When we introduce ourselves as a holacratic organization, potential customers often do not know what to make of it—or we are met with skeptical smiles: “Holacracy isn’t economically viable. You won’t last long.” If that were true, we would never have implemented it. When applied correctly, Holacracy significantly improves collaboration and actively fosters innovation.
When companies transform into agile organizations, the initial focus is usually on organizational aspects. Development teams look for ways to implement tasks more effectively. If they use a framework such as Scrum, it takes time for everyone to find their roles and for teams to adjust. It takes even longer for daily routines to become second nature. During the implementation of Scrum—and even more so with the broader introduction of Holacracy—economic metrics are rarely the primary focus. This makes it harder for organizations to integrate them meaningfully later on. Ultimately, however, organizational structure and economic performance must align. Regardless of how companies are organized, they must operate profitably to secure their long-term existence.
Holacracy is designed to enable more agile work and therefore higher value creation. Often incorrectly referred to as “Holokratie,” the model is based on the concept of a holarchy, introduced by writer Arthur Koestler—a combination of “hierarchy” and “holon.”
A holon is “a whole that is part of a larger whole.” The organization consists of self-organizing units. The reference to hierarchy is deliberate: the circle structure is hierarchically arranged, with subordinate sub-circles and higher-level super-circles. In this sense, Holacracy can also be used to map organizational hierarchies—for example, as a starting point for transforming into an agile organization. Like other organizational models, Holacracy ultimately aims at business success and secure income for all employees.
Thinking in roles increases productivity
As a holacratic organization, we offer our employees a wide range of opportunities to contribute and grow within a transparent structure. They take on multiple clearly defined roles. By strictly separating “role and soul”—the role and the individual as a person—we are able to discuss matters objectively. Each role represents a whole in itself. Projects are handled in so-called circles, made up of the roles required for the task. After more than ten years of Scrum project experience, we decided in February 2017 to move toward Holacracy to further improve as an agile organization. Unlike Scrum, Holacracy is often viewed critically. In our experience, this is largely because it is much harder to implement and internalize.
Holacratic structures take some getting used to. New employees are often puzzled when they hear dialogues like: “In my role as ‘Marketing,’ I need €1,000 from you in your role as ‘Circle Lead’ for the new corporate brochure.” In practice, however, this approach creates transparency and allows us to operate with very few rules—which we then apply consistently. One rule, for example, states that employees may incur expenses up to a certain amount but must inform all relevant parties. A marketing colleague can therefore order business cards without asking for permission. We place great importance on owners and leaders consistently acting within their roles. A Circle Lead might respond that the expense is not within this year’s budget—but not that €1,000 is “too expensive” or that a brochure is unnecessary. This distinction is crucial.
Scrum as a framework—and its potential antipatterns
While Scrum primarily operates at the team and project level, Holacracy structures the entire organization or organizational units. At rising systems, we combine both models at their respective levels—a step that has clearly moved us forward as an agile organization. At the same time, we are aware that both models have gaps that can only be filled through daily practice. It takes experience to apply them in ways that truly maximize productivity..
Scrum supports team self-management and provides various metrics. One of these is velocity, which is often used early on. Velocity illustrates how challenging it can be to view Scrum from a purely economic perspective. Velocity is not a comparative performance metric. The velocity of one team cannot be compared to that of another. It exists solely for the self-management of the individual team. When leaders search for business metrics, they may—due to a lack of alternatives—be tempted to use velocity. This leads to a well-known antipattern: comparing teams based on velocity and assuming that continuously increasing velocity is desirable. It is not. Other metrics are more appropriate—but they are not part of Scrum and must be added. Scrum is, after all, only a framework.
Agile projects must be economically viable
Holacracy provides fertile ground for innovation. Because roles are flexible and temporary, over-identification is rare. Employees are less likely to cling to ideas for non-objective reasons and are more open to new perspectives. Our focus is always on the organization as a whole. Of course, everything we do is guided by a company strategy. We regularly adapt it together to our needs and market requirements—but we never lose sight of it. Every agile development goal must align with our business objectives. We rely on classic business tools, such as profit and loss statements, to assess whether the effort and returns of our agile projects are in balance.
We review the profitability of each circle. Because we constantly reflect on our work, we quickly recognize when something is off and take corrective action. If a circle’s results are not economically convincing, we jointly analyze the reasons to learn for the next iteration: Were the roles not optimally assigned? Did roles lose sight of the goal? Or were objectives not clearly defined? In this way, Holacracy helps us live our values, summarized in one guiding principle: “Embrace change and continuously improve.”
We have refined this article based on feedback we received. Thank you for your input—it has been incorporated into this updated version.