In mid-2016, we decided to take a radical step in our approach to management and adopted Holacracy. As a result, we've largely disempowered ourselves as founders and handed over a significant amount of responsibility to our employee. Today, I'll explain what prompted us to make this decision and why such radical steps are sometimes necessary.
When Torben, Marcel, and I decided to go with Holacracy, the approach was radically different from anything we were used to. Perhaps you've even heard about Holacracy before but it was probably being mentioned in a negative context. That's because there are actually only two ways it can go with Holacracy: it will either prevail (e.g. at Zappos) or it'll fail and is completely eliminated from the organization (e.g. at Medium). As the media prefers to report on failures than successes, however, I think it's time to hear from people with first-hand experience.
Using Holacracy to create more freedom
Zappos, the American Zalando model, relies on Holacracy . When 20 percent of the entire workforce leaves the company, it is a great (negative) cover story. The fact that the remaining 80 percent are among the top employees and are probably much happier again is not worth mentioning in this context.
Another headline often used for Holacracy is "Organization without bosses" (negative). In reality, however, the exact opposite is true: organizations working with Holacracy are full of new decision-makers. A more appropriate headline would therefore be: "Organization full of bosses".
Research shows that every time the size of a city doubles, innovation or productivity per resident increases by 15 percent. But when companies get bigger, innovation or productivity per employee generally goes down. So we're trying to figure out how to structure Zappos more like a city, and less like a bureaucratic corporation. In a city, people and businesses are self-organizing. We're trying to do the same thing by switching from a normal hierarchical structure to a system called Holacracy, which enables employees to act more like entrepreneurs and self-direct their work instead of reporting to a manager who tells them what to do.
Holacracy indeed promises more freedom within the company, for both the new and old managers alike. In this article, I'll show you exactly how this can be achieved and what moved RAIDBOXES to take such an extreme step.
Job apathy - one reason for a radical step
If you were to ask your friends how they feel about their job, it's highly likely that three from five of them are unhappy. Listen on for a bit longer and you'll easily get to the root of why: everyone is fed up with their bosses. By the way, those two satisfied people you spoke to are usually bosses themselves. 😉
This subjective impression is confirmed by the Gallup Study 2016 results: 85 percent of participants don't enjoy going to work and they usually only do the minimum work required by their contracts. The study has been collecting the same data for decades and you can see how the situation has barely changed over time.
These findings aren't new and endless studies comes to the same conclusions. Management training courses designed to resolve these types of problems have been around for years. In my opinion, however, training can only alleviate the symptoms of a problem that is on a structural level. The problem itself is caused by the way in which we work today.
Today's leaders are stuck in melee mode
If you dig a little deeper into management theories, you will find that there are three types of leadership: Dialogical, structural and cultural leadership. Dialogical leadership describes a direct interaction between superiors and employees. In this form of leadership, leading and maintaining dialogue is a major resource guzzler. Leadership training - in my experience - often starts exactly here. But direct interaction becomes less and less important when structural and cultural leadership are perfected.
Structural leadership, on the other hand, refers to everything that does not require direct interaction. This includes general, documented work instructions, but above all rules and the structure of the company itself. If, for example, the management of a call center decides to grant employees their own budget for discounts and special conditions, this creates more freedom for each individual and makes the organization more decentralized.
Cultural leadership means that the entrepreneurs create values and visions, according to which the company and its staff act. Among other things, the culture of a company determines which employees are selected. For example, if a company sets the value of transparency as its guiding principle (as it like Buffer does), a team member who refuses to have their salary published is not going to get very far within the company.
When structural and cultural leadership are brought to the foreground, it results in less direct interaction. In turn, this means less potential for misunderstandings and more resources for the actual core tasks. The team and management experience more freedom and are more satisfied. That's exactly what Holacracy promises.
Four reasons for our move to Holacracy
Holacracy emphasizes cultural and, above all, structural leadership while reducing dialogical leadership to a minimum.
As founders, this promise was very appealing. Ultimately, our own personal experience was the decisive factor in the decision. We wanted:
- To minimize personal frustration
- More freedom for each individual
- More freedom for us as managing directors
- Better scalability and more agility
1. Minimize personal frustration
Several years ago, managing director and RAIDBOXES founder Torben asked his previous employer for a promotion with more responsibility. At that point, he'd already been working 60-hour weeks at the agency for several months for a below-average salary. But instead of a promotion, he was handed his notice. The message? Anyone who dares to show initiative or contradicts the management's assessment at this company will be fired.
For Torben, however, this was a stroke of luck and exactly the right reason to start his entrepreneurial career. This frustration was characteristic of Torben's entrepreneurial career and nourished a strong desire to do better in his own company. He wanted to give his employees: more freedom, more responsibility and overall more creative freedom. Naturally always with the aim of increasing the satisfaction of both parties and the productivity of the company as a whole.
2. More freedom for the individual
A year and a half after our first start-up project failed, I was certain about one thing: I never want to be employed again! The freedom had just felt too good. It wasn't that I'd ever had a bad experience in a job. But even as a graduate in job interviews, I'd always wanted to do things differently, in my own way, and to be in a position to make important decisions by myself.
This means I also don't feel like "hiring" anyone either. I want all team members at RAIDBOXES to feel like entrepreneurs. For me, this means responsibility for results and budgets, the freedom to make mistakes, and the freedom to get the best out of their areas of responsibility in the ways they see fit.
These are exactly the sort of people you need to create a holacratic organization.
3. More freedom for the management
For Marcel, our then CTO with over 15 years of entrepreneurial experience, such things certainly played a role. However, he has made the particular experience that with the number of employees, the amount of work for the managers also increases. With the result that there is less time for the really important things.
This was reason enough to do things differently at RAIDBOXES and organize the company in such a way that he was needed as little as possible to keep the daily business running.
4. Better scalability and more agility
Aside from the personal reasons for our decision, we're also acutely aware we need to remain agile. We are David fighting the Goliaths out there on the hosting market. If we don't grow quickly, react to customer demands swiftly and create innovations, the big players on the market will swallow us whole.
In our opinion, free, happy and motivated employees are therefore a basic prerequisite for our competitiveness!
To recap, Holacracy promises:
- more freedom for the employer and the workforce
- more responsibility for the individual
- little direct management
- agility and scalability
Holacracy promised everything we were looking for!
Introducing Holacracy at RAIDBOXES: it's been worth it!
All the reasons above led us to take this radical step. We say radical because we, as leaders, have had to give up our authority in the classical sense and concentrate much more on structural and cultural leadership to resolve our "tensions".
Our conclusion after four years of Holacracy: it was worth taking the step! Team satisfaction is very high and productivity has improved. We've noticed how recruiting new team members is different than in traditional organizations. Now, you need to focus much more on the cultural factors of the applicants.
I explain exactly how Holacracy works and what the first steps to implementation are in my articleHolacracy in sction: 5 steps to develop a high-performance team. Further information and our presentation on Holacracy from WordCamp Cologne can be found here.
What's the situation like in your company or circle of friends? Do the problems mentioned here sound familiar? Are you perhaps even a founder yourself and have had good or bad experiences with similar concepts? I look forward to sharing stories!