Holacracy: What Is It, and How Does It Work?

A holacracy is an organizational structure that distributes authority throughout an organization, empowering employees to execute their roles with complete autonomy. While holacracy can help organizations adapt quickly and gain organizational transparency, it is not a fit for every company culture.

What Is Holacracy?

Holacracy is an organizational framework that is self-governing and gives employees autonomy to lead in their roles without asking for permission or seeking consensus.

In a traditional hierarchical system, employees often have to escalate an idea up the corporate ladder for approval, which can be inefficient, prevent valuable frontline insights from being heard and stop change from happening. A holacracy, on the other hand, empowers workers to take ownership of their domain, propose solutions to organizational hurdles and make group decisions using a structured, transparent process instead of navigating office politics. While it may sound like anarchy, its rules and processes are more detailed than a typical bureaucratic organization. 

The term ‘holacracy’ was created in 2001 by Brian Robertson, the founder and CEO of now-defunct Ternary Software, who wanted to develop an organizational structure that reflected agile principles and collective decision-making.

 

How Does a Holacracy Work?

In a holacracy, teams have more autonomy to execute and propose ideas without building consensus or running things up the chain of command. To implement and maintain this kind of structure, founders and CEOs ratify the Holacracy Constitution, allowing holacracy’s governance process to determine who has decision-making power.   

In this decentralized configuration, everyone in the organization knows exactly what each person is working on because the expectations of each role are laid out in detail, made visible throughout the organization and updated on a regular basis. By explicitly stating what each role can expect from each other, teams can prevent inaccurate assumptions and misunderstandings that lead to workplace conflict. 

Meetings are formatted for focus and efficiency, and a clear process for decision-making eliminates the need to gain consensus and navigate complicated power relationships. Instead, a holacracy gives employees a clear-cut process to change the dynamics of their role, their team or the organization overall. 

 

Elements of a Holacracy

Work Is Organized Into Roles

The structure of a holacratic organization takes shape around the work that needs to be done. When an objective is identified, a role is created with a distinct purpose and “accountabilities,” or deliverables expected from that role. Those accountabilities are regularly updated as projects evolve.  

Employees have complete autonomy to take whatever actions they deem appropriate to achieve a role’s purpose and accountabilities, provided those actions do not violate the rules or infringe on another role’s purpose.

Employees opt in to fulfilling the roles that interest them — even if they’re in other areas of the company. Employees typically take on multiple roles.

Groups of Roles Form ‘Circles’

Each role belongs to a team, or “circle,” with a shared purpose. Each circle has regular tactical meetings — typically once a week — to give updates, resolve any issues and sync its efforts toward reaching its purpose. Circles also have governance meetings — typically once a month — to improve upon the operations of the circle and to update the accountabilities of each role. 

The accountabilities and purpose of each role and circle are visible to the entire organization through software platforms like GlassFrog and Holaspirit.

Circles Interact Through ‘Links’

Representatives from each circle regularly meet with the larger circle that encompasses them. For example, a social media circle may be a sub-circle of the marketing circle, which is a sub-circle of the broader organization.

A circle’s “rep link” speaks on behalf of the sub-circle, aiming to resolve any larger organizational constraints that might be causing tensions for that circle. The circle’s “lead link” digests information from the larger circle discussions to ensure the sub-circle’s work is in alignment.

The lead link is also tasked with keeping the circle focused on its purpose, which can include setting the strategy for the circle, assigning employees to roles and routing information or requests to appropriate roles within the circle.  

 

Benefits of Holacracy

Transparency and Clarity in Roles and Responsibilities

In a holacracy, everyone can see exactly what is required of each role and each team, and the process for changing those expectations is laid out in a detailed governance structure.

“There’s a clearly defined ruleset that tells you exactly how everything works in the company,” Robertson told Built In. “And if something’s not working well, you know exactly how to go and propose a change to that.” 

That level of clarity is helpful for diagnosing problems on the organizational level and efficiently finding the right role or circle to consult on a given topic. It can also be helpful for people — especially those in technical roles — who struggle with navigating workplace politics, said Ad Astra CTO Geoff Vandegrift, who experimented with holacracy in a previous role. 

“So many conversations could happen but don’t because they don’t want to complain about a coworker or something,” Robertson said. “Having a defined process makes it very much not about that. It enables conversations to happen that otherwise often don’t.”

Agile Decision-Making and Faster Adaptation 

In a holacracy, the structure takes shape to meet the demands of the work. A role or circle might form to achieve a certain goal, and then it might be disbanded and replaced with something else to meet the next goal that arises.

The decision-making process of holacracy is also designed for agility. Decisions don’t require consensus, and proposed changes can only be rejected if they interfere with another role’s work. That’s much different than a traditional hierarchical structure, which tends to support the status quo through institutional inertia.

“Hierarchy breeds dysfunction,” Vandegrift said. “You want to preserve your territory, you want to preserve yourself, and you’re doing it against the better of the needs of the business.”

Increased Ownership and Employee Initiative 

By giving employees the autonomy to lead their roles without asking permission, Robertson said employees start acting more entrepreneurial, almost like co-founders of the company.

A more traditional structure may involve a manager or higher-up telling an employee what to do. But when an employee has the freedom to make decisions for themselves, they may feel more responsibility to see their decisions through. More control over their day-to-day actions can also instill a greater sense of purpose in employees, further motivating them to perform their best work and take the lead on finishing tasks.     

 

Disadvantages of Holacracy

Significant Time Investment and Learning Curve

Holacracy has a steep learning curve, and many companies hire a trainer to help them implement it. The learning curve varies greatly based on the team, Robertson said, but generally it takes a team about six months of slower-paced work before it starts to see a ROI that compensates for the initial time investment.

“It’s hard at the beginning, but once you hit this critical mass, it’s like lighting a fire in a dry forest,” said Frank Cuiuli, founder and CEO of Australian Salesforce consultancy 8Squad, which practices holacracy. “It just spreads quickly because you’ve got all the raw materials there.”

Potential for Too Many Meetings

One common complaint is that holacracy has too many meetings, many of which are focused on internal operations and the governance process. If an employee fills five roles in two or three different circles, for example, they might have to attend weekly tactical meetings and monthly governance meetings for each role.

On the other hand, the structure of the meetings are more efficient, Robertson said, and prevent tangential topics from being considered. One company found that its average amount of time spent in meetings decreased 90 percent after six months of holacracy practice, according to Robertson.

Difficulty With Change Management 

Beyond the learning curve, adopting a holacracy also requires a change of mindset. Employees who previously looked upward for direction will have to learn how to take ownership and be accountable.

Experienced leaders might say they like holacracy, but Cuiuli said they sometimes revert back to “their traditional behaviors of using relationships as a tool for getting things done.”

“In a hierarchical system, the personality will always trump the process,” Cuiuli said. “It’s the person with the title and political influence who will ultimately make the tough decisions.”

For a holacracy to work properly, though, everyone needs to buy into the reasoning behind holacracy and make the effort to learn a new way of working. 

That degree of change management can be difficult for an organization. Because holacracy has not been widely adopted, there’s not a lot of resources available. Cuiuli said it would be helpful, for example, to have a network of other holacracy practitioners that could support each other and share what they have learned in their journey.

 

History and Origins of Holacracy

Brian Robertson was the founder and CEO of Ternary Software when he developed the idea for holacracy in 2001. He was influenced greatly by the agile methodology for software development, which allows teams to adapt quickly to change instead of adhering to preconceived plans. He was also inspired by other self-organizing and collaborative decision-making philosophies, such as sociocracy.

Eventually, Robertson came up with the name “holacracy,” which was inspired by Arthur Koestler’s 1967 book The Ghost in the Machine. In the book, Koestler uses the term “holon” to refer to the concept of a whole organism that is also a part of a larger whole. These holons are connected through a hierarchy called a “holarchy.”

In early 2007, Robertson and co-founder Tom Thomison launched HolacracyOne, a company that trains other organizations to use holacracy. They drafted the first version of the Holacracy Constitution in 2009.

Holacracy rose to prominence in 2014 after it was adopted by Zappos, a giant online shoe retailer that had a staff of 1,500 employees at the time. Blogging platform Medium adopted holacracy around the same time. Both Zappos and Medium have since backed away from holacracy.

 

Examples of Holacracy

Over 200 companies use a holacracy model, according to HolacracyOne. Below are just a few examples. 

8Squad

8Squad is an Australian Salesforce consultancy with more than 90 employees. The company practiced its own version of holacracy when it launched in 2019, but it decided after 18 months to implement the textbook version of holacracy.

David Allen Company

David Allen Company certifies and trains individuals and teams in the work-life management system Getting Things Done, named after Allen’s best-selling book from 2015.

Zappos

The most prominent example of a holacracy is Zappos, which adopted the framework in 2013. Shortly thereafter, 18 percent of its 1,500 workers voluntarily took severance packages, with some citing holacracy as the reason. The company has reportedly backed away from the traditional version of holacracy, although a company spokesperson told Built In that it has always used a hybrid version of holacracy that best fits its needs.

Mercedes-Benz.io

Mercedes-Benz.io is a startup founded in 2016 under the Mercedes-Benz umbrella. The company embraced holacracy as a way to match the agile nature of its products and achieve its mission of rapid growth. A 2021 research paper reaffirmed Mercedes-Benz.io’s strategy, exploring how a holacratic approach has enabled the company to keep pace with digital transformation. 

Medium

Blogging platform Medium also adopted holacracy around 2013, but it dropped it by 2016. The company’s former head of operations wrote that codifying role responsibilities was too time-consuming and that teams had difficulty gaining alignment on cross-functional initiatives. 

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