2014-02-05

Lessons From Converting To A No-Management Company--In Just Two Days

Six months ago, a New York-based consulting company named Undercurrent took a dose of its own medicine by becoming a holacracy: the management structure used by GitHub and Zappos. Here's how they did it.



A growing number of tech companies like GitHub, Medium, and Zappos have adopted "open allocation" management structures that (mostly) eliminate bosses. But what happens when you go from management to no-management in the same week?

To answer that question, you have to dive into the world of open allocation company structures. Far from being free-for-alls, the non-structure-structure that underpins these companies can vary based on philosophy.

One hugely popular version of open allocation is Holacracy, in which decision-making power is distributed across small, autonomous teams rather than one central management group. Developed by entrepreneur Brian Robertson, who has since cofounded a consultancy, HolacracyOne, to spread its practices, the system has quickly gained currency in management circles. After Zappos announced its adoption of Holacracy, publications from Forbes to the Harvard Business Review weighed in on its pros and cons. Mashable declared it the "hot management trend of 2014."

According to Aaron Dignan, the CEO of the management consultancy Undercurrent in New York, Holacracy's minimization of hierarchies enables companies to react faster in the marketplace. His own company converted to Holacracy six months ago, and it now works with companies such as GE and American Express. "It's freed us up to be faster and be more adaptive in the long run," he says.

Distinguishing "Roles From Souls"

A boutique consultancy founded in 2007, Undercurrent brings the operational practices of high-growth startups to older, less nimble companies. But many of the forward-thinking ideas Dignan had for Undercurrent's clients hadn't been tried within his own company. Holacracy, he realized, provided the way to test his own advice.

After months of exploring the organizational structure, the 28-person company converted to Holacracy in just two days. In an all-hands session, all of Undercurrent's employees familiarized themselves with the Holacratic management process by walking through its procedures.

As part of the conversion, Undercurrent had to revamp its organizational map. The company is now organized into circles that represent each of the company's management areas:

  1. The board
  2. The "core" management
  3. Culture
  4. Growth (new business)
  5. Offerings (product development)
  6. Reputation (public relations and thought leadership)
  7. Clients (project management)
  8. The governance of its recently opened Los Angeles office
  9. Venture investments

Contrary to popular belief, Holacracy does not eliminate hierarchies altogether. Each circle has a designated leader, who has the authority to appoint others into roles within the circle, but changes to the circle's governing policies must be agreed upon by all of its members. Employees may belong to several circles, but no one--not even Dignan--belongs to them all.

"It's all about separating roles from souls--the work from the person," Dignan says.

One benefit of this organizational structure is that it decouples specific roles from the people who perform them. Often, certain roles--say, heading the company's wellness program--are assigned to an employee as ancillary responsibilities. In a traditionally organized company, such duties can easily get lost in the shuffle if that employee leaves, since they're not part of a formal job title. But in Holacracy, all roles are clearly defined and accounted for, independent of whoever may perform them.

Increased Focus Means Better Work

Undercurrent's new structure has changed how employees' overall responsibilities are assigned. By defining each role in the company independent of job title, it is easier to bundle roles more logically and ensure that employees aren't juggling an unmanageable number of responsibilities. Most employees at Undercurrent, Dignan says, have five to seven discrete roles in their positions.

The shift has even enabled Dignan to prune his list of duties. "In the first few weeks and months, I spent my time giving away authority," he says. For instance, he is no longer a member of Undercurrent's reputation circle, which is responsible for overseeing the company's public relations. Though that may seem an odd area for a CEO to cede responsibility, Dignan says doing so has allowed him to better focus his attentions on other areas, such as growth and culture.

Undercurrent's structure offers additional benefits to employees as they seek to develop their careers. Because different roles are not tied up in one particular title, they can be delegated to anyone. Employees, as a result, are free to try out different responsibilities with much less risk of failure than in a typically organized company.

And because employees are not tied to any specific role, their raison d'être doesn't automatically disappear if the company decides to shuffle around or eliminate certain functions. "Even if you get rid of a role, the person is still in the job," Dignan says. "They're just not doing that one bit of work any more."

Meetings And Team Structure

Within Undercurrent's organizational circles, employees convene three tiers of meetings: a weekly tactical meeting, a monthly governance meeting, and a quarterly strategy meeting. The weekly meeting takes its page from the scrums of agile development: members of each circle meet to give and receive updates on the status of their projects.

The other two are more reminiscent of corporate board meetings. In monthly governance meetings, each circle reviews its procedures and standards for accountability, so that projects will be completed as smoothly as possible. And each quarter, each circle recalibrates its big-picture priorities for its projects.

Because Undercurrent's circles are organized by role, rather than by person, these meetings are interdisciplinary by default. Launching a new service, for instance, may require input from employees in various traditional departments, from marketing to legal. At Undercurrent, those employees all meet regularly as members of the company's offerings circle, so a new service proposal will not be delayed in transit between departments.

"You don't have to wait for the legal department, or the development department, or for an advertising partner outside of the company," Dignan says. "Whatever role the circle needs to fulfill its purpose, we make sure it's there."

Categorizing meetings into three distinct types helps to clarify the purpose of any given meeting, making it shorter and more efficient. Moreover, says Dignan, this organizational approach takes away the incentive of being the loudest person in the room. At Undercurrent, employees are more likely to be chosen to lead circles by helping others do well in their roles and guiding the organizational process along as a whole. "The way to promote your own career is to be good at the process, versus commandeering the process," he says.

Impact On Customers

Now that Undercurrent has completed its transition to Holacracy, it is introducing its clients--both startups and large corporations--to its principles. Dignan usually encourages clients to test out the alternative management structure within one department or location. The company will walk that group's members through exercises, such as mock meetings, to help them envision how Holacracy might take root within their organization. Dignan will then refer companies that seek to explore further to HolacracyOne, which develops official guidelines for the management structure.

One of Undercurrent's clients is New Lab, a shared facility for design and manufacturing companies that is set to open in the Brooklyn Navy Yard next year. (It is currently operating in beta.) Scott Cohen, New Lab's cofounder, seeks to operate the facility as a Holacracy from the outset. "The most interesting part for me is how to encourage people to innovate in micropods--empowering people to try things on the ground and report back to each other on a regular basis," he says.

Holacracy, Cohen believes, will be particularly useful in engaging New Lab's tenants. Its tenants are not mere occupants of the facility; they have the opportunity to develop programs and services for the space. One of New Lab's beta tenants, for instance, has proposed to run a 3-D-printing shop in the facility. Even though the tenants are not employees or subsidiaries of New Lab the company, they are important stakeholders in the facility's management. Cohen envisions designating a circle for tenants and New Lab's management to review such proposals on an ongoing basis.

"It's a great model to enable them to add value to the ecosystem," he says.

[Image: Flickr user Mario Antonio Pena Zapatería]






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