Holacracy and other flatter-earth theories

Management fashions come and go, but one that has attracted a good deal of attention this year is "Holacracy" – a system devised and trademarked by consultant Brian Robertson, which replaces formal company hierarchies with a flatter structure consisting of self-managing "circles". So far, so apparently uncontroversial: institutions like the Harvard Business Review have been extolling the benefits of flatter organisations for years. But there's something about Holacracy that stirs up unusually strong emotions.

Ditch the boss!

Converts to Holacracy's "ditch the boss" and "distribute power" ethos claim the system is no less than a revolution in how companies are managed and structured. Instead of travelling in one direction – up – accountability travels by many different paths across and through the company, making specific job titles obsolete. One of the root attractions of Holacracy is that, unlike conventional management structures, it is grounded in modern technological reality. The system builds on the sort of workflow software that first emerged in the late 1990s. As such, Holacracy is sometimes claimed to be a way of formalising the informal way in which modern companies already actually operate.

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Proponents argue that by encouraging employees "to act more like entrepreneurs", Holacracy makes companies more flexible to changing situations – and therefore more resilient long term. Among other benefits touted are the elimination of "arrogant" executives, more efficient meetings, and even the abolition of office politics. What's not to like?

Some 300 US companies are reported to have embraced the system, including Twitter co-founder Evan Williams, who is trying it out in his new publishing start-up, Medium. But perhaps the most advanced of these test-beds is the Amazon-owned online shoe retailer, Zappos – a billion dollar company that began implementing Holacracy in 2013. "We want Zappos to function more like a city and less like a top-down bureaucratic organisation," CEO Tony Hsieh told Quartz. "Companies tend to die, cities don't."

Gurus gone wild?

Yet it's fair to say that Holacracy has attracted its fair share of opprobrium. Memorably described by Forbes magazine as an example of "gurus gone wild", critics slam the system as unworkable and a recipe for organisational chaos. Some have even remarked on its disturbingly "cultish" tendencies. Leading the charge is Professor Jeffrey Pfeffer of Stanford's Graduate School of Business who describes himself as a "realist". Holacracy, he maintains, runs counter to everything we know about the human psyche, and its instinct to create pecking orders. Whatever the proclaimed merits of self-managing, leaderless systems, hierarchy is "here to stay". To argue otherwise is to deny reality.

No surprise then that the Schadenfreudists were out in force this summer when reports emerged of a staff insurrection at Zappos. When given an ultimatum by Hsieh to embrace the new system or leave, almost 210 of its 1,500 workforce opted to take paid redundancy. "It's kind of deliciously ironic", noted Jeffrey Pfeffer, "that self-management is being decreed from above". But Holacracy's supporters see no contradiction in that. "Imagine a country that's going to move from a dictatorship to a democracy," counters Holacracy founder, Brian Robertson. "The easiest possible path is for the dictator to autocratically decree that this is now our constitution." Rather than focusing on the 14 per cent of Zappos refusniks who couldn't stomach what one described as "bothersome social experiments", we should consider that 86 per cent of company employees who remain committed believers.

Something better change...

Clearly, the jury is still out on whether Zappos' experiment in Holacracy will bear fruit – even Robertson admits they're in for "a multi-year journey". But while Holacracy might be considered an extreme example of the move towards flatter, more democratic management, there's no doubt that's where the zeitgeist is headed. A good thing too, say those who believe that management reform of hidebound organisations is long overdue. As Stefan Stern, a visiting professor at Cass Business School in London observes: "A board that sees itself operating not at the heart of a strict hierarchy but rather embedded at the heart of a living organisation is likely to provide better leadership and ask better questions of employees, communicating with them eye-to-eye."

Some will always believe in the inherent benefits of rigid organisation. As Jeffrey Pfeffer outlines: hierarchy makes complexity possible – and may actually fuel, rather than hinder, creativity. Certainly, there are countless examples of creative pioneers – Apple's Steve Jobs springs to mind – who were never exactly renowned for their democratic leadership.

Ultimately, outside forces may have a role to play in how companies evolve.

In 1928, when John Spedan Lewis, architect of Middle England's favourite department store chain, John Lewis, formed a Partnership giving employees part-ownership of the firm and a share in how it is run, the move was as much pragmatic as principled. Lewis had been spooked by the Russian Revolution and the ongoing march of socialism and reckoned that a company grounded in fairness had a better chance of survival. It will be interesting to see if the current political drift leftwards has a similar impact on today's corporate pragmatists.

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