Holacracy: Post-Hierarchical Organization with Empirical Process Control

I had the privilege of putting my thoughts on Holacracy and evolutionary, or post-hierarchical organizations together for a talk this week at an executive and organizational development event.  I posted the slides on my SlideShare, but I thought I should try to coalesce my notes and outline here for consumption.

I started with a quote from Peter Drucker and asked “What would it look like to design an organization?”

The fundamental task of management remains the same: to make people capable of joint performance through common goals, common values, the right structure, and the training and development they need to perform and to respond to change.

Hierarchy and centralized control create fragility. We need a post-hierarchical antifragile organization designed for robustness and survivability.

From Industry 1.0 to Industry 4.0. 100 year old management theories from the Industrial Revolution will not survive in the digital age and as we enter the age of IoT and cyber-physical systems. Organizations are complex, adaptive, human systems.

    • Industry 1.0   1780s — mechanical production, water and steam power
    • Industry 2.0   1870s — mass production, division of labor & electrical energy
    • Industry 3.0   1969 — automation, electronics and IT
    • Industry 4.0   tomorrow — IoT & cyber-physical system.

Complexity increases with each new era.  The military term VUCA (Volatility, Uncertainty, Complexity, Ambiguity), coined at the US Army War College after the cold war has been in vogue. Organizations are complex, adaptive, human systems.

Traditional Managers and Staff functions give leaders a sense of control over workers, from an era when laborers were not thought capable of thinking, They treat organizations like they are machines, with a mechanistic, top-down approach. Managers quite often only serve as an information conduit – push decisions down, and send information up. People conform to McGregor’s Theory Y (intrinsic motivation), not Theory X (pessimism, control), and traditional management theories will not prepare us for the complexity of the future.

A Word on Millennials. A study somewhere (forgive me for not identifying the source) states that 4.6M 26-year-old “echo boomers” will define the world of work in the 2020’s. They will crave a new system or organization based on the peer-to-Peer architecture they grew up with. Millennials are often described as hard to manage because they grew up with the internet where anyone had a voice, where everything was connected in a network. They want a new system of organization (Web Kids). The TCP/IP (Transmission Control Protocol/Internet Protocol) – peer to peer architecture of the internet designed for robustness and survivability — should be reflected in our organizations.  In this way, we have any-to-any connections, not one-to-many. Millennials will soon be the largest generation in the workforce, and companies need to find a way to design new organizational systems in order to attract them. 

A Few Visionary Companies. I cited a few examples of companies experimenting and paving the way.

  • Buffer: Distributed Wholeness & Alignment — no physical office, sense of family
  • AgBiome: Conflict Resolution ProtocolsAgents and Development Coaches
  • Valve: Self-Organized Project Teams people move their desks to form teams to work on what they have passion for
  • Buurtzorg: Decentralized, Autonomous Teamsover 8,000 nurses working in neighborhood teams
  • Happy Melly: Peer-Based Rewardspeers determine rewards based on points
  • Semco: Self-Set Pay — Company Financials are completely transparent, and employees determine own pay

 

 

We see a few trends here among these companies. Radical transparency and high trust. A culture of team accountability for performance and delivery. Employees able to choose the most valuable work that they can do. Protocols and procedures for conflict resolution and decision making. 

An evolutionary organization. Holacracy is founded on Sociocracy. Created by Brian Robertson in 2007. It offers Social Systems Design, A Cultural Operating System, Agile Governance, &Continuous Participatory Change. 

Social Systems Design.  With social systems design, we move from mechanistic systems designed for control to conscious living systems designed for wholeness, well-being, and evolution. This type of organization is able to sense and respond to change in order to survive. Social Systems design is now a mainstream topic. It has been around since late 20’s, when Gerard Endenburg developed Sociocracy. It was first published in english in 1985. Holacracy is the most famous implementation of social systems design in corporations, but it is “pre-fab” so and has a good deal of prescribed protocols and patterns.  Holacracy has been extremely beneficial to me and my team of agile coaches at ARCA with our Agile adoption. It provided a way to evolve the organization and integrates with Scrum framework (transparency, inspection, adaptation) and agile principles and values.

Lean-Agile-Holacracy.jpeg

A Cultural Operating System (OS). In technology, we think of an operating system (OS) as the foundational layer between the hardware (e.g. your phone) and the software (e.g. your apps). It provides a way for you actually use the technology.  But, organizations don’t run on code, they run on simple rules & foundational architecture —  values, practices, beliefs, and authority dynamics. Anyway, we Need to move beyond just an OS to a living organism that reflects the whole, human system of the organization.

The thing about an Operating System is that you’re never ever supposed to see it. And the only mission in life of an Operating System is to help those programs run. So an Operating System never does anything on its own; it only steps in and tries to make it easy to do your job. — Linus Torvalds, creator of Linux

 

 

 

Agile Governance. With Holacracy, our organization is designed around teams called circles.  Each circle has a domain(s) and a set of accountabilities.  People are hired for a certain skill to fulfill accountabilities of a circle, but they can also take on other role in any any other circle at any time.  Through governance, our organization and its’ policies are constantly evolving, almost on a weekly basis. Holacracy provides governance in the form of:

Open Allocation for Authority Distribution. This is really progress in management science. Teams self-organize. 

Double-LinkingThe word manager is not our lexicon. We have lead links and rep links in each circle, and they have difference purposes for communicating and linking to other circles. 

Advice Process & Governance. Proposals are processed in a type of meeting called a governance meeting.  This provides a clear form of advice process with clarification, reaction, and objection rounds. It ensures your peers understand your proposal — you have to thoroughly explain and justify it. It provides a bias towards action – if it does not move us backward, do it (safe enough to try).  The real key is collaboration, not consensus.

Meeting Protocols.  We also have tactical meetings, to provide status, alignment, and resolve issues. Issues or concerns are called tensions, and they are triaged and addressed at the end of the meeting with an action (a form of parking lot). We also have check-in & check-out protocols, and a facilitator and secretary role during the process. 

Continuous Participatory Change. Holacracy provides an opportunity for the whole organization to be involved in its’ maintenance.  It provides transparency. People want and deserve to know what is going on around them and why — it gives them a sense of purpose and ownership. Freedom and responsibility go hand in hand. It provides opportunities for leadership storytelling. Leaders set the vision & direction (mission command) for the organization. Otherwise people tell their own story, and it is likely the wrong message.  Finally, it provides empirical process control — empiricism is the theory that knowledge is derived from experience. We are a learning organization, with a willingness to experiment and the inspect and adapt (continuous improvement & relentless reflection). We are able to pay down the organizational debt (bureaucracy) that creeps in and refactor the organization. We are never done. 

The ultimate freedom for creative groups is the freedom to experiment with new ideas. Some skeptics insist that innovation is expensive. In the long run, innovation is cheap. Mediocrity is expensive—and autonomy can be the antidote. Tom Kelley, General Manager, IDEO

 

Empiricism (experimentation) leads to innovation, and this is the only way we can be ready for the complex problems of the future.

 

Until the Next Iteration . . .

Jason

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