2 reasons to be skeptical of holacracy

Holacracy: a future without traditional management?

You can always count on Zappos to keep things interesting. The shoe retailer and its charismatic CEO Tony Hsieh have been providing exciting fodder to business journalists for years now by building a quirky culture and breaking all the rules. And recently they did it again.

The company, according to Aimee Groth, who is writing a biography of Hsieh, is radically reorganizing, getting rid of job titles and traditional hierarchies in favor of a self-governing management system known as “holacracy.” The announcement caused a predictable media storm. Some of the responses were enthusiastic, but much commentary expressed a fair bit of skepticism about the new approach. Why? Two main themes emerged.

Playing king of the hill

The first line of questioning focuses on some supposedly immutable truths about human nature. Since our hunter/gatherer days, this thinking goes, we’ve been wired to battle for status. “In a holacracy, the titles disappear, but human dynamics won’t,” executive coach Harrison Monarth wrote in the HBR blogs.

Humans, like dogs, he argues, are naturally inclined to establish a pecking order. Removing titles and making this battle for status more opaque won’t end it — it will just force it into new channels. Make power and prestige something you have to continually and subtly negotiate by removing the traditional org chat and you’re bound to create more insecurity and defensiveness. That’s “not exactly fertile ground for collaboration and innovation,” Monarth concludes.

But these concerns don’t just spring from vague notions of evolutionary biology or psychology; real world examples seem to support pessimists like Monarth. In the 1980s, companies like Shell tried something similar to holacracy. “Of all the places that implemented the system, [MIT Sloan School of Management professor Jan] Klein says she only knows of one that made it last long term,” Business Insider reports. Almost everywhere “the effort started to flounder after just six months.” Why? The systems may have been logical but people, it turns out, generally aren’t. “We’re human beings; we just don’t do that,” Klein said. “We’re social beings, and social issues get in the way of logic sometimes.” Facebook’s attempts to create a flat culture foundered on similar problems, as status-seeking went covert and people jockeyed over desk position as a proxy for more traditional markers of status.

This sorts of undercover politicking could be bad for morale, but it’s associated with other nasty effects as well, such as decreased productivity and higher attrition. Time spent stressing about your status and worrying about who you’re sitting next to is time not spent on actual work, and some folks aren’t interested in sticking around for a job that doesn’t promise any professional advancement. “Companies bled talent as successful managers jumped ship instead of losing their titles,” notes Business Insider in its write-up of failed experiments in flat organizations.

Playing hot potato

Another possible question that arises when traditional command and control structures are dismantled: who does the work that no one wants to do? Sure, holacracy may allow techies with minimal soft skills to push people-centered tasks onto those more suited to them, but what about the unpleasant responsibilities that aren’t improved by aptitude, such as firing underperformers and making tough calls about layoffs? You wouldn’t want to employ the person who enjoyed those jobs.

The fear is that the flexibility of holacracy will let people play hot potato with the nastiest bits of work, which will end up getting put off or not done at all. “How will they manage bad apples?” Willium Tincup, CEO of HR consultancy Tincup & Co, asked of Zappos on the recruiting blog Fistful of Talent. “Truth is, a part of holacracy that I like is the bit about managers. i.e., management without managers. I mean, who doesn’t like that? But after careful thought, it’s actually the wrong war. I don’t hate managers. I [hate] bad managers,” he explains. “That got me thinking: how will companies deal with the eventuality that bad managers (in whatever form) will happen? How will they identify these rotten apples and, more importantly, get rid of said apples?”

Tincup’s concern that no one will want to deal with bad apples and nasty conflicts is supported by a recent experiment at a Norwegian tool manufacturer that got rid of supervisors in favor of self-governing teams with a rotating “spokesperson” role. It’s not holacracy exactly, but it has similarities, and the results weren’t exactly an unqualified success.

“Although members wanted to do good by their team, the transient nature of the spokesperson responsibility made it possible to skimp on more onerous and seemingly less essential activities,” the British Psychological Society Occupational Digest blog reports. Unpleasant questions may get kicked around, in other words, rather than promptly solved.

But never bet against Zappos

Does all this mean that holacracy at Zappos will fail? Certainly not – and Zappos has proved its skeptics wrong plenty of times in the past. What these serious concerns about holacracy do mean is that this is an experiment worth watching closely. How the reorganization plays out could have much to teach us about the fundamental needs and limitations of employees. Succeed or fail, we’ll all learn something from Zappos’ bold experiment.

Do you think holacracy at Zappos will succeed?

Post by Jessica Stillman

Jessica Stillman is a semi-nomadic freelance writer (current location: sunny Nicosia, Cyprus) with interests in entrepreneurship, remote collaboration, unconventional career paths and generational differences.