A Holacracy is a management strategy and an organizational structure where the power to make important decisions is distributed throughout an organization. It differs from conventional management hierarchies where power is in the hands of a select few. The core principle of a holacracy is self-organization where employees organize into several teams and then work in a self-directed fashion toward a common goal.

Understanding a holacracy

The core principle of a holacracy is self-organization. Instead of having employees waste time waiting for a boss to give them instructions, they organize into several teams and then work in a self-directed fashion toward a common goal.

Indeed, a Holacracy Empowers Employees with responsibility. While they are required to complete their work in a satisfactory time-frame, how that work is completed is left to the teams themselves. This has several benefits for businesses and their employees, including transparency, employee engagement, agility, and better company culture.

Shoe company Zappos and its 1,500 employees are perhaps the most notable example of a company adopting the holacracy approach. 

Valve Corporation, a video game software company, is also an advocate. Employees there can work on whatever interests them, but they must take full ownership of the finished product – whatever the outcome.

Advantages and disadvantages of a holacracy structured businesses

Advantages

• Purpose-driven. With the hierarchical management style removed, individual employees work toward the same goal which is soon reflected more broadly across the business.
• Agile customer service. Zappos noted that as the company grew, they were unable to efficiently respond to customer queries because of a convoluted management structure. A holacracy allowed every employee to deliver exceptional customer service without the need to refer enquiries to more senior colleagues.
• Sets clear expectations. Holacracies by their very nature set clear and transparent objectives, so every employee knows what is expected of them. This negates inefficiencies and the often hidden power struggles that exist in hierarchical organizations. 

Disadvantages

• Difficult to implement in large organizations. Although the transformation of Zappos into a holacracy was a success story, examples of similar businesses doing the same are uncommon. In some cases, vast amounts of resources must be devoted to re-training. Some managerial styles also become entrenched in company culture and are hard to remove.
• Lack of accountability. Loosely defined roles in a holacracy without distinct performance standards make it more difficult for HR departments to measure employee capability.
• Lack of focus. The focus on teamwork can lead to confusion and a lack of focus. Decisions may be debated ad-nauseam, leading to inefficient work practices and the wrong decision being made. Furthermore, some employees have skillsets or personalities that are better suited to solo work.

Key takeaways:

• A holacracy is a non-hierarchical governance structure characterized by self-organized groups who hold an equal share of authority and voice.
• A holacracy empowers employees to become more invested in their careers through open communication and flexible work practices. This strengthens company culture and allows a business to reach its goals. 
• A holacracy creates a purposeful and agile workforce that understands what is expected from them. However, it will not be suited to large organizations with established cultures. The focus on teamwork and loosely defined roles can also lead to substandard employee performance.

Additional resources:

• Successful Types of Business Models You Need to Know
• The Complete Guide To Business Development
• Business Strategy: Definition, Examples, And Case Studies
• What Is a Value Proposition? Value Proposition Canvas Explained
• Marketing Strategy: Definition, Types, And Examples
• Market Segmentation

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