Holacracy: Restructuring for a Digital World

Holacracy: Restructuring for a Digital World

There are currently so many emerging trends in IT and one of the great conundrums is backing the best bet for your organisation.  The vast array of new technology is either the answer to the problem or it could be the problem itself.

Is there not a wider issue than the ever-growing menu of options that we have in the technology world and that issue tends to cause issues in many organisations?

That issue is people and culture.  There are many articles and books available about culture and how culture needs to change to enable digital transformation. In a recent survey undertaken jointly between Ensono and the Cloud Industry Forum looked at digital transformation across a variety of size and type of organisation across a range of business sectors.

However, unlike most other surveys on this subject, this one questioned both the business and IT in all of the organisations surveyed and found a significant difference in perception about how to succeed at digital transformation between the business and IT.

One group sees transformation as an on-going journey, an holistic approach that requires complete business buy-in, that is rapid, iterative, agile and is approached with energy and velocity whereas the other group saw it as a technology led exercise designed to reduce costs and create operational efficiency.  This is perhaps an unsurprising distinction, except that it was IT who saw transformation as an holistic business led approach and business that saw it as a technology led exercise.

What does that tell us?  More than anything it does show a marked difference of opinion between the business and IT.  The actual difference is, in most ways, irrelevant.  What can be seen is that many organisations are struggling to understand how to wrap their arms effectively around digital transformation and drive significant benefit from it.

So what do organisations need to have at the forefront of their thoughts?  Perhaps now is the time for organisations to take a long hard look at how they operate, both as internal IT functions and as wider businesses. One emerging approach to organisational change is the concept of holacracy, an organisational model that eschews the traditional hierarchical approach to business leadership and distributes decision-making authority in self-organising circles that are made up of employees who hold roles, often multiple roles, rather than Job Descriptions, with each of these circles being arranged around a purpose statement.

This approach creates a much more adaptable, innovative and resilient organisation and forms the basis of a transformative culture.  Every employee has self-organised purposes and accountabilities and is capable of contributing to the evolving structure of the organisation.  It removes the need for the benevolent manager and removes the CEO as a single point of failure.

To borrow an analogy from the CEO of Zappos, a holacracy is similar to a greenhouse with each plant being an employee.  Traditionally the CEO is the tallest and strongest plant that all other plants aspire to be. In a holacracy, the CEO is the architect of the greenhouse, the person responsible for creating the conditions where all plants can thrive and go stronger and where there are no dominant plants that prevent others from thriving.  Or, in more practical terms, a holacracy is like a city. The Mayor and the council provide the infrastructure and certain core values but the members of the community act independently.  Cities grow and thrive through self-organisation but against a set of common values.

The identification and codification of the common values is one of the biggest challenges to establishing an effective holacracy.  The question is, how do organisations go about creating a set of common values? The key to this is culture. So is there a default transformational culture?  Of course not.  In fact, research suggests that it doesn’t really matter what cultural values a company establishes.  What matters is commitment to the values and the willingness of the company to hire and fire based on those values.

Most organisations have guiding principles, mission statements or core values and these are usually well advertised within the organisation, but the general problem with these is that they are usually top down statements, often created by Senior Leadership or external advisors.  The other problem is that nobody really pays much attention to them and few live their work life with them at the forefront of their mind.

For principles to work they need to be crowdsourced across the organisation and they must be discussed, debated, challenged and they will take time to agree, embed and publish.  But the process of establishing them is in itself important and an interesting mirror in terms of digital transformation.  The process is as important as the outcome.

Organisations often place their emphasis on the outcome of any change activity but the process is equally important.  The engagement, the debate and challenge, the strawmen, the failures – they allow rapid and iterative change to be identified and the process itself often embeds change osmotically rather than change being some complex formal process that is the final stage of something.

The process of changing how an IT organisation works is also critical.  Self-organisation and management does require a different mindset – it requires a much more entrepreneurial approach from all employees and that requires a different personality type.  So we can establish a city based or greenhouse framework but we need the right people inside the revised structure and that becomes a challenge, especially within IT functions.

Agile Consultation

What makes a good entrepreneur?  There are many studies and much data on this subject but condensing all of this down, there are three core characteristics that mark out successful entrepreneurs: they are comfortable with ambiguity, they have a strong sense of curiosity and they have high emotional intelligence.  These are not typical characteristics of IT staff.

Building the teams is also critical.  The best performing teams are not created by simply putting the ‘best’ individuals together.  This has been understood for many years in sport and probably the best example is the New Zealand All Blacks rugby team.  They have a core value that says ‘the best players don’t make the best All Blacks, the best people do’.  And they drive this value through every player.  At the end of a game who sweeps the changing room?  The captain and the senior players.  They always clear up after themselves.  They never rely on or put upon anybody else.  They are a self-contained, self-policing team made up of the best people they can find.  Funnily enough, they are also the best rugby team in the World.

A rugby team is probably one of the best examples of a holacracy.  Every player has their position but they also have specific roles in given situations and with each role they have a purpose.  In a scrum each player has a role, in a ruck the same players have a different role and in a maul yet another role.  They know these roles but, more importantly, they know the purpose of the situation they are in and fulfil their role in accordance with that purpose.

Applying this back to business, too many organisations keep bringing in the ‘best brains’ from outside.  It’s a constant drive to keep recruiting the ‘best’ but often they don’t look at the best people inside and ask ‘how can I help them become better’?  We live in a hire and fire culture but we rarely hire and fire to core values but keep referring to ‘performance’.  We have Performance Reviews, Performance Related Pay, Key Performance Indicators. What is performance?

Every All Black team has a player or three that you would probably not expect based on pure rugby ability.  But they are strategists, peacemakers, motivators. Measure them on rugby ‘performance’ and they would probably not make the grade.  Measure their impact on a team and they are indispensable.

Pick the best people, those who most closely align with corporate values and teams will evolve.

Most adverts for jobs in IT list the technical skills required, sometimes list preferred corporate background and almost always contain the phrase ‘must be a team player’.  What exactly does that mean?  When this is questioned, few managers are able to effectively articulate this requirement and even fewer evaluate it effectively during the hiring process.  Worse still, many organisations, especially within the IT function, have somebody who is often described as ‘a bit awkward and upsets people but is technically brilliant’.  That is a big red flag.  Somebody with a strong cultural fit, a sense of curiosity and a willingness to learn is a far better hire than an awkward genius.

In IT, we need to reverse the recruitment criteria.  Technical skills can be learned.  Hiring top techies today is an own goal if their cultural fit is poor because tomorrow their skills will be out of date and their cultural fit will still be poor. We need to hire people who will be able to challenge and disrupt the current thought processes, understand the business and learn or find partners to deliver the technology.

The other element that is significantly important is to find purple people.  What are purple people?  This is a concept that emerged in the Insurance industry in the 80s where insurance companies were looking for technical experts who understood the businesses they were dealing with sufficiently well to effectively assess risk.

In IT terms, purple people are those that instinctively and completely understand the needs of the business without needing to be told but who also have a comprehensive understanding of technology.  But why purple people? The original theory described the business understanding as red – instinctive, passionate, creative and the technical knowledge as blue.  More logical and rational.  Psychologists often characterise people as of blue or red personalities.

And when you mix blue and red?  You get purple.  But purple people are rare.  Very rare if the truth be known and if you find one then you may well introduce a single point of failure.  Building purple teams, an arbitrated environment for red and blue people to come together is becoming a more accepted approach.  It is easier to create teams than find the purple people.

Purple people generally drive and embrace change as they have the confidence to understand the potential and map it to business success.  And we live in a World of change: it’s difficult, it’s challenging and it will become ‘Survival of the Fittest’ as Charles Darwin once said.  Except that he was very careful about how he defined ‘fittest’.  He said that “it’s not the fastest or strongest or most intelligent of species that survives.  It’s the one that is most adaptable to change”.

To survive we need to move beyond predict, plan, control and execute to how do we get rapid feedback, respond and build an organisation around adaptability and resilience.  Many organisations try to build on predictability, especially of structure.  But the structure is the one variable that affects productivity and output so transformation of these key drivers requires flexibility not predictability and that is the biggest change organisations need to address.

Why do we undertake digital transformation? Many organisations are reacting to the World around them.  They are responding to declining revenues and squeezed profits and often see digital transformation as the panacea to this.  The trouble with this approach is that it often leads to tit for tat transformation.  The competition transform so we must.  A new entrant comes into our market so we must have a comparative offering.

All of this leads to relatively dull innovation.  Organisations are like the Red Queen in Alice Through the Looking Glass – in a race simply to keep up with the other racers.

The most successful transformative companies are those that are bold, those that are prepared to take risks.  As organisations become more established and bigger, it becomes more difficult to take risks because there is a hierarchy that naturally forms to prevent risk so we need to radical if we are to transform.

We need to forget consensus, forget seeking permission.  Standard linear thinking doesn’t lead to innovation and no innovation means no transformation. As Albert Einstein said ‘Innovation is not the product of logical thought’.  Linear thinking, logical thinking doesn’t lead to innovation because it requires a known outcome.  And consensus isn’t scalable in an organisation but holacracy is.

Arrange a Conversation 


Article by channel:

Read more articles tagged: Culture, Featured, Organisational Design