Contributors: Jen Palmer, Rick Kahler, Rosien van Toor, Yoad Rowner
Editors: Evan Leybourn, N.T. Fawal
Brian Robertson was enjoying his first solo flight while training to become a private pilot when he was faced with a dilemma; a low voltage warning light was blinking, but every other instrument reported the aircraft was running smoothly.
The problem, Brian assumed, was with the warning light and not the aircraft as a whole. As such, he thought it safe to proceed.
He was wrong.
Brian ultimately landed safely, narrowly escaping a more serious incident. This forced him to ask: Why did he assume he, as the pilot, had the right to “outvote” the low voltage light?
That nagging question led him to reflect on his business dealings: Why did managers have the right to outvote members of their teams when issues were raised? Why were the voices of people on the ground being ignored by CEOs? How could he remove the risk of someone’s critical observation being disregarded because they weren’t positioned at the right point in the command chain, or because they didn’t deliver their observation to the correct person in the correct way?
His solution: Holacracy, a decentralized governance framework that operates according to the open-source Holacracy Constitution. Brian Robertson worked alongside Tom Thomison to both build the Constitution and create HolacracyOne–a training, coaching, and consultancy organization that helps companies around the world explore and implement the Holacracy business framework. This framework encompasses a distinct set of rules and processes which help organizations become more decentralized, flexible, adaptable, disciplined, and democratic.
This case study will examine the construction of the Holacracy Constitution as a living document, and how two organizations–Devhouse Spindle and Kahler Financial–have made Holacracy work for them.
Holacracy in Practice
Kahler Financial Group, established by Rick Kahler in 1983, is a South-Dakota based financial adviser. Their mission is to assist their clients in making wise financial decisions that contribute to their prosperity and happiness, which is reflected in their “client-first, fee-only” structure.
Around 2015, Rick Kahler was searching for ways to give his team more ownership and responsibility while allowing himself to step back from direct management. Holacracy was one proposed solution, and Rick decided to take the plunge.
Kahler Financial’s transformation can be contrasted with the experiences of the team at Devhouse Spindle. Devhouse Spindle, founded by Marc Vletter, is an IT company based in the Netherlands that builds VoIP services. These services are then sold by Voys, their sister company (also founded by Mark Vletter) which is based out of the same building. While Voys and Devhouse Spindle are strongly intertwined, they operate as separate entities–for example, Devhouse Spindle also sells products and services to Voys’ competitors.
Voys was founded in 2005, but their development branch wasn’t made a separate entity until 2015. After enjoying fifteen years of rapid, award-winning growth, Voys had become a tangled organization, where the work got done but accountability was muddled. Hence, the decision to split their dev team into their own company, which would be Holacratic in nature from day one.
These two organizations have each implemented and lived Holacracy for over half a decade. Their experiences with Holacracy–their pitfalls, struggles, and successes–all began with the same document: the Holacracy Constitution.
The Holacracy Constitution is a living document that provides clear guidance and structure for organizations either wishing to implement a Holacratic structure, or to incorporate aspects of Holacracy into their existing structures. The Constitution is now in its fifth iteration, and every evolution of the Constitution is generally accompanied by a wide array of adjustments, tweaks, and edits to the language, methodology, and structure of the document.
As an open-source document, the Holacracy Constitution is constantly being updated in response to reports of issues and edge cases. Other partners can suggest solutions or submit information that could support a future, official revision to the Constitution. These submissions are collated over time and the Constitution itself is iterated upon when there is enough information and consensus to support a change.
Much like an operating system, changes can come in major releases–Holacracy 4.1 and 5.0, for example–or in the form of minor “beta” releases and bug fixes. A minor change might be an adjustment in language, or an addendum that aids in conflict resolution: For example, in Holacracy 5.0, particular focus was given to reducing useless meetings. As such, frameworks have been put in place enabling many of the procedures that usually happen inside meetings–alignment, conflict resolution, etc.–to occur organically outside of a formal meeting space.
Major constitutional changes may reinvent an entire system of governance, or reframe the way in which systems are interpreted and actioned. As an example, one major change from version 4.1 to version 5.0 of the Holacracy Constitution is the structure of the document itself.
In Holacracy 4.1, the language used throughout the Constitution was university-level. In addition, sections of the Constitution referenced one another constantly, to create a unified, coherent system. This worked well for native English speakers who could read and understand the Constitution in its entirety before implementation. However, it posed difficulties for translators and people of ESL (English as a Second Language) backgrounds, and made it difficult–if not impossible–to implement Holacracy piece by piece into an existing organization. As a result, Holacracy 5.0 has been simplified with a clearer, more universal language. In addition, each section of the Constitution now stands alone, allowing an organization to engage with the new structures and processes incrementally.
Even though the Constitution is more accessible today than ever before, adopting Holacracy is not a small decision. The first step any CEO must take when joining the Holacracy community is to sign a document ceding authority over their organization in favor of the distributed system of governance outlined in the Holacracy Constitution. HolacracyOne is no different. Brian is not a CEO, but a lead spokesperson for the organization. He has many accountabilities and can do anything he deems necessary in order to fulfil those accountabilities, but he has no authority over other partners.
For Kahler Financial, the road to successfully implementing the Holacracy Constitution was not as smooth as hoped, and many initial decisions determined by time and budget resulted in the building of bad habits and processes that have taken years to expunge. The first obstacle to overcome was resistance: not everyone at Kahler Financial was eager to dive into Holacracy and explore this new system of governance. It took help from external coaches to sell the concept to the existing team.
That process of “selling it” continued for six years, but it is important to note that most of those struggles can be attributed to a process of continual reinvention, where Holacracy was being implemented over and over while repeating many of the same mistakes. These mistakes included hiring coaches for brief interventions rather than as long-term consultants, and not taking every team member through comprehensive training. At Kahler, what was concluded is that piecemeal training in Holacracy only created a need to re-train down the line. Getting long-term assistance from professionals and making sure everyone has all the information and training they need is essential, as well as providing ongoing access to coaches if team members feel they need additional assistance.
Unlike Kahler Financial, Devhouse Spindle (hereafter referred to as Spindle) was built from the ground up as a Holacratic organization. This helped Spindle avoid many of the traditional pitfalls that other organizations have stumbled over during a transition between operating structures. All colleagues were enthusiastic and ready to learn new systems, structures, and methods of governance, and for those adopting Holacracy, the increased clarity surrounding roles and accountabilities was considered a marked improvement on the confusion they’d experienced over the preceding years.
However, like Kahler Financial, Voys and Spindle didn’t dive into Holacracy solo. They sought help from a licensed Holacracy provider, Energized.org, who worked closely with the team for six months to support their initial structuring and continued to consult with the Spindle team if any problems arose. Energized helped train internal coaches at Voys and Spindle, but returns to provide in-depth training when necessary. The benefits of maintaining close relationships with external trainers cannot be underestimated and have been worth the investment many times over.
Knowing your Role
There are other ways in which the Holacracy framework differs from many traditional operational frameworks. One of the most obvious differences is in how each partner’s role is defined, and what they can do while in pursuit of their accountabilities. Many traditional organizations will define a role by stating what each person is supposed to achieve, and how..
Holacracy, by contrast, asks: What do you want to achieve? What will you make yourself accountable for? Who will you work with in order to achieve these accountabilities? It also doesn’t define how a person is supposed to do their job. It assumes each partner is driven, intelligent, professional, and accountable, and will strive to fulfil their accountabilities. As such, the Holacracy Constitution outlines a governance process through which organizations can evolve and define for themselves what their partners can’t do – for example, intruding on other partners’ domains, or the acquisition of resources without prior agreement. This is made explicit in Article 4 of the Constitution, which states: “You have the authority to take any action or make any decision to enact your Role’s Purpose or Accountabilities, as long as you don’t break a rule defined in this Constitution.” These rules create clear boundaries and allow everyone to operate autonomously, with confidence and security.
The Holacracy Constitution has provided a framework that has allowed both Spindle and its colleagues to grow and mature since its inception. Initially a rebellious teenager that defined itself by what its sister company wasn’t, Spindle has evolved into a structurally similar business which operates inside the same larger company circle as Voys.
Holacracy’s fluid structure of circles, roles, and accountabilities has also allowed crossover roles between the two businesses. For example, after initially creating separate Finance, Marketing, and HR circles for Voys and Spindle, the two companies found it was more efficient and productive to share a circle for each. Despite this overlap, the two companies have managed to maintain a strong sense of identity and individuality.
However, what could be intimidating for new colleagues at Spindle is the increased responsibility that accompanies autonomy. If a colleague sees a problem relevant to their accountabilities, they must fix it, and be prepared to fail multiple times in the process. At Spindle, this fear is relieved by pushing a culture of action over a culture of perfection. Finding a workable solution as opposed to a perfect solution is always the imperative. The mantra is: “Is it safe enough to try?” Unless a proposed solution is deadly and cannot be reverted, the Spindle team believe it’s better to experiment and fail early.
Tensions are Running High
Another hallmark of the Holacracy framework is to approach discussions using a “one-tension-at-a-time” approach. In short, this framework asks for all participants in meetings, conflicts and negotiations to begin with an agenda of tensions, or gaps, in where the organization currently is and where it could be. These tensions are presented and solved in order of importance, with discussions ending the moment the person who originally raised the tension feels satisfied.
By viewing meeting items or conflicts in terms of tensions as opposed to general concerns, discussions stay fast and focused. Nobody is allowed to interject with their own tensions or derail conversations when a tension is already being discussed. One hundred percent of the meeting must be focused on solutions to the tension at hand.
This “one-tension-at-a-time” approach has worked well at Spindle. Everyone within the meeting is focused on helping the holder of a tension get what they need. As a result, meetings stay brief. Derailments are minimized. Other companies have discovered the same: One organization implementing Holacracy was known internally for their extended meetings, which often circled around tensions over and over without ever coming to a solution. They decided to measure the time it took to make a single decision before and after the implementation of Holacracy’s “one-tension-at-a-time” approach. The result: A 90% reduction in the time it took to resolve tensions.
At Kahler Financial, it took a while for the team to understand that Holacracy’s systems allow for tensions to be raised and discussed in a healthy manner, without damage being done to systems or relationships. However, achieving this healthy balance took time, reflection, trial and error, and external consultation. Rick’s process of discovery was also aided by speaking with other Holacratic teams at global forums. Meeting with other people who had gone through similar trials and found unique paths to success allowed Rick to put his own challenges in context, and build a reliable professional network who could give him the insights that his local, traditional professional networks couldn’t.
Brian Robertson of HolacracyOne has noted that this methodology of problem solving isn’t solely limited to organizations. Conflicts and tensions will naturally arise in friendships and personal relationships, and the more people try to solve multiple tensions at a time, the more tangled the problem becomes. A person who has been struggling with long-standing tensions can also feel emotionally tied to the resolution of that tension, and will inadvertently derail the problem-solving process because their self-worth is now tied to having that tension resolved in the way they want, to the priority of all others. By working according to a strict Constitution that honors all tensions as valid and outlines a process for resolving tensions, emotion can be removed from the equation in favor of mutual solutions and satisfaction.
Rules are simple. People are complicated.
Of course, practicing Holacracy isn’t always as easy as referring to the Constitution. People are complicated, and the concept of radical autonomy is often tempered by the fact that small decisions made in alignment with the purposes of a circle will often have broader impacts that affect people and processes outside that circle. In addition, breaking down working processes into a series of smaller decisions spread among roles naturally causes conflicts.
When conflicts like this occur at Spindle, the default resolution method is to seek consensus. This is human, but not necessarily Holacratic. To solve this, Spindle sometimes creates roles that own a single process from beginning to end, but this solution has also received pushback; These roles can be perceived as managerial, and don’t necessarily ensure accountability or clarity.
In these cases, there sometimes isn’t an easy answer embedded in the Constitution. The solution can only be found in transparent conversation, negotiation, and experimentation.
Similarly, the team at Kahler Financial have also discovered that, while Holacracy includes mechanisms and spaces for open conversation and debate, it is up to the team to ensure those spaces are being used correctly. In the early days of Holacracy at Kahler Financial, Rick instituted a “Tribe Space” which was, at the time, not officially a component of the Holacracy Constitution. This space was intended to foster open and frank discussions, but was instead used as a space for venting. Conversation in the Tribe Space soon got ugly, and the space had to be discontinued. The solution lay in mentoring team members in the practice of transparency and openness, which led to a larger culture of consciousness and awareness. In addition, funding was provided for anyone seeking personal development and therapy. This has facilitated more open and respectful communication without the need for “clear-the-air” meetings.
Rick is aware that other companies use the concept of a Tribe Space well, and that different methods of therapy–both individual and group–can have extremely positive outcomes for team members and the team as a whole. However, he also believes that conflict resolution through company-mandated therapy is not necessarily productive. It takes time for everyone to be comfortable processing their tensions in a group setting, and the last person who should be in therapy is the person who doesn’t want to be.
Alignment and Consensus
Holacracy is a system where individuals set their own prioritizations based on what they feel is the best value for the organization at the time. Open information sharing, proactive discussions and prioritization pitching helps teams and circles reach alignment, and in the rare case that two roles are unable to reach an agreement on alignment priority, they can call on a Circle Lead to make an official prioritization.
Circle Leads can also assist when team members aren’t achieving their accountabilities. The Holacratic framework asks that performance problems aren’t strictly viewed as individual problems, but as potential symptoms of a malfunctioning system. The team member may have made mistakes, but it’s more likely that the system wasn’t built to help them get the results they wanted. As such, Holacracy provides mechanisms for the people involved to ask: Have expectations been clearly set? Are everyone’s roles clear? Does everyone have the tools and autonomy they need? Are priorities not properly aligned?
This level of organizational clarity has been of immense benefit to the Spindle team, who have found it easy to adapt traditional structures to suit the Constitution, especially regarding how simple it is for their colleagues to keep their roles and accountabilities up to date and transparent. Everyone knows what everyone else is doing at all times, no matter the size of the business.
This also gives individuals at Spindle more control over their tasks. It’s easy for people to say “I don’t have a role for that” when presented with tasks outside their accountabilities. The flipside of ownership is that team members are not pressured to heap their plates high with additional tasks outside their role’s purpose or accountabilities.
Kahler Financial has had the same experience. Everyone knows their roles, and business moves swiftly without the CEO needing to be present. When someone realizes their role isn’t resonating with them, it’s simple to leave the role for someone else to take over. This allows everyone in the team to be in a constant state of growth and discovery.
Do we have to go all-in?
Non-Holacratic organizations can find a lot to gain by investigating and borrowing from the Holacratic method. In fact, Brian enjoys when curious organizations examine the ways in which their systems and employees are struggling, and then borrow solutions from the Constitution. He recommends that all organizations consider the “one-tension-at-a-time” meeting system, as well as their tactical meeting processes. However, the most important aspect that all organizations can borrow is how Holacracy manages and defines roles, how individuals operate, and how they check in with other roles using a concrete system of language that helps avoid confusion and conflicts.
Is it possible to measure the effectiveness of a Holacratic structure? One Holacratic organization implemented an internal survey that asked everyone: “Do you feel like you have access to the authority and decision making to get your job done?” Six months after implementing the Constitution, 60% more of the team said yes than before the implementation. That same organization also measured the time it took in meetings to decide on policy changes or job descriptions. The time taken before Holacracy was somewhere between weeks and never, as decisions pinballed back and forth until they were no longer relevant. The time after Holacracy: an average of twenty minutes.
But will every organization see universal benefits by adopting sections of the Holacracy Constitution? Not necessarily. For example, even after flattening their structures, defining clear accountabilities, and implementing the broader strokes of the Holacracy Constitution, employees at Kahler Financial were still seeking consensus from their CEO. To that end, Rick also struggled to step back when major decisions needed to be made, even though he didn’t hold those roles. While Holacracy includes mechanisms for enabling autonomy and empowerment, successful implementation ultimately relies on the willingness of team members to engage with those systems and, in turn, to disengage from systems that are not included in their circles of accountability.
Their solution was to use Holacratic methods to create new policies, domains, and roles to limit the power of Rick’s roles–specifically, ensuring that autonomous power was being exercised properly, and that decisions could be arbitrated by a role other than one held by Rick.
Put simply; people are people, and Holacracy is only a system to be implemented and lived by human beings–exciting, brave, pioneering, but fallible human beings. If an organization wishes to cherry-pick aspects of the Holacracy Constitution to suit their business, the Constitution supports that, but it must be done with the understanding that the team will ultimately be responsible for the success or failure of those systems.
How do we know it’s working?
At Kahler Financial, there was no single point where Holacracy “clicked” and everyone understood and embodied their roles. Rather, it was an extended, ongoing process in which, one day, Rick walked into a meeting and realized he didn’t need to be there. There were also instances where Holacracy allowed for greater flexibility and provided clear guidelines when it came to shifting team members in and out of roles that weren’t resonating, or when a role needed to be created to fill a gap. For example, it took time to realize that there was no single role at Kahler Financial in charge of the overall budget. Holacracy gave the team the tools to solve that problem quickly and simply.
It was also possible to tell when Holacracy was working by looking for signs of empowered action–or more precisely, by looking for the lack of unempowered action. For example, an absence of meetings, an absence of individuals waiting to get permission from management, or an absence of approval-seeking and tedious group decisions.
The Spindle team has also discovered that there is no point at which Holacracy becomes comprehensive and infallible. For example, there is a real danger of people inside an organization like Spindle insisting on doing everything “the Holacratic way” without considering whether there are other methodologies that can complement and enhance Holacracy. This is especially true when it comes to questions of culture, which is largely intangible and can’t be the responsibility of a single role. In these instances, Spindle recommends that practitioners be wary of developing tunnel-vision, and be ready to look outside their organization for answers and inspiration.
However, even with these potential pitfalls, Holacracy has an immense amount to offer. Effective Holacratic organizations feature people diving into major decisions, partners having conversations where they’re declaring what they’ll do next, without waiting for a permission slip, and the like. A Holacratic organization can be seen as a business made up entirely of people acting like managers, owning their own roles, and feeling free to push back against anyone who infringes on their domain. A successful Holacratic company is also defined by speed; nobody waits or defers. They make decisions, push through obstacles, and seek help when they need it.
Lessons from the Trenches
Both Kahler Financial and Devhouse Spindle have gained structural flexibility, autonomy, and organizational resilience through their adoption of Holacracy. Both have also experienced the highs and lows associated with the wide-scale adoption of new systems of governance.
If there is one lesson Rick Kahler would like other organizations to take away from his experiences, it is that there is no way to do Holacracy effectively without committing to the process in terms of time and budget. Holacracy has a high startup cost, is expensive to implement over time, and has a steep learning curve. Those who underestimate Holacracy will struggle. However, despite additional costs and complications, Holacracy has brought twice as many benefits to Kahler Financial. Increased autonomy, improved communications, the decentralization of authority, independent budget control, and improvements in communication and mentoring have all resulted in an organization that has continued to run smoothly and efficiently for the benefit of customers throughout 2020 and 2021, and without the necessity of CEO oversight.
The Devhouse Spindle team have also discovered that Holacracy is an ongoing practice. As a result, the process of onboarding at Spindle is constant, and the entire team are always revising and reflecting upon their practice of Holacracy. Even in a company that was born Holacratic, it is easy to revert to traditional methods of accountability and decision governance. When faced with complex decisions, it’s human nature to sometimes look to someone else in search of answers and authority. They have learned that Holacracy is not a “one-and-done” practice. It must be constantly applied, learned, and lived.
The road to success may not be universally smooth, but the rewards for a disciplined, systematic approach to Holacracy are huge. For businesses seeking to become more flexible, disciplined, and democratic, the Holacracy Constitution may be the answer.