Holacracy Has Some Serious Problems. Here Are 9 Practical Reasons Why

While holacracy may be a really cool concept to some, it has some serious problems.

I was asked on Zoe Routh’s recent podcast show what my views were of holacracy as a way to manage a company.

Holacracy is a system for managing a company where there are no assigned roles and “employees have the flexibility to take on various tasks and move between teams freely”.

The organizational structure of a holacracy is rather flat, with there being little hierarchy.

Holacracy replaces the conventional management hierarchy with a new structure.

In holacracy, instead of operating top-down, power is distributed throughout the organization – giving individuals and teams freedom “while staying aligned to the organization’s purpose”.

It encourages individual team members to take initiative and give them a process in which their concerns or ideas can be addressed.

Proponents of holacracy argue that…

“it empowers team members to freely contribute ideas much like in an idea meritocracy. It is possible because employees from all levels are autonomous and are given the freedom to discuss ideas they believe will benefit the organization.”

Holacracy is a system that removes traditional managerial hierarchies “allowing employees to self-organize to complete work” in a way that increases productivity, fosters innovation and “empowers anyone in the company with the ability to make decisions that push the company forward”.

What I like about holacracy.

  • Movement of people among teams can enhance employee experience and personal development.
  • Empowering people can speed up the decision making process.
  • Flat organization structures typically improve the strategy execution process with the removal of layers in the organization structure.

What my concerns are.

  • The concept looks good on paper but the challenge is how to OPERATIONALIZE the concept without reducing organizational effectiveness and performance.
  • The most appropriate structure for an organization should follow this process:
  • What is the Strategic Game Plan?
  • What are the fundamental processes to use to deliver the Game Plan?
  • What organizational structure is best suited to the processes defined?

The structure chosen must be the most effective one to deliver the organization’s STRATEGY; structure shouldn’t be chosen for any other reason.

You simply can’t “empower anyone in the company with the ability to make decisions that push the company forward.”

In my world that’s a crazy notion :(

  • ️ Staying ALIGNED with the organization’s purpose is a major issue with holacracy; defining the ‘box’ for the teams to play in.

Rather than allowing employees to do their own thing, effective alignment between what people do and what the organization’s strategy says requires Line of Sight leadership to prevent dysfunction and to ensure the strategy for the organization effectively executed.

FOCUS. It’s all very well to have a structure that encourages new ideas but this has the potential for people to ’chase stuff’ —the possible many—rather than stick to the priorities—the critical few— inherent in executing the organization’s strategy.

EMPLOYEE ENGAGEMENT. To maintain executional focus, some employee’s new ideas will not receive attention which would damage the purpose of self directed teams.

  • Teams will COMPETE with themselves which is another version of internal SILO competition which can create dysfunction and loss of focus on strategy execution.
  • Teams have people with varying degrees of skills, competencies and experience. Decisions made by inexperienced teams could jeopardize the overall PERFORMANCE of the organization.
  • The delegation of traditional leadership responsibilities to numbers of teams has the potential of negatively impacting strategic leadership roles.

It could be a slippery slope to the ABDICATION of what leaders are there to do: create a high performing organization that executes its strategy brilliantly!

Zappos executive John Bunch, who co-led the rollout of holacracy, has explained that the company, famous for its exceptional customer service, encountered some “big challenges” in its business metrics and sought to redirect employees’ focus back to the customer (an oft-cited criticism of holacracy is that it is too internally focused).

Like many gee-whiz organizational ideas, the holacracy notion marches to its own drummer rather than being an effective and helpful tool to execute strategy and build performance.

Organization structure should serve strategy and process. Period.

Related: My 4 Simple Ways To Be an Audacious Leader