I’m broadly a fan of the idea of holacracy — essentially, running a company without true management titles in a way that’s supposed to foster healthier approaches to conflict and allow for more fluid movement between roles — because, to be honest, we’ve had companies for over a century now and no one seems to know exactly how to manage them properly to get a good mix of “we make money” and “our people are happy being here.” (Truthfully, that intersection point may be a utopia.)

Holacracy is good in the sheer sense that someone, somewhere is trying a different approach rather than saying “Well, that’s how things are!”

The most notable U.S. company to try this out is Zappos (in turn owned by Amazon), and there’s a long profile of how the process is going over at Quartz. Definitely read the profile when you have a few minutes — it’s interesting and brings up more points than I can make here — but before we get into some issues with holacracy, let’s start by talking about something really interesting and positive around the idea. Tony Hsieh, the CEO (more on titles in a second) of Zappos, noted this in the Quartz article:

When a city doubles in population, it tends to become 15 percent more productive. When a company doubles in size, it tends to become less productive.

In the same vein, 89 percent of the first Fortune 500 companies are gone now, underscoring that idea: companies tend to die. Cities don’t. What if we looked at building a company like we build a city?

Obviously this idea, too, is somewhat of a utopia — comparing “a city” to “a company” is interesting on surface, and definitely somewhat academic in nature, but it’s also a little bit of the definition of apples and oranges. Some people could look at those two concepts and say “Well, there is some overlap we could exploit to make work better…” but most human brains aren’t capable of that.

That goes back to the core issue with holacracy, in my humble opinion. It’s too confusing for a normal person to process. Consider this paragraph:

Hsieh says that the responsibilities that used to be held by managers are now split between three roles: lead link, #mentor, and compensation appraiser. (In a tech-y conceit, the #mentor role does actually have a number sign in its name.) The #mentor circle is exactly as it sounds: matching employees with mentors. While lead links are focused on guiding the work itself, mentors are tasked with employee growth and development, and compensation appraisers work with both to determine an employee’s salary. “Manager” is now essentially barred from the Zappos vocabulary; but in casual conversation, employees still use the term.

Imagine going to work and having to call people “lead link” or “mentor” or “compensation appraiser.” It totally flips the script of how we think about managers and hierarchy; trying to turn around that type of embedded understanding of terms is like trying to reverse several oil tankers at once — in a fucking kiddie pool. It’s hard, in other words.

As for compensation:

“How do you compensate someone who’s on the phones 50% of time, works 20% in wellness, and 20% in a merchandising role with product?” says Delaney, who is now the lead link of the company’s senior HR circle, called People Ops. “There’s no market-based compensation for that person. Right now we’re trying to figure out what is that world going to look like, and how do we fairly compensate people in that system?”

Alright, so break this down:

  • Roles/titles are confusing.
  • You probably will get paid less for doing more work, generally-speaking.

Is it any wonder, then, that —

Recent departures since the rollout include David Hannigan, who was brought in as the chief information security officer after the company’s data breach in 2012; Larry Hernandez, a recruiting lead who was in the pilot group for Holacracy; and former CTO Arun Rajan who was part of the tech exodus. Rajan returned this fall as interim COO and says that he now understands the inner workings of the company better since everyone’s roles are more clearly identified. “It’s the best tool we have to move into self organization,” he tells Quartz.

In many cases, Holacracy served as the tipping point for departures. Some former Zappos employees say the system makes it hard to hold staff accountable for meeting deadlines, and get people to take responsibility for things that need to be done. But “for a lot of us who left, Holacracy wasn’t the No. 1 reason,” says a former employee who held a senior role in the company and asked not to be named. “The No. 1 reason is that people don’t understand the strategy for Zappos. What’s the strategy? Part of the strategy is self-organization.”

Here’s the thing: holacracy is an idea. It’s a concept. Even Tony Hsieh and his top people (his “lead links”) admit it might not be a long-term solution.

This is kind of a bigger execution of the idea that, as millennials take over the workforce, hierarchy will die out. It probably won’t. It’s very hard to change basic tenets of how work unfolds; it’s too jarring for people. You can’t suddenly tell a group of people, “Now you don’t have a true manager anymore.” That can work for maybe 1-2 out of every 10 people, but the other 8-9 will either slack off, not know what they’re supposed to focus on, or a handful of other problems. Humans aren’t really designed for this holacratic model, IMHO.

Even if they were, confusion over titles and fair wages would doom it.

What’s The Real Answer?

Workplaces often suck, and the typical refrain is “That’s how it always is!” There are answers, though — they requires humans to make some focused choices that they may not be capable of making once they get more responsibility and more tasks, but still. There’s an approach that can be followed.

A lot of what’s linked above is a utopia in its own right, but the cool thing is — you can do pretty much all of that while still maintaining a revenue-first focus in your organization.

Once anything seems like “extra work” or “an impediment to the true goal” (which, even if often unstated, is making money), people won’t focus on it. That’s just reality.

About Ted Bauer

Born and raised in New York, Ted has now lived in a variety of cities -- and currently calls Ft. Worth home. He's worked in numerous verticals, including education, sports, television, health care, and now the travel industry. His different experiences -- with cultures, and bosses both excellent and horrible -- shape a good deal of his writing, including at his personal Context of Things blog.

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