an impact. This impatience results in their resistance to go through the slow and hard way to the top of the mountain.
Finally, environment becomes the final straw. The generation that came before strived for glory and career success. They built mega companies that aimed to get larger and more powerful resulting in a heavy corporate environment that only cares about numbers and monetary success. This is where millennials are landing, an environment where they are unable to overcome the instant gratification, to build their confidence, find balance and find that purpose. Millennials look at the lifetime’s outcomes, not the year’s, but companies are too focused on growing more and increasing numbers to pay attention. The leadership committed to support and help pull millennials to the top is simply lacking. After all this, Sinek’s conclusion is it is the companies’ responsibility to pay attention and look towards the future by helping this generation rise above.
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Now let’s talk about Gen Z. In Mark Zides’ Ted Talk “The difference between Gen Z and everyone else” Gen Z’s are referred to as the “woke” generation. But also the lazy, the digital natives, gamers with no social skills but incredible social media skills. Always looking for that work-life balance and resolve social issues. (Zides, 2022)
Corey Seemiller’s TED talk “Generation Z: Making a difference their way” is a colleague professor that for several years had included 10 hours of community service in her syllabus to bring a sense of purpose to her class. She was completely surprised when her first Gen Z class arrived and was asked by a student if she can count her work for the non-profit organization she created as her community service, leaving Seemiller so surprised that she responded “Yes!” While other students nodded in affirmation. Since then Seemiller investigated what drives Gen Z’s, what do they value as meaningful? She found that 50% of Gen Z’s have an entrepreneurial goal to “leverage their passion to create social change, no interest in creating the next mega company but would rather have a small company focused on resolving an issue they care about” and that 40% want to “change the world by developing an invention” (Seemiller, 2017).
So to compare both, we can say that millennials may be more self-serving by looking to create value for others to fulfill their job satisfaction and feeling of meaningfulness. While Gen Z’s look outwards, recognize that the world is broken and they want to fix it at its core to help others and provide a better future for the next generations. For both though, simply volunteering at a food bank is not enough, that would be accepting living with the issue of hunger. Both millennials and Gen Z’s look to create real value with their everyday actions. We can see that the entrepreneurial environment and the purpose driven principles are embedded within holacracy. Perhaps its promise for meaningfulness has potential.
Self-managed companies - have employees found meaning?
According to Holacracy.org there are over 100 companies implementing it as of today around the world. Zappos, Royal Imtech, and Medium are some of the companies to have adopted it, all with different outcomes. What is clear from studying the journey these companies took to change their organization’s culture and management structure is that holacracy is designed to be customizable to the particular needs for each company and it really does take a considerable amount of time, energy and resources to become fully functional.
Zappos, a large company with 1800 employees and $316 million in revenue (2022) implemented holacracy back in 2013 and has held it ever since. The company’s first order of business was to deploy training to all employees on holacracy and self-management. The next was to offer severance packages to those that didn’t align with it and would rather move on. This became a source for media attention calling the approach radical. However, Zappos’ hiring process has always included a genuine cultural fit as the company’s core value. Upon deciding to implement holacracy, Zappos kept their core value and created their own set of cultural principles.
“Ten core values that drive the culture at Zappos endorse delivery of superior service, embracing and creating change, adaptability and flexibility, learning potential, risk-taking, and highly committed and motivated employees [...] Employees are motivated to work as mini-entrepreneurs, running their respective circles as mini-enterprises.”
Just as holacracy allows companies to customize their journey of self-management towards their mission, implementing it also allows employees the liberty to customize their own careers. At Zappos, employees earn badges that are based on their vital contributions in their roles and skills acquired throughout the year. These badges are metrics used for compensation, sense of accomplishment and healthy competition based on merits. Self-management has also allowed them to become experts of the demographics of their circles. This means that they are able to respond with autonomy to change and emerging market needs faster and more confidently. With this advantage plus the ability to work on several different roles in a year that expertise is multiplied and therefore productivity levels are high.
It’s also important to mention that Zappos has faced senior-level employees’ concern about having their managing power stripped from them. Seems like the self-managed structure only catered to the new generations’ principles and forgot the senior-level’s custom for traditional structure. This contributed to Zappos losing its coveted position in the Fortune 100 list. Zappos’ example of holacracy was able to provide the space to find that purpose and sense of making an impact that millennials look for. By owning their role they are able to explore their confidence, innovate, see direct results of their work and learn to lead at any level they currently are in their careers. This means millennials get the opportunity to create value for the company and for the social issues that apply. On the other hand, Gen Z’s entrepreneurial spirit would be satisfied in Zappos’ version of holacracy, however, their search to resolve social issues at its core and at a grand scale might require a structure that heavily relies on the company’s mission. Not every company would be a good fit, Gen Z’s search for meaningfulness needs a mission and a structure that develops from it. Not to say holacracy is not it, but perhaps depending on the company’s mission it might not always be the best.
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Royal Imtech’s case adopting holacracy remains a case study in business schools today about the challenges of implementing holacracy in a global firm. Royal Imtech adopted holacracy after the CEO attended an executive training course about it in Las Vegas (Roelofsen & Yue, 2017). In 2012, before adopting holacracy, the company faced a major fraud case in their Germany location that involved false reporting to headquarters and million dollars invoiced without delivery of service (Eenennaam & Michel, 2021). This was a major red flag for the company’s culture and ethical behavior. So, when the CEO proposed changing the management structure to holacracy with the enthusiasm that it would result in more time and opportunities for acquisitions and higher revenues the results were far from it.
In 2015, Royal Imtech went bankrupt after the self-management structure caused employees to act unethically in order to meet the ambitious target revenue of that year. The company quickly crashed from being unaware of the unethical behaviors and therefore unable to stop them from happening in multiple of their locations. This is a case where the company’s mission became the reason holacracy heavily contributed to its failure. Cases like this serve as a reminder of why holacracy was created, the principles it’s meant to follow and the need for a mission beyond higher numbers. However, it doesn’t stop companies from customizing it to what works for them, which is why the mention of holacracy in any firm calls for caution especially for millennials and Gen Z’s.
Finally, looking at Medium’s adoption of holacracy offered an approach where self-management was implemented in a customized way and constantly evaluated to the point of reaching a decision making moment. Medium’s mission is “to deepen readers' understanding of the world and to empower writers to share their best work and biggest ideas” (Medium, n.d). By creating a model for digital publishing that supports vital storytelling without advertising, Medium looks to provide a space where deeper connections can be forged between readers and writers as well as promotes substance and authenticity. Needless to say, Medium’s essence is already aligned to holacracy’s principles and values, which is why it was a smooth transition when adopted. The adoption came in 2013, monitoring carefully how it was working, constantly reviewing and checking in, molding it to adapt to Medium’s particular needs. (Doyle, 2019) The employee’s job satisfaction was achieved since they became so connected to the company’s mission that they found meaning in improving their connection with its users as well as creating value for the firm as for the writer’s industry. However, they announced in 2016 that the company was moving beyond holacracy as the challenges they faced to coordinate efforts at a larger scale proved they needed to evolve the structure into something that supported these types of strategies. Still, the CEO of Medium praised holacracy and stated his position against the media’s skepticism on the concept. Although holacracy did not remain for the long-term it has become embedded into the company’s culture even as they’ve moved into a hybrid of centralized and decentralized management structure.
Verdict
Considering the millennial's definition of meaningfulness, holacracy appears to have been designed for that. By creating a management system that removes the limitations that millennials have had no choice but to face in corporate environments, holacracy provides the field for this generation’s leadership development. Leadership development in millennials is the essential missing element to reach the ideals of this generation. Like Sinek mentioned, millennials are impatient, and they are impatiently looking to find ground to transform the way we work, create shared value between companies and communities, and advocate for an employment and organizational management system designed for human nature and not numbers.
Gen Z’s on the other hand, like Seemiller stated, want to change the world by resolving issues at their roots. Zappos, Royal Imtech, and Medium’s cases show holacracy is definitely dependent on mission, plans for company growth, and particular strategies. Two of the three are not using holacracy anymore granted, it was precisely Royal Imtech’s doom, but Medium used it to its full potential until their needs to go beyond made it impossible to mold holacracy to stretch that far. Zappos, although still uses it, is not considering the range of generations that work at the company which means holacracy to an extent is inflexible. Gen Z’s ideals go farther than millennials’. I believe holacracy would fall short for what this generation’s definition of meaningfulness is.
All in all, holacracy is a great first response to the needs of today’s generations that is still evolving and perhaps will find a way to break through its current limitations. Evidently, it has been influential enough to have persuaded hundreds of companies to try it out. Which is a success in itself, proving that the structure is compelling and robustly designed. Regardless of holacracy’s limitations, there are key practices that were created based on their principles that make a big impact in organizational culture change with small actions in any organization structure. Referencing the Harvard Business Review digital article “How Self-Managed Companies Help People Learn on the Job” these are the three steps that contribute greatly to cultural change (Bernstein, Canner & Dobbs, 2016);
Pretend everyone is a volunteer that wants to be there but also has no obligation to stay. This way you can ensure that the work is being driven by the mission, the reason they choose to work there.
Make roles more fluid. The article mentions Google as a creative example of a hierarchy structure that promotes flexibility and self-management in choosing roles across departments. This allows employees to find direct connections between their work and the mission.
Differentiate “working on” and “working in”. The former being the topics that focus on governance and the “how we work” conversation and the latter being the specific work to get done within the structure. Both conversations are important to have among teams. Inclusion and transparency goes a long way to build loyalty to the mission and to the company.
While these steps can be implemented to any company with any mission for cultural change they can also be catered to start ups who already have a culture like this and become fundamental company values. By following these steps and continuing the search for meaningfulness, I have no doubts millennials will find more ways to improve holacracy or even create better management structures for Gen Z’s, who will likely come in and completely revolutionize them, setting it up for the next generations’ success. Either way, I’m looking forward to the great ideas these generations will bring.
Fitzsimmons, 2018
References
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Images
Fitzsimmons, G.H. (2018). Save the Millennials [Image]. Daily News. https://dnews.com/opinion/cartoon-save-the-millennials/article_5bbb9a02-ccf4-11e8-99c5-1f6cdff2beb1.html
Freepik. http://www.freepik.com
Rossi, L. (2022). Unconventional Team Structure (Part 2) [Image]. Refactoring. https://refactoring.fm/p/unusual-teams-2
