The Jury is Still Out on Holacracy as an Alternative Organisation Structure

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On two previous occasions I have written about Holacracies which are offered as a viable alternative to traditional hierarchical structures. There are a growing number of companies, most notably Zappos, which have embraced the Holacracy model as a whole of company structure. Opinion is divided about its value and relevance; supporters believe it fosters flexibility, engagement, productivity and efficiency, while critics dismiss it as a naive experiment. I am interested to see how and where this concept gains traction. New research findings[1] published shed further light on progress.

To recap, a Holacracy[2] is a widely adopted system of self-management where authority and decision making are distributed among fluid ‘circles’ throughout the organisation and governance is outlined in a Holacratic Constitution. The Constitution sets out how ‘circles’ form, operate and interact, how they identify and assign roles, and what boundaries roles should have.

Findings offer further insights:

  • This self-managed model offers the opportunity for organisations to remain nimble and adaptable as well as have a high degree of adaptability something which traditional hierarchies find challenging to provide.
  • If this concept is to work teams, not individuals, departments or divisions, are the essential building blocks of the structure.
  • The organisation’s Holacratic Constitution is a living document outlining the guidelines by which circles are created, changed and removed, allowing teams to design and govern themselves.
  • Leadership is distributed among roles, not individuals, which allow leadership responsibilities to shift as work changes, as new roles are defined and existing roles become redundant.
  • In hierarchical structures people have a single broadly defined role. In this structure roles are designed to specifically match capabilities with organisation goals which allow people to utilise their specific strengths more frequently.
  • Decisions made closer to the work are more efficient and communication is accurate as decisions pass through fewer hands and are less likely to be watered down.
  • Response to changing market and customer needs is more precise.

However the Holacratic model is not without its challenges:

  • Role proliferation can lead to:
    • Too much fragmentation which actually complicates getting work done.
    • Complicated compensation structures. As a team member expands the number of roles and the number of ‘circles’ of which they are members it is challenging to benchmark remuneration rates.
    • Complications with recruiting as people are hired for roles to meet specific needs. Requirements of the role need to change or other roles are needed as market and customer needs change or emerge.
  • This model was supposed to remove differences in status, however the differences remain and require management.
  • Even with education and development problematic behaviour remains on the part of some individuals and it takes time and attention to remedy.
  • This model can lead to being too responsive and adaptable to customer needs which can be challenging as often customers don’t always know what they want.
  • Time required is still under question as the number of meetings required grows as the number of ‘circles’ grow.

This model has potential where adaptability is required such as in companies that are in start-up or operating in fast changing environments. In companies where reliability is valued ahead of adaptability e.g. retail bricks and mortar, banks, heavy manufacturing, a more traditional model is necessary.

Organisations have not dismissed this model, however they are taking a more measured approach. Rather than taking the wholesale adoption of the model across the organisation they are applying the model where it makes sense to move away from the hierarchy in favour of this more nimble approach.


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[1] HBR July-August 2016 Beyond the Holacracy Hype

[2] Developed by Brian Robertson 2007