Holacracy vs. hierarchy: working without managers? (2/2)

January 25, 2022

Working without hierarchies? To better understand what holacracy is all about, we turned first of all to where this trend has its roots. The idea on which holacracy is based is actually over 10 years old. In many aspects, this idea merges well with the 21st century New Work image of companies as hip places where employees find self-fulfillment and embrace agile work practices in their cool offices. In all honesty, the 2020s revolutionized the way we work in many respects, such as the rise of hybrid working models fueled by the Covid 19 pandemic, yet there are quite a few companies still stuck within their old organizational structures.

New Work with new hierarchical norms?

The majority of traditional companies operate with a hierarchical organizational structure. This means that instructions and objectives come from upper-level management and are passed onto the company’s various fields, departments and employees. A holacratically organized company takes a different approach, distributing decision-making abilities to as many of the organization’s members as possible. However, this doesn’t necessarily mean that there are no longer any hierarchies, but rather, that dynamic hierarchies emerge to serve the purpose of the task at hand.

In practical terms, that means the decision makers can change depending on the task, as opposed to assigning decision-making ability permanently to specific employees, which is common practice in rigid hierarchies. Holacracy allows for everyone to be a decision maker, and for every one to be, at some point or another, the manager. The biggest difference between holacracy and hierarchy can be found within company-wide structures.

In a nutshell, three major differences become apparent when both are compared:

Roles: In traditional companies, every employee has a specific job. What this job entails is mostly fixed and isn’t very adaptable to new situations or developments. In contrast, a holacratic organizational structure is distinguished by its dynamic roles, with the approach being: the task at hand is more relevant than who assumes it. So the question goes from being “who is doing what” to “what has to be done” and “who can do this now”. Roles are constantly changing, along with the individuals who carry them out.
Authority: Holacracy is popularly described as an organizational model minus authority, which is only partially true. When managers within traditional organizations delegate authority, it’s still their word which ends up having the most clout. Authority also exists in holacracy, however, instead of being bestowed upon a certain person, it is divided up among a number of teams, with each team able to operate autonomously while maintaining communication with the other teams. This approach ensures that decisions can be made locally. Holacracy is popularly described as an organizational model minus authority, which is only partially true. When managers within traditional organizations delegate authority, it’s still their word which ends up having the most clout. Authority also exists in holacracy, however, instead of being bestowed upon a certain person, it is divided up among a number of teams, with each team able to operate autonomously while maintaining communication with the other teams. This approach ensures that decisions can be made locally.
Rules and Bureaucracy: Even if it sounds like a cliché, there are many traditional organizations which have established guidelines comprised of both written and unwritten rules. It’s especially the latter which can lead to problems when internal power struggles arise. Holacratic forms of organization uphold transparency, all rules are openly acknowledged and are the same for everyone, which promotes working on equal terms.

Can holacracy be the New Work model of the future?

In general, there are several advantages to holacracy: faster and decentralized decision-making, a higher pace of innovation and flat hierarchies, more equality and motivation among employees, as well as higher productivity and flexibility. For the movement’s supporters, this is the working model of the future. Yet some aspects should also be viewed cautiously, albeit without necessarily wanting to have “the hierarchy” back. Critics point out a lack of interpersonal relations due to the frequent changes which occur within organizational circles or extensive coordination problems between various circles and sub-circles. In addition, some employees feel they’re being given too much free reign, or feel they have unwanted decision-making responsibilities put upon them. The organization’s accountability towards legislative authorities could also potentially create legal issues.

These arguments may well be the reason why so few German companies have managed to implement a holacratic organizational model. On one hand, it’s considerably difficult to change the existing corporate structure in established companies. Many employees are skeptical when it comes to changes and managers are not often very willing to give up their leadership roles and executive authority. However, the increase of project work can be viewed as a tiny step towards holacracy, since this type of work tends to experiment with flexible structures. It’s not surprising that especially startups and NGOs are able to swiftly react to changes and maintain their innovativeness in dynamic market conditions, making them more open to alternative structures. A great example of this are the pioneers from our namesake, Einhorn (German for unicorn). Since 2019, they’ve been integrating holacratic elements into several areas of their day-to-day business, for example, by changing their approach to teamwork, salaries and working times.