Holacracy Team Structure

Team Structure in Holacratic Organization

The most recent approach to organization design involves a shift toward self-management. One extreme self-management model is called a holacracy or holacracy team structure.

The design trend toward self-management reflects a fundamental mind-shift in the way human organizations and management are viewed.

Self-management goes beyond contemporary ideas such as employee empowermentOpens in new window, flatter organizations, distributed decision making, elimination of bureaucratic red tape, and pushing authority lower in the hierarchy.

Complete self-management includes all these ideas, and even more. The traditional management functions of planning, organizing, staffing, and controlling are assigned to all employees. There are no managers to perform these management functions.

All organization members are personally responsible for planning their own work, coordinating their actions with others, developing their own personal relationships, acquiring needed resources, and taking corrective action with respect to other members as needed.

Companies such as Morning StarOpens in new window, ValveOpens in new window, W.L. GoreOpens in new window, and ZapposOpens in new window have adopted some form of extreme self-management. Morning Star emphasizes a few key ideas as the basis for its self-management philosophy:

  • People are generally happier when they have control over their own life and work.
  • It does not make sense to give decision-making authority to the person furthest away from the actual work.
  • The traditional hierarchical model is a recipe for a slow painful death.
  • There is an undeniable link between freedom and economic prosperity.

The most widely used model of self-management, the holacracy team structure, has been adopted in about 300 organizations.

In this organizational design, circles (the holacracy term for teams) are the basic unit and building block of structure, not individuals, departments, or divisions.

Each circle shares a common purpose and has decision-making authority over how to do its work and achieve its purpose. For example, there might be a circle for helping to hire new employees or a circle charged with motivating employee professional growth and recognizing employee achievements.

Sub-circles can be created for tasks that do not require input from all team members. Members may choose to change circles to follow their specific passions.

The holacracy team structure is an extreme organic design composed of fluid teams and no managers. A few informal leaders may emerge within the circles based on who has expertise in the matter at hand. Employees decide when a circle is needed or when a circle should be abandoned.

Within each circle, individual roles are jointly negotiated with other members regarding the tasks needed to accomplish the circle’s purpose. People do not have job descriptionsOpens in new window.

Each individual has authority over how individual goals are achieved, discretion over resource use, ownership of knowledge related to the work, and accountability for work outcomes. In a holacracy team structure, each individual performs a variety of roles and probably has a role on three to four teams at the same time.

The same individual might serve as a design technologist on one team, act as finance advisor on another team, and perform as a meeting facilitator on a third team.

The key is that employees discuss their own role with other circle members to define role boundaries and stay coordinated with one another and aligned with each circle’s purpose. Conflicts are addressed face-to-face without a manager. If there is no resolution, the participants can appeal to a peer council.

Autonomous self-managed team designs such as the holacracy team structure typically start with a written guideline. The circles are nested within a larger structure that individuals can help define.

In a holacracy, employees ratify the constitution outlining the rules by which circles are created, changed, or removed. The constitution does not tell people how to do their jobs. It is a broad-brush document describing how circles can form, operate, and govern themselves.

The guide describes how to identify and assign roles, the boundaries the roles should have, and how circles interact with each other.

Figure X-15 A Holacracy Team Structure Figure X-1 A Holacracy Team Structure | Credit — Based on Jacob Morgan, “The 5 Types of Organizational Structures: Part 5, Holacratic Organizations,” Forbes Opens in new window

At Morning StarOpens in new window, each employee consults with coworkers and writes up a formal agreement known internally as a colleague letter of understanding. Each employee talks with coworkers to develop an understanding of what is needed. These letters outline jointly agreed upon responsibilities, goals, activities, and metrics for evaluating performance to spell out an employee’s work commitments.

This structure is used primarily in small to medium size organizations that face a need for continuous learning and innovation to meet rapidly changing customer needs. One of the largest and most well-known companies using a holacracy team structure is online retailer Zappos.

When Zappos shifted to a holacracy team structure, 150 departments disappeared and were replaced by around 500 self-managed circles and sub-circles that were designed around projects and tasks rather than hierarchy and job descriptions. Job titles were a thing of the past. There were no bosses. People would now perform multiple roles in a variety of ever-shifting teams. The “people managing” responsibilities previously held by managers would be split among three team roles—”lead links,” who would focus on guiding the specific work; “mentors,” who would focus on employee growth and development; and “compensation appraisers,” who would concentrate on employees’ salaries. No one was assigned to these—or any other—roles. Rather, people would negotiate with one another and allocate duties to those who were best suited to performing them. Employees would move into and out of roles—just as they would move into and out of various circles—as needed to address perceived changes in ongoing needs.

CEO Tony Hsieh had originally planned to shift Zappos to holacracy over a three-year period, but about mid-way through the process, he decided that a more radical approach was needed. He sent employees a memo stating the date when the change to holacracy would occur. Hsieh offered three months’ severance pay to anyone who felt that he or she just wasn’t interested in working in the new type of organization design. About 200 people took him up on the offer. Those who stayed have been working within and adapting the new structure since 2015.

Characteristics of Holacracy Team Structure

An illustration of a holacracy team structure appears in Figure X-1. Such an organization has the following characteristics:

  • Teams (circles), rather than individuals, tasks, departments, other units, are the fundamental building blocks of the organization. Everyone works on a team in a holocracy.
  • Individual roles are collectively defined and assigned within the various teams a needed to accomplish the work.
  • Teams evolve, form, and disband as conditions change. As new opportunities, needs, problems, goals, and tasks emerge, organizational members create new teams or circles to address them. One example comes from KETC, the public television station in St. Louis, which forms temporary teams to bring community ideas into its programming surrounding major local or national events.
  • Teams design and govern themselves. Holacracy teams work inside a larger structure of circles that everyone has a hand in shaping. In a holacracy, people generate and agree to a governing constitution that defines the rules by which teams operate, such as the way they should form, how they identify and assign roles, and how members should interact among themselves and with other teams.
  • Leadership is distributed and contextual. No one is an assigned “manager.” The responsibilities of leadership are continually shifting as needs arise, teams change, and new roles are defined.

Strengths and Weaknesses

As with all structures, the holacracy team structure has both strengths and weaknesses, as listed below.

  1. Promotes a focus on teamwork and collaboration
  2. Promotes rapid, innovative responses to customer needs
  3. Each employee has a broader view of the organization’s purpose
  4. Decisions are made close to the work
  5. Improves employee growth via sharing responsibility, making decisions, and being accountable for outcomes
  1. Determining individual and team responsibilities is time consuming
  2. Requires changes in management philosophy and culture
  3. Traditional managers may baulk when they have to give up power and authority
  4. Requires significant training of employees in social skills
  5. Can limit in-depth skill development in a specific function

The most significant strength of the holacracy team structure is enhanced coordination, which can dramatically increase the company’s flexibility and innovative response to shifts in customer needs.

For example, ValveOpens in new window made the decision to expand from PC games to hardware because a few employees grew tired of repeated customer requests for hardware that enabled people to play games in their living room. People formed a team to investigate the ideas that resulted in a huge new hardware release.

In addition, because there are no boundaries between functional departments, employees take a broader view of organizational goals rather than being focused on the goals of a single department.

The holacracy team structure promotes an emphasis on teamwork and cooperation so that team members share a commitment to meeting common objectives. Moreover, decisions are made close to the work which avoids the web of hierarchical titles and reporting relationship that make it hard to figure out who decides, requires written justification, and slows everything down, and the decision-maker does not understand the problem.

Finally, the holacracy structure can improve the quality of life and personal growth for employees by giving them opportunities to share responsibility, make decisions, and contribute significantly to the organization. Employees are typically enthusiastic about their involvement in bigger projects rather than narrow departmental tasks.

One weakness of the holacracy team structure is that it can be complicated and time-consuming to set up in an existing company because it requires significant changes in culture, job design, management philosophy, and information and reward systems.

Traditional managers may baulk when they have to give up power and authority to serve instead as members of various teams. Employees have to be trained with the social skills to work effectively in a team environment.

Finally, the holacracy team structure can limit in-depth knowledge and skill development in technical areas that could be attained in a functional structure.

Remember This
  • The most recent approach to organization design involves a shift toward self-management.
  • The most widely used model of self-management is the holacracy team structure, which has been adopted in about 300 organizations. In a holacracy, everyone works on a circle (team) and there are no bosses.
  • Each circle shares a common purpose and has decision-making authority over how to do its work and achieve its purpose.
  • Individual roles are collectively defined and assigned within the various circles, and circles evolve, form, and disband as conditions change.
  • Each person performs a variety of roles and may have a role on three or four teams at the same time.
  • One of the most well-known companies using a holacracy team structure is Zappos.
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    Research data for this work have been adapted from the manual:
  1. Organization Theory & Design By Richard L. Daft