Holacracy has been making headlines both for how radical the flat management philosophy seems and how difficult it is to adopt.

Look no further than the many stories covering the trials and tribulations over at Zappos. At least 210 employees (14 percent of the company) took buyouts and ran after longtime leader Tony Hsieh announced that the company would continue its commitment to dissolve its hierarchy and transition to a holacracy without traditional managers.

But Zappos is just one, unusually public case study at one very large company. Is a holacracy any easier to pull off at a smaller business? I talked to several companies to find out.

A steep learning curve.

My first stop was to speak to Brian J. Robertson, the chief evangelist of the holacracy movement. Robertson runs a $3 million consultancy in Spring City, Penn. called HolacracyOne (H1), which teaches other companies how to adopt the philosophy. He's also the first one to admit the system can be frustrating. In the absence of standard org charts, holacracy uses detailed governance (spelled out in an oft-revised constitution) and role-based structures to spell out who does what.

"If you don't want bosses and bottlenecks, then, like a society away from kings and dictators, you need the rule of law," explains Robertson. "You cannot have an open society without imposing order, if you don't have a basic framework in place that is legally clear." 

But learning that framework can take a while. And on top of the learning, your employees will still have their everyday jobs to do. "The challenge with the rollout is, it's not like we can completely shut down the business to roll it out," says Zappos' John Bunch, who is leading the company's holacracy initiative. "All business needs have to keep being met."

Lex Sisney, a CEO coach and scaling expert who took H1's 5-day Practitioner Certification Training in Las Vegas last year, admires holacracy's potential as a framework for organizational agility and self-directed employees. "But what's counterintuitive to me is it tries to create that through almost heavy-handed regulations," he says. "The common perception in media is it's a free-for-all. But it's absolutely the opposite. There's a four-inch thick constitution."

In a post on LinkedIn, Sisney notes that holacracy's nuances are so challenging, there were participants in his course who were in the training for the third or fourth time. "At one-week long and $4K a pop, that's quite an investment," he writes. 

An acquired taste.

Yet, there they were, in Las Vegas, making the investment. It all begs a basic question: If holacracy is such a pain to implement, why is it so appealing? 

For Mort O'Sullivan, founder of ArcaTech Systems, a $100-million designer and manufacturer of hardware and software systems for devices that handle cash, the appeal of holacracy was its rule-based framework. The company, based in Mebane, NC, had grown organically by leaps and bounds since its 1997 inception, making seven Inc. 5000 appearances.

Last year, O'Sullivan and his leadership team decided it was time to grow through acquisitions. Prior to its holacracy implementation, ArcaTech did not have a spelled-out governance framework--nor a documented set of rules and roles--explaining how the company operates. Employees who came aboard via acquisition would be rudderless. But with holacracy's framework in place, O'Sullivan believes ArcaTech and its 450 employees are now in a better position "to bring other employees into company and integrate them into how we do things," he says. 

In addition, O'Sullivan has seen a change in the way his employees perceive him. Instead of being the answer man for everything, he's an employee with clearly demarcated supervisory roles. Now when he shows up at a meeting, he's not there as the CEO per se. He's there as the global HR policy coordinator. The work he's doing at that meeting "is captured in that role," he says. "The work I'm actually doing isn't that different. But the way the rest of the organization perceives me carrying out that role is different."

There's a process for that.

It doesn't mean the transition to holacracy has been without hiccups for ArcaTech. Not long ago, at what in holacracy terms is known as a governance meeting, O'Sullivan and his top team encountered a situation in which "the rules can sometimes feel unnecessarily constrictive," he says.

Following holacracy's rules for meetings, the group had asked clarifying questions about a particular "tension," which is holacracy's term for a problem. After the questions, as per holacracy meeting rules, the proposer of the tension had a chance to modify his proposal, then and there.

The hiccup? The proposer admitted he was at a loss for how to do it on a moment's notice. It was tempting for O'Sullivan's top team to stop then and there, and begin a spontaneous discussion about how to modify the proposal. That way, they could leave the meeting feeling as if they'd eased the so-called tension. "But the rules don't allow it," says O'Sullivan. "Whereas if we could've deviated from that, we would've facilitated that tension much faster," he says. 

Of course, another of holacracy's charms is that, once you adopt the rules, you can modify them any way you like. But what you can't do is decree that modification on the spur of the moment, in the midst of a meeting.

In other words, O'Sullivan or another ArcaTech employee could very well share a proposal at the next governance meeting--or even via a group email or a collaboration system like Slack--to change the meeting rules, permitting a bit of old-school, free-form discussion for the sake of modifying proposals on the spot. But a change like this can't just happen because the leader formerly known as the CEO (and still in reality the owner) says so. There's a well-defined process in place. 

A little of this, a little of that.

Though Robertson generally insists that holacracy has to be an all-or-nothing affair, he too is a bootstrapping entrepreneur who grasps that such whole-hog adaptations are not always feasible. Chapter eight of his recent book is filled with techniques for partial adaptation, whether it's for the sake of streamlined meetings or the clearer definition of roles and procedures.    

You can also mix and match from numerous systems and see what you like best. Aaron Dignan, founder of the $10-million, 33-employee design and strategy consultancy Undercurrent, based in New York City, switched the company to a holacracy late in the summer of 2013. About a year later, one of his employees wrote that while he embraced holacracy's principles for distributing tasks, the transition was still a "pain in the ass."

Dignan says that while holacracy is a big piece of the company's structure, it's not the only one. For example, he uses Spotify's concept of chapters and guilds, which give employees the chance to get together in small teams outside of holacracy's circles and meeting structures. 

Like O'Sullivan, Dignan has felt his staff's frustration at meetings where it seems like there's not enough space for discussions. But like many of the founders who've embraced holacracy, he is a systems thinker; he understands that "the thesis in holacracy is that meetings are not the place for that," he says. "The idea is to learn to use the tools and process to move us forward, to be more mechanical and algorithmic," he adds. "During the other 38 hours of week, we can be intensely human and have one-on-ones and go to coffee."

Little time for talking.

If you follow that algorithmic logic to an extreme, though, you can create an environment that seems almost oppressive. For example, what if you decreed your employees were no longer allowed to use adverbs? Meetings would go faster. Conversation and email would be more precise. Why not, then? Because it would be difficult to enforce. The delays of enforcement would offset the speed gains of linguistic efficiency. 

But what if you found a style of communications efficiency people could get used to? That's what holacracy is after. And in that way, it owes a great debt to the work of one of its signature clients: David Allen and his methods for "Getting Things Done" quickly and efficiently. Allen's techniques help to eliminate communications redundancies--but on the surface, some of the methods can seem strangely inhuman and mechanical. 

For example, there are times when Allen will send an email to his wife about getting wheatgrass for their dog, even when his wife is sitting in the same room. Ask him why, and he'll say, "Because if I don't, then she'll have to write it down." And since he and his wife are in alignment about efficient processes and techniques--and they are by now accustomed to communicating this way--well, once you get used to it, it's really not as inhuman as it might seem. 

Conversation can be fun and it can be reassuring. But in the end, it's not always efficient. "The reality is, any word spoken from one person to another is useless to the rest of the organization," explains Dignan.

Not long ago, a new employee asked him to go to lunch. Dignan insisted that the employee ask him to lunch via Slack. For two reasons: First, there'd be a written record of it that he could reply to later. Second, others would know they were having lunch--and that he was getting to know the new employee.

Published on: Aug 24, 2015