The ‘future of work’ is a hot topic, with a proliferation in recent years of books, conferences, events and experts exploring trends and addressing how organisations will need to change in order to be successful in coming years. A recurrent theme across these is the need to shift our thinking around organisational structure. Traditionally, hierarchical structures have provided control and centralised decision-making. The traditional structure has served organisations well in the past, providing a clear and efficient way of organising people, allocating resources, and getting work done. However one of the trade-offs for these efficiencies is often resistance to change - organisations have become slow moving beasts, with many layers of hierarchy blocking innovation from lower levels. We all know that to be successful now and into the future organisations need to be increasingly agile and responsive to change. But in order for that to happen, people who develop new ideas need to be able to execute them. If traditional organisational structures are preventing this from happening, then is it time to change the way we think about structure?
There are now a number of viable alternative management structures emerging in organisations across the world. One of the more well-known models, thanks to some high profile cases such as Zappos (a US based online shoe and clothing shop), is Holacracy. Within the Holacracy structure, power is removed from a management hierarchy and instead distributed across the organisation (in a ‘Holarchy’). The organisation is broken down into roles in order to get the work done, and roles are grouped into circles, which are grouped into broader circles. It’s not that Holacracy lacks structure – in fact it’s quite the opposite. There are clear rules and processes for how the self-organised teams break up their work, and authority is distributed so that decisions are made locally. This all sounds wonderfully empowering and agile, but is it a silver bullet?
As of 2013 there were around 300 organisations globally using Holacracy. The David Allen Company (DAC) implemented Holacracy in 2011 and is one example of an organisation that appears to be experiencing success with the model. Whilst DAC CEO Mike Williams admits that understanding the full impact Holacracy has had on the organisation is a ‘work in progress’, he says that it has helped the organisation improve focus and transparency, reduce expenses and increase clarity around decision-making. He suggests that the key is allowing a transition period for a conscious change in behaviour to occur.
It can be tempting to get caught up in the allure of an attractive alternative to the hierarchical structure that is broadly considered to be past its use-by-date, particularly when the alternative is espoused by high profile organisations. However whilst I like shiny new things as much as the next person, I also want to know that they will really work in a range of situations and environments, not just a handful of cases. As such, I find myself asking a number of questions - is Holacracy just a fad or is it a real, viable alternative to the traditional hierarchical structure? What are the performance implications of such a structure? Would Holacracy work in diverse organisations or is it really just suited for the Silicone Valley start-ups, like the one in which it was founded? What are the downsides to this structure?
PricewaterhouseCoopers suggests that there are ten principles that any organisational structure should be evaluated against, so as a starting point to answering the above questions I consider these principles.
It appears that Holacracy stacks up pretty well against each of the requirements of effective structure – indeed it actually excels in some areas compared with traditional management structures. For example, Holacracy is specifically designed to clarify decision rights and responsibilities and improve innovation and flexibility by distributing authority throughout the organisation in a structured way. By removing management layers, decisions are able to be made quicker, allowing for a more flexible and agile approach to work. In addition, the capabilities of the people within the organisation are leveraged as people can be assigned to multiple roles and complete work based on their skill set and where they can add value, rather than having one set job description as is the case within traditional organisational structures.
In traditional organisations, disruptive organisational restructures are required to make structural changes. However within Holacracy, special Tactical and Governance meetings allow the organisation to make iterative adjustments and improvements based on any tensions or issues that arise. This element of the structure provides a process for eliminating difficult links by ensuring that roles are aligned, and assists to contain costs as roles and tasks are continually evaluated on strategic relevance – roles are not left to become redundant over time.
The principles of organisation design outlined by PwC provide a useful framework within which to evaluate Holacracy as an organisational structure. At first glance, Holacracy appears to stack up rather well. The unique elements such as the self-managed teams, along with the tactical and governance meetings, provide the flexibility but also rigour required to achieve most, if not all of the principles. However, is it the silver bullet?
It is critical to remember that no two organisations are the same – what works very well for one may be very ineffective for another. There are many stories of organisations that have implemented alternative management structures with great success, such as the twelve organisations explored in Frederic Laloux’s book Reinventing Organizations. However for each of those there is potentially another example of where the implementation has failed, or where the true impact of the structure is unable to be determined due to lack of metrics and measurement.
If you’re considering a radical change in the structure of your organisation, you should first consider why and how you think the new structure will achieve the outcomes you are seeking. You may find a framework such as the ten principles helpful in shaping your initial thinking. Then once you have determined that your proposed structure would stack up against each of the principles, its time to consider the prerequisites, conditions and considerations for the structure to be successful within your particular organisation. Keeping in mind that every organisation is unique, thoroughly working through your own cost-benefit analyses will assist you to determine whether an alternative management structure will be worth exploring for your organisation.