Why Holacracy Is Such a Poor Management Structure

It’s official: Holacracy and similar “flat organizations” are futile.

If you’re unfamiliar with the term (or concept), Holacracy is an organizational structure wherein hierarchy is out. You don’t have a chain of command; there are no level-2 staff or middle management. It’s effectively a company’s way of saying, “We’re all adults, let’s get the work done.” Teams drive productivity, and there are no traditional “managers” to speak of.

Conceptually, it’s awesome. You won’t have random people who are technically senior to you assuming they’re your boss, and you’re free to work unfettered and dip into projects that may have once required permission from an equal.

Unfortunately, Holacracy just doesn’t work. The Evolutionary Leadership theory posits that large groups just aren’t effective without leadership, and leaders aren’t effective without the ability to manage smaller groups. Top-down management may be critical due to our behavioral heritage.

Zappos is the most notable example of Holacracy gone awry, but it’s far from the only tech firm to give a flat structure a shot; Buffer, Medium, and GitHub all tried some variation on the theme. Holacracy doesn’t always work well for larger teams, and doesn’t allow for easy growth. From Medium… about Medium’s attempt:

Our experience was that it was difficult to coordinate efforts at scale. In the purest expression of Holacracy, every team has a goal and works autonomously to deliver the best path to serve that goal. But for larger initiatives, which require coordination across functions, it can be time-consuming and divisive to gain alignment.

Holacracy also requires a deep commitment to record-keeping and governance. Every job to be done requires a role, and every role requires a set of responsibilities. While this provides helpful transparency, it takes time and discussion. More importantly, we found that the act of codifying responsibilities in explicit detail hindered a proactive attitude and sense of communal ownership.

GitHub’s experience with Holacracy was worse. By at least a small measure, it likely aided in one of the company’s most notable developers feel discriminated against. Former CEO Tom Presot-Werner and his wife (who did not work at GitHub) were accused of harassing Julie Ann Horvath into leaving in 2014, when the company was small and utilizing Holacracy. It’s hard to imagine a CEO and his spouse doing the same in a more traditional environment, where there are several layers of control and management between the people at the top and the mid-level people getting things done.

Both GitHub and Medium have moved away from Holacracy.

Valve has long been a shining example of a flat structure working for larger firms, but the patina is wearing thin. Rich Geldreich, who worked for Valve from 2009 through 2014, recently took to Twitter to denounce companies that flatten.

Though he doesn’t name Valve, strong evidence points to his tweets as directly referencing the company. He describes Valve’s structuring as leading to “company-legalized extortion,” given how Valve apparently tied responsibility and performance to results: Assuming responsibility for a project meant you were its owner, and if it failed, so did you.

PCGamer points to a Glassdoor review of Valve that suggests there’s a clique of decision-makers rather than a formalized, top-down management structure. Furthermore, “No matter how hard you work, no matter how original and productive you are, if your bosses and the people who count don’t like you, you will be fired soon or you will be managed out.”

Holacracy and “flatness” are fine for smaller companies that want to use such buzzwords to attract talent. If the startup you’re applying to utilizes such a structure, there’s likely no reason to panic. Small teams need to be nimble, and Holacracy lends itself to that.

But it’s an experimental relic for larger firms. Once rapid innovation is less critical, the business of being a business comes into play. For most tech companies, Holacracy just doesn’t work.

5 Responses to “Why Holacracy Is Such a Poor Management Structure”

  1. Andrew Lennox

    If everything in this article were true, it would not look good for Holacracy.

    Of course, that’s the problem — this article seems to be so badly researched as to be absolutely useless.

    First, it equates “flat” and Holacracy. Holacracy, even according to its creators, is not at all flat. Holacracy creates explicitly hierarchical structures, and very much does have leadership and leaders. It is not consensus based, and suffers from none of the cliquishness attributed to Valve’s culture.

    Then, it claims Zappos is an example of Holacracy gone awry. Zappos would disagree, and has at every turn. Their employee turnover in the wake of the Holacracy transition would, in any other circumstances, be hailed as a success in a company employing such a high percentage of call center employees. Zappos is still using Holacracy, and while there were growing pains (as there are with any reorganization), they’re happy with the results.

    The case at Medium is at least close; they had adopted parts of Holacracy (organizing work into roles and using the meeting structure), but they did not actually change the management hierarchy. They simply used Holacracy tools to describe their managers as roles, and then wondered why the structure wasn’t more nimble than their original management hierarchy… which was still in place. Any Holacracy coach would have told them that it wouldn’t work well (and I’m sure some did), and it turned out exactly as one would expect.

    Bizarrely, the article then attributes strange GitHub happenings and Valve’s awful cultural problems to Holacracy. Of course, neither of these companies has ever used Holacracy, but that doesn’t stop Nate Swanner; he has an axe to grind, and he’s not about to let pesky facts get in the way of his curt dismissal of things he doesn’t understand.

    Back when I worked for a paper, it would have been a firable offense to publish such a badly-researched and factually unhinged piece. The era of fake news indeed?

    • Greg Mathers

      I agree that a weakness of the article is no referenced research to support the author’s claims. But for Mr. Lennox to accuse the author of making unsubstantiated claims and then refute them with unsubstantiated claims of his own is strange to say the least;

      • Andrew Lennox

        Should Dice offer to pay me for my time, I would be happy to. I was writing a comment, while the author was writing an article; the burden of proof is his, and the standard of evidence is higher.

        The only one of my claims that is not easily confirmed with few minutes of Google is the one about Medium; I have inside knowledge there, and I don’t know if any journalists have done enough research to actually put something on the Internet about it. Given the paucity of research ability shown in most pop-business articles, I’d doubt it. Anything that is at all complex gets reliably butchered in most outlets, and even venues like HBR seem to be hit-or-miss with details.

  2. Bill Gates

    “It’s official” this article is nothing more than tabloid trash. So many factually wrong assertions and so much downright bad thinking. This is the quality of Dice content?