By Adam Schmideg originally published by Lab.Coop on medium.com

Working with a startup is thrilling — while you are in the honeymoon phase. Then it can become pretty frustrating, no matter how many sexy perks they have come up with. Is this inherent? Or are there more fulfilling ways of working together?

Holacracy is one of those promising new ways to run an organization. When I first heard one of its creators, Brian Robertson, talk about it, it hooked me. I raved about it to my wife, my friends, everyone. My sober friends and my even more sober managers warned me. “Rumor has it Zappos is in deep trouble with it,” they said. Their wisdom came from a single blog post (or from its catchy title: Zappos is struggling with Holacracy). Other organizations are “feeling new wind beneath [their] wings” after the initial hiccups. HBR hits the middle ground exploring what’s beyond the hype. Is it a management fad or is it a way out? I set out to get the answer from a company that has been using it for two years. This story is based on actual events that happened to real people, sprinkled with my imagination. You can call this a documentary fiction.

The chances of grabbing talent from the big and sexy companies

Peter leans to the white-navy-blue striped wall. He holds his glass with both hands, looks around at the six men around the table. David sits across, he plays with a small glass of Unicum (the local bitter shot), he looks down on his shoes. The bartender hits a bell in the background; this is how customers of the Silver Bullet Bar know their food is ready. “We are one of the nine,” says David. Peter nods, “You all knew 9 out of 10 startups fail. Not because we made something wrong. This is how business works. Brickflow was in the 9.” David puts his finger into the empty glass and licks it, still looking down, “I have a friend who works at PreMeStream. He asked me if I wanted to join.”

Peter expected it, but not this fast. “What did you respond?”

“Of course, I’m not joining PreMeStream. But it made me think.”

“What? The salary there? The foosball table? The fame?

“Exactly.”

They have known each other for ages. Peter knew the blue Nike shoes Tom is looking at; they bought them together. Peter checks the faces; people are fidgeting with their drinks or beermat. The bell at the bar is ringing again.

[White dices on checked wood, CC0 license]

Half an hour later it’s only two of them, Peter and Tom. The same glass of beer is sitting in front of Peter. Tom, the other co-founder is about to order his third. He drinks half dark, half light.

“We will lose these guys, they will leave one by one. The captain goes down with the ship. You can leave anytime you want.” Peter says.

Tamas looks hurt. “Let’s play Titanic together. I trust you, and you are never without a plan B.”

“It’s easy to have a business idea. The hard part is to have good people for it. How can we keep these guys? How can we attract new people? How could we compete with the big and sexy companies, like Prezi, LogMeIn, or UStream? They can do all the tricks the rest of us just want to imitate. What do we have that we could offer these guys?”

Tom shrugs, “We can offer them stock options like all those startups.”

“Pay with a future that may never come.”

“It’s up to them to make that future a reality.”

Peter knows a thing or two about that future, “That’s an illusion. The bigger the company, the more so. You have these business bestsellers on servant leadership and its kind, but the big decisions are made by the CEO.”

“So you want to give them full power to make decisions? How can you make sure they won’t drive the whole company bankrupt in a week?”

“I have no idea. I will do my homework.”

The awkward silence of structured meetings

There are more ways to skin a cat and even more ways to run a company. Agile practices address the team-work in software development; sociocracy has alternative ways of making decisions. If you enter a bigger bookstore and pause in front of the bookshelf of management, the end of the bookshelf is hardly visible. It’s like entering a candy shop where you pick an orange candy here, a chocolate covered bar there, you mix and match your very own method. Holacracy is like a pre-packaged box of candies; its promise is the tastes will work together nicely.

The same guys are sitting around a table, this time it’s in the office. Three more people joined the team who bought into the idea of being real owners of a company. Peter stands, waits for the chitchat to fade away. “I already told you about Holacracy, so I don’t want to repeat the whole story. This is Adam, most of you have already met him. He will help us hold our first Tactical meeting.”

People around the table look at each other; they don’t know what to expect. There’s a second of awkward silence, but Adam, the new guy, is in control. He holds a basket full of blue sheets of paper nicely laminated. He hands them out. “These are the steps of the meeting.” He keeps one copy himself, “I will need it too. First, we’ll have a check-in round. You say what’s on your mind. No crosstalk, please.”

“What is crosstalk?” whispers a participant to his neighbor. “Maybe the last words of Jesus,” is the response. They get a look from Adam. OK, this is going to be some serious game.

“By the way…”, says Peter. Adam interrupts him, “it’s not the right time for that. We’ll collect the agenda later, if you want to talk about this.”

Meetings in Holacracy have a strict format. Some find it “fully unnatural”, like “playing a game of Management Dungeons & Dragons” (Julia Culen, a former consultant of a company that adopted Holacracy). Of course, it feels unnatural first, because it’s unfamiliar, you learn something new. When you first played football in the backyard with your friends, the rules were unclear, and if there was a debate, the biggest guy was right, he made the rules.

Professional meetings are usually the same, it’s the guy with the highest rank or strongest voice who wins the argument. When the big guy doesn’t have a strong opinion in the issue at hand and lets the rest decide, groupthink takes over. Holacracy stops these dynamics which makes the big guy uncomfortable while the smaller guys feel liberated — after they realize they don’t have to consult their bosses at every decision.

The end of coaching someone into the right mindset

Three months passed, they have the routine, they do the check-in round without commenting on one another. The basket with the sheets lies on the table, everybody takes a sheet, a yellow one this time. The blue ones are for tactical.

There are two types of meetings in Holacracy. Tactical meetings are for operational issues, governance meetings are about changing the way the organization works. Changing the organization is not a special case but it’s business as usual. Everybody can change the organization easily to improve their work.

Adam holds a sheet but doesn’t need it. “We’re building the agenda. Anyone?”

No reaction. Peter waits, then raises his hand. Tom raises his hand too.

Adam writes the agenda items on the whiteboard. “Partner naming convention” He started with bigger letters, the last few letters of the word are crammed before the edge of the board, it reads “partner naming convent”. Tom takes a deep breath and starts to explain, “the idea is if you work here for more than a year, I mean before the year passes, and…”

Adam is kind and firm, “in two or three words, please. You’ll have time to explain it when we get there.”

Tom looks up at the ceiling. The paint is missing in large spots, trendy startup offices are refurbished like this. “OK. Paying money.”

Notes taken. Adam nods towards Peter; he’s quick to start, “My proposal is to name everybody in the company a partner and name the lead link of the top circle ‘managing partner’ to fit standard business conventions”. The secretary leans close to his laptop while taking notes.

Adam: “Clarifying questions round.” The first man at the table asks, “Should we call you a managing partner and everyone else a partner?” Peter says, “The governance is about roles, not about persons energizing the roles.”

“I know. But do you…”

“Yes.”

Second person: “What about lead links in other circles within the top circle?”

Peter: “Not specified.”

By Simon from United Kingdom (WWE Wrestlemania 28 — The Rock vs John Cena) [CC BY 2.0, via Wikimedia Commons]

Ten minutes later the proposal is discussed and accepted. There was only one objection to it, but by the rules it proved invalid. Peter sits smiling as people leave the room. He waits for Tom to stand up; he gestures to Tom at the door to let him go first. “I knew you would push it through Governance.” says Tom with a sigh as they walk out of the room. Adam stays in the room, alone. He collects the sheets from the table and shakes his head; oh, that triumphant smile on Peter’s face.

Holacracy discourages usual manager behaviors, such as “coaching someone into” performing a certain task or stifling an initiative by expecting to be convinced. However, Holacracy doesn’t explicitly stop such behavior, it just draws attention to the pain it causes. It needs to be a conscious effort of partners to get rid of office politics and their other tools; they won’t go away by themselves.

If a manager doesn’t realize she has become one of many partners, she’ll keep doing the old routine. She will misuse the governance.

If an employee doesn’t realize he has become a partner with increased responsibilities, he’ll keep doing the old routine. He will misuse the governance.

They will practice the empty rules of Holacracy, perpetuate the old management system in disguise, and wonder why it fails to work. Organizational growth is impossible without personal growth.

“Do we really want to do Holacracy?”

They put a large green canvas in front of the window to have some darkness in the room. It’s an early spring afternoon, some already wear shorts and t-shirts, the slower adopters still wear pants and long sleeve shirts. They bought this projector for a project but never used it, no-one knows when its left plastic leg snapped off. Adam piles a couple of books under until the trapezoid on the wall shows all the details. A simple slide, white background, the title in old fashioned Arial, “How we are doing Holacracy wrong”.

Adam wears a black turtleneck, not typical of him. He has a softer voice than at the meetings he facilitates. “We all noticed it didn’t work. So after some encouragement from Peter I signed up for a 5-day Holacracy training in Vienna.”

Someone murmurs, “5 days? You are a tough guy.”

Adam clicks, the clicker doesn’t work, he steps to his laptop and hits the space key. It’s a rage face, the title says, “Mistakes we made.” There are four bullet points below the title but no text. They will appear soon. Adam starts to talk.

“Holacracy separates role and soul, it separates organizational space where we work together from tribe space where we connect as people. Holacracy seemed like such a well-thought-out system we used it in all aspects of the company, shoehorning personal matters into Holacracy didn’t work at all. We tried to use the magic weapon of Holacracy in the tribe space — and it doesn’t work, it makes things worse, it’s not the right tool for human relations. Holacracy is a great tool for self-organization of the Work, but awful for people matters. This doesn’t make Holacracy awful, just use the right tool in the right place.”

The last slide comes twenty minutes later. A single question mark. The room is silent, Adam’s question still hangs in the air, “Do we really want to do Holacracy?”

Peter sits in the back. “As I see there are three options. Option A, Holacracy is not for us. Option B, well, Adam, you can’t do the job of facilitating it. Option C, …” Now he stands up slowly, “option C is, we didn’t implement it properly.”

Adam has an answer but doesn’t say a word. He’s not sure where Peter is getting at.

Peter concludes, “and I think, it’s option C. We’ve learned from our mistakes. We can finish the test ride and we are ready now to commit to it.”

[Girl jumping, CC0 license]

Becoming actual owners

The room looks like prepared for an ad-hoc wedding ceremony, there is a pedestal in the middle covered by a white scarf, it’s long enough to hide the three cardboard boxes used to build up the pedestal. There is a single sheet of paper on it with a fountain pen lying on it. It reads “Constitution Adoption Declaration”. Tom enters the room, the others already stand there leaning against the wall. Peter smiles nervously, Tom pats his shoulder, “It’s your turn to sign it, Sir. I mean, managing partner.” Peter laughs and walks to the pedestal, reads the whole text. A businessman never signs a contract without reading it first. Even if he printed it an hour ago. He takes the fountain pen and signs it.

It’s done, but the situation doesn’t feel finished. “I am just a partner like all of you in this room,” Tom says. He goes up to the pedestal, draws a line under Peter’s signature and writes, “supported by the partners:”, and adds his curly signature. He waves the others to join him.

Work on governance in small iterations

The first governance meeting after they signed the constitution. Peter freshly shaved. “We are building the agenda”, says Adam. Four hands in the air.

The first proposal is about separating their first spin-off venture from the mother company. Peter chimes in during the objection round, “it just gives me another idea I have to share”. Adam gives him a loving, my-silly-old-bear look, “It’s not the right time.”

He gives a time-out gesture, they are now outside the meeting at a meta-level where they discuss the rules of the game. “Let me clarify it. The goal of the process is to get to some improvement as soon as possible. If you have an idea, there are two cases. In the first case, it’s a reason why this current proposal is a bad idea. And we should consider that before accepting this proposal. In the next objection round, we’ll get to that. The other case, you have an idea that makes this proposal better. This is great, but we want to progress with quick improvements. If you want to implement your idea, add a new agenda item and propose building on the current proposal. Are we good?”

What we’ve learned: level one facilitation is holding the rules, keeping the mechanics running. Level two facilitation takes coaching, etc.

Holacracy depends on self-management / personal organization. GTD (Getting Things Done) is more important than Holacracy. If people only focus on the latest and loudest, that invites constant heroic action and victimhood. No output of the Holacracy system would get processed, people actually use others to tell them what to do hour by hour (managers in the better case, random Slack and Facebook messages in a less good case)

[Cocktail glasses by Leeroy, CC0 license]

The two components of success

They are sitting in the Silver Bullet Bar again, they had to rearrange the whole room, pushing tables together so it can accommodate all the people. They may outgrow this pub by next year. Peter leans to the wall, he rolls an empty glass in his hands. People around the table all talk at the same time, they can’t hear the bell in the background. The waiter arrives balancing a plate full of shots. Hands reach out before he could place any of them on the table. Peter raises his shot, “It’s been a busy year. We are going strong without any external investment. Thank you, partners. You know me, I have a rational mind, I make business decisions, and business is not about heart. But…”, he touches his heart with a half serious, half theatrical gesture, “I am grateful you endured with me. Our success has two components. One is our experiment with this new management model. The other is you. Without your trust, it would have been impossible.”

Happy faces all around. Except for Adam. He hasn’t touched his drink, watches his shoes carefully. The noise, the elated babbling dies off. “What’s up?” says Peter.

“I have a friend. He works for PreMeStream. We talked the other day.” Adam thinks carefully before each sentence.

He looks up with a huge grin on his face: “He wants to join us as an intern.”


This is not purely fiction, Adam, Peter, and Tom are real people who have been practicing Holacracy for 2 years. They contributed a lot to this article. The stories and dialogs were made up by me based on actual events and how I imagined them.

Permission to republish granted by the author.

Featured Image/graphic link added by Enlivening Edge Magazine.

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