Holacracy - power to the people

New Leadership: Holacracy Makes Everyone a Leader and Creates Freedom

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 employees. Today, I'll explain what prompted us to make this decision and why such radical steps are sometimes necessary.

In mid-2016, Torben, Marcel and I decided to focus on a completely different management concept than before: Holacracy. Some of you may have already heard of it - but probably mostly in a negative context. Because in fact there are really only two possibilities with Holacracy: Either it catches on (as with Zappos), or it fails and is completely abolished (as with Medium). But since the media sometimes prefer to report on failures rather than successes, I think it's time for a first-hand experience report!

Using Holacracy to create more freedom

Zappos, the American Zalando role model, relies on holacracy. When 20 percent of the entire workforce leaves the company, it makes for a great (negative) cover story. Unfortunately, the fact that the remaining 80 percent are among the top employees and are probably much happier is not reported.

Another headline that is often used for holacracy is "the organization without a boss" (negative). In reality, however, the exact opposite is true: organizations that work with holacracy are full of new leaders. So the better headline would be: "Organization 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-organized. 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.

- Tony Hsieh, CEO Zappos

In fact, Holacracy promises more freedom in the company. To both the new and the old managers. In this article, I will show you exactly how this is to be achieved. And I describe why Raidboxes decided to take this extreme step.

Job apathy - one reason for a radical step

If you ask your friends how things are going at work, three out of five of your friends and acquaintances are probably pretty dissatisfied. The source of the dissatisfaction is usually quickly identified if you listen closely: they are all annoyed with their superiors. By the way, the two who are satisfied are usually managers 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 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.

New Leadership: Holacracy Makes Everyone a Leader and Creates Freedom
The long-term comparison of the so-called Engagement Index shows that the number of highly motivated people in particular remains comparatively stable. The number of people who tend to work to rule and those who have already "quit internally", on the other hand, fluctuates. This means that the proportion of employees who are not very satisfied or dissatisfied remains constantly high at around 85 percent (source: Gallup, 2016).

These findings aren't new and endless studies come 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, for example, 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 the 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 entrepreneurs create values and visions according to which the company and its staff act. The culture of a company determines, among other things, which employees are selected. If a company sets the value of transparency as its guiding principle (as Buffer does), for example, then a team member who refuses to publish his or her salary will have little chance in 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:

  1. To minimize personal frustration
  2. More freedom for each individual
  3. More freedom for us as managing directors
  4. Better scalability and more agility

1. Minimize personal frustration

A few years ago, Torben - Raidboxes founder and managing director - asked his previous employer for a promotion to a position with more responsibility. He had been working for the agency from Münster for many months at that point. And that with a below-average salary, but in a 60-hour week. Instead of a promotion, however, he was given notice of termination. The signal: anyone who dares to show initiative or contradicts the management's assessment 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 formative for Torben's entrepreneurial career and nurtured a strong desire to do better in his own company. He wanted to give his employees more freedom, more responsibility and overall more room for creativity. Of course, always with the goal of increasing the satisfaction of both parties and the productivity of the company as a whole.

New Leadership: Holacracy Makes Everyone a Leader and Creates Freedom
Every permanent employee at RAIDBOXES has read this book. It's not the only title available on Holacracy but it's very concise and focuses on the required structural changes and necessary tools and processes for implementing the method.

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 an employee 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.

Therefore, I have no desire to "hire" anyone. The word alone symbolizes stagnation for me. That's why I want all team members at Raidboxes to feel like entrepreneurs. For me, that means: responsibility for results and budget, the freedom to make mistakes, and the freedom to get everything out of their area that they can and think is right.

These are exactly the sort of people you need to create a holacratic organization.

3. More freedom for the management

For Marcel, our CTO at the time with over 15 years of entrepreneurial experience, such things certainly also played a role. In particular, however, he experienced that the workload for managers increases with the number of employees. With the result that there is less time for the really important things.

Reason enough to do everything differently at Raidboxes and organize the company in a way that he is needed as little as possible to keep the day-to-day 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.

To recap, Holacracy promises:

  • More freedom for the employer and the workforce
  • More responsibility for the individual
  • Little direct leadership
  • 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: So far it has been worth it! The satisfaction in our team is very high and the productivity has improved. However, we already notice that the recruitment of new team members is at least different than in traditional organizations. You have to focus much more on the cultural factors of the applicants.

How exactly Holacracy works and how to take the first steps towards implementation, I explain in my article "Holacracy in action - In 5 steps to a high performance team". You can find more information and our presentation from WordCamp Cologne on the topic of Holacracy 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!

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