Holacracy: Reaping reward of devolved company hierarchy that is executed minus nit-picking boss

Holacracy: Reaping reward of devolved company hierarchy that is executed minus nit-picking boss

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The March 2015 announcement by Zappos that they were fully embracing holacracy, an organisational structure that they’ve been experimenting with since 2013, has renewed my interest in hierarchy-induced dysfunctionality.

In case you’re not familiar with this approach for structuring teams, you should know that holacracy doesn’t mean chaos. There is still an organisational structure and an organizations chart. There are still clearly defined roles and responsibilities for the positions in the organizations chart. The difference is that these roles, responsibilities and positions are NOT permanently associated with any one individual’s name.

Instead, people flex and adapt to the changing needs of the business, which seems much more sensible to me than sticking to a structure that doesn’t meet the business needs!

Here’s what the founders of this movement have to say about it at HolacracyOne: “Holacracy is a new way of running an organisation that removes power from a management hierarchy and distributes it across clear roles, which can then be executed autonomously without a micromanaging boss. The work is actually more structured than in a conventional company, just differently so. With holacracy, there is a clear set of rules and processes for how a team divides its work and defines its roles with clear responsibilities and expectations.”

Based on this description you might guess that some disgruntled employee who’d been the victim of a poor manager invented holacracy. Perhaps! Bad management is more the norm than most managers would like to admit. One book on this topic, “A Bias for Action”, claims that only 10 per cent of managers truly act purposefully to get the most important work accomplished.

The other 90 per cent waste time procrastinating, becoming emotionally detached and distracting themselves with busywork such as email and meaningless meetings. And anyone who’s been part of a merger or acquisition knows that enormous amounts of time are spent discussing who will get the coveted spots on the combined organization chart rather than exploring how the unified organization will benefit from potential synergies.

The million-piece puzzle challenge

Before we continue, imagine you are in Levi’s Stadium, the new home of the San Francisco 49ers. In the middle of the playing field is an enormous pile of puzzle pieces, and there are 1,000 people in the stadium prepared to help you. The only other things at your disposal are the box that the puzzle came in and the infrastructure available in this 21st century stadium. How would you organise these people? What would you display on the two enormous HDTV scoreboards?

An org chart with department managers for the various parts of the puzzle? I hope not! At the end of this article, I’ll tell you my solution, but first think about yours.

Fixed hierarchies are dysfunctional by design

I’ve always had strong objections to hierarchical organisations. Hierarchies concentrate power in the hands of a few individuals, and power corrupts. In the business world, Bob Sutton’s famous “asshole research” has indisputably shown that people with power have less empathy and less impulse control, think the rules don’t apply to them, and think of their own needs more than other people’s needs.

Although you might speculate that this kind of person is simply more likely to be promoted, Dr Sutton’s research has shown that these behaviours emerge as a result of obtaining power. Any one of these unattractive behaviours might be sufficient to cause employees to seek work elsewhere, but the third one – “thinks of their own needs more than other people’s needs” – should call into question the whole concept of hierarchical organization design.

My own personal experience with hierarchies has been extremely negative, beginning with my family. At the age of 10 I was already beginning to question if it was wise to concentrate power in the hands of those who could not be trusted to wield it with restraint. Entering the military at the age of 18 (mostly to escape my domineering father), I experienced an entirely new type of hierarchical dysfunctionality in this explicitly “command and control” environment. Later, when I worked for HP, I observed that being inoffensive for long periods of time appeared to be the most important criteria for promotion.

Shouting something like “Take your severance package and shove it!” I tried my luck at a series of start-ups, only to find that even small organisations could be tainted by the stench of power poisoning. When I myself finally attained an executive title, the lure of indulging in my power was barely balanced by my enormous sense of responsibility to our organization and our people. I was repeatedly tested, and only the complete collapse of our company during the 2001 dot.com bust spared me from further temptation.

Does hierarchy really improve efficiency?

Some people argue that hierarchies are important to inspire collaboration and efficiently achieve results in teams. Unfortunately for that argument, an HBR article by Zenger & Folkman showed that the 16 most common areas of weakness among senior managers in FIXED hierarchies included:

• Collaboration and teamwork

• Inspires and motivates others

• Solves problems and analyses issues

• Takes initiative

• Drives for results

Looking at the full chart of all 16 fatal flaws (below), I find it particularly disturbing that the No.1 weakness of the worst senior managers is their failure to develop others. And I’m not comforted by flaw No.5 – failure to develop themselves. These two combined signal to me that hierarchies contain within them the seeds of their own destruction.

A simple hierarchy exercise

You might be thinking “Hey, we can’t have a body without a head! We need executives to set the direction and managers to manage the work!” Yeah, I thought so, too. This makes sense in theory, but an exercise that I’ve done hundreds of times over the past 10 years with people from 50 different countries demonstrates quite the opposite. In this 10-minute experiment with a simple hierarchy people are asked to sit in the configuration shown here, with allowed communication paths represented by the red arrows. This organisational structure simulates the chain-of-command communication common in hierarchies. This exercise is done silently, using only post-its for written communication, in order to simulate the primarily email-driven work environments typical in many organisations.

At the start each team member receives a set of symbols. The team’s goal is to identify the common symbol among all team members.

The catch

Only team member A is given the team’s goal in their instructions. Team members B, C and D just receive a set of symbols. Unfortunately, team member A rarely shares the team goal with B, because they assume that all members have received the same information.

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