Holacracy: The New Management Framework Shaking Up the Workplace

August 12, 2015
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Category: Management

Flat management. Lattice structure. Self-organization. Holacracy. In recent years, there have been a lot of stories about the so-called “best” management frameworks for businesses. Usually these discussions center around a well-known startup that has implemented one on the premise it’ll drive innovation, increase employee happiness, and boost growth. But a recent article about online retailer Zappos has sparked fresh debate–and commentary from other companies–about whether these management structures really deliver employee happiness, or only more management headaches.

So, with all the conflicting reports, what’s the real story behind these frameworks, and are they good for your business? Keep reading to find out.

More Managers, More Problems?

In early 2014, Zappos announced they’d be doing away with the traditional corporate hierarchy at the company, eliminating managers and titles, and transitioning to a management structure called “holacracy.” It was a risky move for the Las Vegas-based company and its founder, Tony Hsieh. But in a Times article, Hsieh asserted it was critical to maintaining the company’s momentum after a period of rapid growth, when the number of managers was increasing and innovation was slowing.

Less than two years later, the reality of holacracy had taken a very different turn for Zappos: Employees appeared to be frustrated with the top-down implementation of the framework by the company’s CEO, as well the complex nature of holacracy. What was supposed to eliminate bottlenecks and increase innovation actually forced many employees to sit in hours of meetings. In response to the unrest, Hsieh fired off a long email to the company and offered a buyout to employees who didn’t want holacracy anymore. A little over 200 employees took it.

Learning from the Zappos Experiment and Others Like It

Zappos and holacracy might have had a bumpy start to their relationship, but other companies have implemented it to great success. Blogging platform Medium (started by Twitter co-founder Evan Williams) is a huge proponent of the framework and even dedicates an entire resource section to its explanation and defense on their site. And it would appear that the holacracy movement is also growing outside of the U.S., where the Amsterdam chapter of a meetup group boasts 216 “holacracy pioneers” including Dutch startup, Springest.

Yet, reminders of the perils of self-organization and manager-less companies continue to emerge. Just last week, Leo Woldrich, COO and co-founder of social media tool Buffer, published a candid post about his company’s experiments with different management structures. In the piece, Woldrich shares that the company recently attempted to “flatten” their organization: removing managers, halting 1:1’s, and encouraging people to pick projects they wanted to work on. The end result? According to Woldrich, things eventually felt “quite odd.” New hires felt lost without guidance, more experienced team members were unclear how they could help out, and there was a general sense that the flat structure wasn’t right for them. Post-experiment, Woldrich observed, “…seeking a flat structure was a misperception of what self-management means.”

So, what else can we learn from companies that have experimented with management structure like Zappos, Buffer, and even Medium? Lots.

Leverage your HR team to drive effective change. Eliminating managers and re-orienting an entire organization would destroy most companies overnight. As Dan Pupius, head of engineering at Medium stated in a post about holacracy, “When you think about a company with no managers there’s a good chance your mind drifts to stories of chaotic ‘meritocracies’, bro-y cultures, and HR disasters.” It should go without saying, but testing out new management practices and structures should be done with the guidance of your HR team. They should serve as the party directly responsible for vetting any changes, taking into consideration the full needs of the organization, versus just the most vocal or popular ones.

Give employees a manager and a mentor. Not all management is bad. But the way we normally think about “managing” is ripe for disruption. At Medium, Pupius says, it’s not that there aren’t individual leaders who help teams reach goals and support their contributions (like typical managers), it’s that under holacracy they’re often not the same person. According to Pupius, this permits employees to have additional sources of support and “allows the organization to recognize different types of leadership.” By giving your employees both a manager and a mentor of some kind, you increase the likelihood they’ll feel happy and engaged at work.

Self-management and hierarchies can coexist peacefully. When Buffer first experimented with their management structure, they did away with a organizational hierarchy, giving employees the ability to pick and guide their own projects, as well as manage them from start to finish. But what they soon discovered was that a flat structure left many employees “lost”, says Woldrich. Unable to get guidance or advice from specific team members, new hires were confused and senior staff felt unable to share their knowledge. This experience helped the team determine that a hierarchy was needed at Buffer so that people could self-manage effectively. For HR professionals considering organizational changes, the Buffer experiment serves as an important reminder to invest the time in finding the management structure that serves your ultimate goals.

Avoid siloed, top-down management changes. Movements are more authentic and compelling when they’re organic. After an organization has grown one way, top-down implementation of a management framework can feel like a dictatorship. This was the case when Tony Hsieh implemented holacracy at Zappos, and could be why so many employees had trouble adapting to the change. Key takeaway? HR should serve as the middle ground between management and your workforce, listening to the needs of both parties, and setting the pace for change that feels aligned with the sentiments of your organization.

Management Structures Aren’t One-Size-Fits-All

While holacracy worked at Medium, it wasn’t well-received at Zappos. And when Buffer experimented with a flat organization, employees felt lost. While these companies are admirable for rejecting the status quo and exploring alternatives to traditional hierarchies, they highlight several clear takeaways for HR pros:

  • Don’t make organizational changes without testing and planning.
  • Evaluate every proposed change in terms of employee happiness.
  • Aim to improve communication between managers and direct reports.

There are even helpful tools out there that enhance communication between managers and direct reports, making it easier to monitor and measure the impact of organizational changes. Tools like these, along with the right level of planning and HR involvement, increase the likelihood that structural changes will make a positive impact on your people and your business.

About

Sonja writes on company culture, employee engagement, and growth. With an M.A. in sociology and a background in business, she's fascinated by people, art, and social movements.

Category: Management


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