Holacracy, the Latest Management Craze

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I have been reading about this latest management fad, holacracy, for some months now, but it was Gregory Ferenstein’s post on July 11 that finally sent me over the edge. For the record, here are two other articles that tee up this management craze. Zappos says goodbye to bosses by Jena McGregor and a more reasoned explanation, published in the Economist, The holes in holacracy.

Also note that the word holacracy is a registered trademark. It is a brand, which always raises red flags in my world regarding its methods. Is it really something new or is the word made up to muddy the already turbid waters in management consulting.

But, I promised to talk about what Tony Hsieh is doing at Zappos and provide a more reasonable context for the structural decisions he is making.

First, “getting rid of bosses.” Boss-ing is something siblings do to each other. Indeed, it is a power struggle. The descriptions of holacracy appear to equate boss with the word manager. I am always amused at where the power lies in the manager-team-member relationship. It is like telling a kid that they have to eat broccoli. But, it is the kid who will determine if broccoli will, in fact, be eaten. Being an effective manager has very little to do with power.

“There are no managers in the classically defined sense. Instead, there are people known as “lead links” who have the ability to assign employees to roles or remove them from them.”

When I look at the “classic definition” of a manager, that person is vested with some very specific authorities. How is this “lead link” different?

  • Determine who is on the team.
  • Determine who is off the team.
  • Set the objective.
  • Assess the team member’s effectiveness in the context of the objective.

“Zappos and Robertson are careful to note that while a holacracy may get rid of traditional managers (those who both manage others’ work and hold the keys to their career success), there is still structure and employees’ work is still watched. Poor performers, Robertson says, stand out.”

So, now I am curious. Just exactly who is it that is doing all the watching if it’s not the manager? Is “lead link” another word for manager?

So, what is all this talk about abolishing managers?

“while the system lacks traditional managers, it does not mean that leaders won’t emerge.”

No shit. Leadership is an observable phenomenon, it happens. And when an organization selects its managers, it had better be paying attention to qualities of managerial leadership (as opposed to political leadership, parental leadership, spiritual leadership).

Apparently, Tony wants to provide the appearance of the absence of managers, by defining broad latitudes of discretion within the various levels of work at Zappos. That is what hierarchy is all about. Hierarchy is not about being the boss, it is not about command and control. Hierarchy is about establishing the boundaries of discretionary judgment within a level of work.

Discretionary judgment is required to make decisions and solve problems appropriate for that level of work. And most teams can handle the problems and decisions that sit within their level of work.

Here’s the pinch. When the problem is difficult or the decision is hard, on the upper end of that level of work, who does the team go to? That would be the manager. Being a manager is NOT about telling people what to do (boss-ing), it is about bringing value to the problem solving and decision making of the team. And that’s the role of the manager. At Zappos, those people exist, and Tony knows exactly who they are. I don’t care what he calls them.

“Zappos just abolished bosses” – Baloney

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“The latest management trend to sweep Silicon Valley requires CEOs to formally relinquish their authority and grants special protection for every employee to experiment with ideas. It’s called holacracy and big name tech leaders have jumped on the bandwagon,” proclaims Gregory Ferenstein in his post on Vox, July 11, 2014.

“Zappos CEO Tony Hsieh announced that he will transition his entire Las Vegas company — with a billion dollars of revenue and 1500 workers — to holacracy by the end of 2014.”

Holacracy is described as the latest management craze and it is just that – craziness. The problem with craziness is that a manager or CEO will read his article and naively follow a prescription that will cost hard dollars and create untold havoc. Following Ferenstein’s prescription could be fatal.

Holacracy is a weasel word. It attempts to use new (made up) terminology to mask a vague notion of contrived credibility.

“Holacracy is management by committee with an emphasis on experimentation. The CEO formally relinquishes authority to a constitution and re-organizes everyone into decentralized teams that choose their own roles roles and goals,” explains Ferenstein. Think about this. What is delegation? Delegation is the assignment of accountability and authority to complete a task. Delegation shifts the accountability and authority to a “decentralized” team that chooses to complete the task (or not).

And believe me. If the “decentralized” team chooses not to complete the task and adopts a six hour lunch break, some manager will step in and say “Guys and gals, that is not what we had in mind.”

If you read this column regularly, you know I am a structure guy focused on the research of Elliott Jaques. This notion of giving a team direction (an objective) and providing them latitude (time span of discretion), within limits, to solve a problem is not a new notion. Holacracy is baloney (weasel word).

Ferenstein would argue with the words “within limits.” He would argue that Hsieh would set those limits free. That will not be the case. Hsieh will define those limits (discretionary authority). Holacracy obscures what is really happening using words without meaning.

“Advocates for holacracy argue that centralization of power suffocates innovation.” Here is the biggest problem with Ferenstein’s description – most managers, CEOs and writers about management DO NOT UNDERSTAND the purpose for hierarchy. They believe that management is all about centralization of power. Hierarchy has little to do with power. Hierarchy has everything to do with accountability and authority.

So, is Tony Hseih misguided in his actions and decisions related to his management structure? No. What IS MISGUIDED is the understanding of what he is doing and its description as holacracy. Over my next few posts, we will look closer at what Tony is doing and see that it is nothing new. And if Tony understood his decisions more clearly, in the context that I will describe, those decisions would be more effective in creating his image of an organization.

The purpose of an organization is not to broker power, but to get work done. I know that is what Tony wants to do. The question is, what does that structure look like? It ain’t holacracy.

How to Build a Team, Where to Start?

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“So, Roger. I am not going to give you all ten projects,” I repeated. “Not yet. Before I do that, we have some growing to do. You handled three projects superbly, the fourth you began to be late and by the fifth project, things really began to slip. But, you have potential. Ten simultaneous projects will require a different approach from you.”

“You said I would have to build a team,” Roger replied.

“Yes, and building a team is more complex than building a checklist.”

“I think I can step back from all my projects and see the things about those projects that are identical, the things that are similar and the things that are different. That’s why my checklists are helpful. But building a team, I am not sure where to start,” Roger admitted.

“At the beginning, of course,” I smiled. “Let’s start with something you know how to do. You are good at making a list. I want you to make a list of everyone on your current team.”

“I can do that,” Roger agreed. “Any particular order?”

“Yes, you know that some of your team members are more capable than others. You know that, because you have worked with them, watched them make decisions and solve problems. I want you to put your team members in order, with the most capable at the top and the least capable at the bottom. When you have finished that list, let’s get together and you can tell me about each one.”

The Shift in Becoming a Manager

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“What would you have to do differently to accomplish ten projects in the same time that you now run five projects? No overtime,” I challenged.

“One thing is for sure, I can’t keep it all in my head,” Roger mused. “You know, some projects, you can manage with sticky notes. When you gave me my third and fourth project, I had to start making lists. When you gave me my fifth project, I realized my lists had similarities and I created a template with all the possible elements. Given another project, I can start with my template rather than creating a list from scratch.”

“But if I give you ten simultaneous projects, what would you have to do differently?” I repeated.

Roger shook his head. “I can’t manage ten projects at the same time, even with my templates,” he concluded. “Something would always be falling through the cracks. I would need some help.”

I nodded in agreement. “Roger, we didn’t start working with you because you could manage a project, or two projects. To manage ten projects, you will need some help, you will need a team. The reason we want to assign you ten simultaneous projects is not so you can build a better template (though that is helpful), but so that you will build a team. This is a dramatic shift from being a supervisor, to becoming a manager. It’s a higher level of work.”

Running One Project Different from Ten Projects

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“So, Roger. I want you to think about something. You did well on the first project we gave you. So we gave you another project. That means two projects,” I explained. “You were doing so well, we gave you a third project and a fourth project. With a fifth project, you are beginning to struggle. You short cut the planning, your schedules are breaking down and things are being forgotten.”

“I guess I didn’t realize,” Roger started. “You see, I have been keeping all that stuff in my head. I am pretty smart, have a good short term memory, so keeping track of the details for one or two projects is pretty easy. The more you gave me to do, the more I had to start writing things down. It’s a different way of keeping track of things for me. I used to just remember.”

“Roger, I want you to think about this. I am not going assign you more projects right now, but if I did, if I assigned you five more projects on top of the five projects you already have, what would you have to do differently to manage all of that detail?”

“I would probably have to put in some overtime,” Roger replied.

“No overtime. What would you have to do differently to accomplish ten projects in the same time that you now run five projects?”

Controlling the Work

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“So, your team isn’t here this morning because you worked them until midnight last night. You burned all the profit in the project on overtime and expedited shipping,” I recapped.

“Yes, I think it is important to control burnout,” Roger replied. “When my team works on projects like that, I can tell they begin to grumble.”

“Why did it take such an extraordinary effort to work through that project?” I wanted to know.

“Oh, I could tell it was a tough project right from the start. The client didn’t really know what they wanted, so we had a lot of starts and stops, re-work and changes. I didn’t realize how many resources we were using until I looked at the budget.”

“You looked at the budget?” I sounded surprised.

“Well, yeah, when the project was about 90 percent complete, I wanted to see where we stood. It wasn’t pretty,” Roger explained. “The client was kind of designing the project as it went along. Unfortunately, we were on a flat fee for the contract.”

“What did you learn?” I asked.

“That it’s a lot more efficient to design things on paper, make changes on paper, re-design things on paper than it is to do it for real. I guess the project would have turned out better if there had been more planning.”
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Burnout

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“I am really proud of my team. We worked overtime to get that project finished. Whatever it takes. That’s my motto,” Roger said.

“Was the customer happy?” I asked.

“You bet. They were jumping for joy. They didn’t think we could pull it off,” he replied.

“I am glad the customer was happy. You also know you blew the budget on this project. I know the customer is happy, because we paid for their project to be completed. And we burned out the team in the process.”

“Yes,” Roger protested, “but we got it done. I am really proud of the team and how hard they worked.”

“And the next project on the schedule starts today. This is one with a good margin in it, but I don’t see your team working on it,” I observed.

“Well, no. They were here until midnight last night, so I told them we could start late today.”
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The Realization of a Manager

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“But, what if one of my team members doesn’t show up?” Sheri defended. “How can I be held accountable for that?”

“You are not accountable for the team member not showing up,” I replied. “But you are accountable for the output of the team who is now short one team member. I hold you accountable for having back up, cross trained team members to pick up the slack. I hold you accountable for knowing your team well enough to anticipate who is not going to show up, and having an alternate plan in that event.”

Sheri was quiet. While she was backpedaling, she knew she was still on the hook.

“Being accountable for the output of the team changes everything,” I continued. “Once you realize that accountability, your behavior changes.

  • You have to know your team members
  • You have to provide clear expectations within the team’s capability to deliver
  • You have to prepare your team to handle the inevitable problems that will come up
  • Your team has to practice to become fluent in handling those problems
  • You have to provide context for the work that your team will be a part of
  • You have to inspect the output to make sure it meets quality standards within time limits

This is all about people, this is all about your team. And, as the manager, you are accountable for their output.”
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The Team Will Never Be Much Better Than the Leader

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“So, I have the team I deserve,” Sheri nodded.

“Yes,” I agreed. “And understand the team you have, will never be much better than you. If you want the team to get better, who has to get better first?”

Sheri was still nodding in agreement, but while her head was moving, her brain was pushing back. She still wanted to lay the blame on her team. “Okay, the team did not do what they were supposed to do, but you seem to say that it is my fault.”

“Fault, schmaltz,” I chuckled. “I don’t care whose fault it is. But, I do hold you accountable for the output of the team. All crumbs, always, lead to the manager. As the manager, you control all the resources for the team. You control the work instructions, you pick the team, you pick the number of people on the team. You pick the roles for people to play, you design the workflow. I hold the team member accountable for showing up and doing their best, but I hold the manager accountable for the output.”
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Is This the Team You Built? (It is.)

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“But, I deserve better,” Sheri protested. “I work so hard, as a manager, I deserve higher performance from my team.”

“You probably do deserve better,” I replied. “Where does that higher performance start? Does it start with you?”

“What do you mean?” Sheri pushed back.

“Your team sounds just like you do. They work so hard, for mediocre results. They deserve better for their efforts.”

Sheri got quiet.

“If I want to know the kind of organization I deserve, I should look at the one I have. Some of this team, I inherited, some of this team I built. But, it’s my team. It’s the team I deserve.”
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