by: Greg Satell
When Alfred Sloan conceived the modern corporation at General Motors, he based it on hierarchical military organizations. Companies were split into divisions, each with their own leadership. Authority flowed downwards and your rank determined your responsibility.
Today, a few organizations – like Medium, David Allen Consultants, and Zappos – are adopting a radically different, approach to management: holacracy. Even as someone who has studied alternative management movements, I’ve been skeptical about holacracy, which eschews the standard “org chart” for a system of interlocking “circles.” To understand it better, I recently sat down with Brian Robertson, author of the new book Holacracy, to figure out how he’s gotten hundreds of firms to sign on.
For all of the sturm und drang surrounding the idea, as we talked I realized a lot of holacracy is just codifying many of the informal elements of good management. By getting beyond the particulars of adopting holacracy and taking a deeper look at the issues it addresses, we can see that problem isn’t that hierarchies have somehow become illegitimate, but that they are slow and the world has become fast. Instead of making the leap to an entirely new form of organization — a radical change not without its pitfalls — perhaps we should think more seriously about the problem of agility itself.
Even Brian admits that holacracy isn’t for everyone (I’m still not sure I would want to work in a company that adopted it), but I think every manager could benefit from a better understanding of the problems that it is trying to solve. So whether you are interested in making the jump to holacracy or not, here are four questions you and your company should be able to answer:
1. What’s your mission? While strategy is often seen as a cerebral, rational exercise, the truth is that to a great extent your mission drives your strategy. Management theorists have called a firm’s mission its strategic intent, because it serves as an organizing principle. A mission is why an enterprise exists, its purpose over and above delivering a bundle of products and services.
Southwest’s mission of being the low-cost airline drives everything it does, from the planes it buys to the routes it competes on. Google’s mission is to organize the world’s information, which helps it attract world-class engineers who share its mission. Tesla’s mission “to accelerate the advent of sustainable transport” transcends car manufacturing.
I’m always amazed at how few managers and front-line employees can articulate their company’s mission – and how few companies seem to have a differentiated mission. That’s a real problem. For all of the talk about “empowering employees” and “pushing decision making lower down in the organization,” without a shared sense of mission, none of that is possible without creating chaos.
By eschewing traditional hierarchy, holacracy helps bring the core mission of the enterprise to the fore. Instead of standard job descriptions listing qualification tasks and reporting responsibilities, it assigns roles, which spell out exactly what is supposed to be achieved and those roles are updated at regular governance meetings.
Clearly, holacracy is not the only way to clarify a mission, but the emphasis it puts on giving everyone in the organization a sense of purpose underlines how many enterprises lack a clear sense of direction. It’s something that we all need to pay more attention to.
2. How does work really get done? Most enterprises have rules, regulations, and procedures designed to promote a culture of predictability. Employees are supposed to get to work at a certain time, fill out timesheets and requisition orders in a certain way, and so on. This is supposed to support order and efficiency.
However, the real world rarely conforms to our expectations. Hopefully, in your organization, people have good enough sense to work around rules when they don’t apply.
Unfortunately, this often creates a destructive organizational dichotomy between how things are supposed to get done and how things actually get done. If these two diverge too much, then management loses legitimacy and trust. Once that happens, it becomes hard for people to believe in the mission of the enterprise, even if it is well stated.
Evan Williams, a cofounder of Twitter and Medium, writes that “one of the principles in Holacracy is to make the implicit explicit” and that is certainly important. However, you don’t need to turn your company upside down to do that. Frank and honest leadership is usually enough.
Make sure that you understand and support how work actually gets done in your organization, rather than some preconceived notion of how it “should” be done.
3. How would someone sell you a transformative idea? One of the greatest challenges of managing an enterprise today is that technology cycles often outpace planning cycles, so firms find themselves constantly having to adjust. Holacracy, inspired by Agile software development, is optimized for adaptation, making these types of adjustments as a matter of course.
One of the interesting things about firms that get disrupted is how often they were aware of the idea that upended their business, but didn’t see the potential. Wal-Mart and Sears. Netflix and Blockbuster. Google and Yahoo. In each case, the market leader had a chance to invest or partner with the upstart that eventually disrupted them.
Holacracy continuously adapts through a series of “governance meetings” that reallocate roles and responsibilities. However, that’s a significant investment in time and effort that many organizations may not want — or be able — to make. In industries with a large number of frontline employees, like retail, it probably isn’t practical.
One way to address the problem of adaptation is to ask yourself, if someone had an idea that could transform my company, how would they sell it? If Sam Walton came to you with a new retail concept, or Reed Hastings with a new way to rent videos, how would they get through the front door? Who would they talk to? How would they be received? What if the next great entrepreneur already works for you? Would she fare any better?
These days, every enterprise needs to develop a culture of change. What’s yours?
4. How do you balance cohesion and diversity? It’s become fashionable in management circles to talk about “breaking down silos” in order to improve how information flows around the enterprise. Yet we need silos, which are cohesive units that are optimized for specific tasks. What’s more, the reorganization efforts that are supposed to break down silos invariably recreate them in different places.
What’s really important is to balance cohesion and diversity. Without cohesion, there is no common purpose, but without diversity groupthink will set in and eventually that purpose will lose relevance. So you need a healthy amount of both in order to be able to both operate efficiently and adapt to new information in the marketplace.
A study of Broadway plays shows this in action. Researchers found that if no one in the cast or crew had worked together before, then results were poor. However, if there were too many existing relationships, then performance suffered as well. Traditional organizations often inspire far too much conformity — but I suspect holacracy and models like it will only exacerbate the problem because, ironically, its reliance on informal ties rather than dictates make conformity that much more insidious.. In hierarchical organizations — whatever their failings — leaders can change direction and combat groupthink. It’s not clear to me how that kind of change would happen in holacracy, which is driven by informal relationships to a much greater extent.
The jury is still out on holacracy, and I expect it will evolve over time just as traditional organizations have done. Every enterprise will have to choose its own path. What’s clear is that the status quo is untenable; we all need to ask ourselves some hard questions and continually come up with better answers.
About the Author
Greg Satell is a U.S.-based business consultant.
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