Holacracy prescribes a set of rules that discards hierarchy: There are no CEOs, only circles and roles.

Share story

The CEO relinquishes power, changes compensation to a “badge” system of rewards for skills and has “governance” sessions in place of daily meetings.

Welcome to the trademarked workplace known as Holacracy.

Zappos.com founder Tony Hsieh embraced the Holacracy ethic so deeply that last month the online shoe company executive asked all employees to adopt it, or leave with pay.

And 86 percent of Zappos employees stayed. Notable departures included the company’s chief technology officer; vice presidents of customer service, human resources and recruiting; and Alexis Gonzales-Black, who co-led the transition to Holacracy.

Gonzales-Black, who left Zappos to start her own company, is still quoted heavily in concept founder Brian Robertson’s book “Holacracy” (Henry Holt, 2015), released earlier this month.

Holacracy prescribes a set of rules that discards hierarchy: There are no CEOs, only circles and roles. But a free-for-all workplace?

Not a chance. Holacracy has more rules, not fewer, and each employee has more autonomy and accountability, said Robertson, a successful software engineer and former chief executive officer himself (Philadelphia’s Ternary Software Inc.) who now works out of a home office.

“It is not a democracy,” said Robertson, 36, who dropped out of high school and college. He and his wife, Alexia Bowers, built a castle-style house in the woods about an hour’s drive west of Philadelphia, several thousand square feet including a fantasy mining shaft leading to guest bedrooms.

In Holacracy, “there are rules and boundaries, there are referees, to use a sports metaphor,” he said.

Or a gaming metaphor. At their kitchen table recently, Robertson and Bowers and friends were playing GURPS, a fantasy role-playing game with table-top figurines, campaign maps and dice.

Robertson’s company, HolacracyOne LLC, has no employees, only 14 partners who live around the country and work virtually. Every other month, they stay at Robertson’s home and another residence down the street with a pool.

“We work together, play together, eat and cook, and build tribe space” separate from work, he said. “We can have dinner without that awkward power of ‘Who’s the boss?’ in the room,” because everyone is clear on their responsibilities.

“I was lonely as a CEO,” Robertson said, “but with a clear process, with autonomy, I can be one of the team.”

“We have no employees, and we never will. Everyone gets a K-1 (partnership income), not a W-2” tax form. Salaries are transparent. “Everyone can see what everyone makes. It’s very gamified. It keeps things fun and transparent.”

Have they fired anyone from HolacracyOne?

“We’ve asked a few people to leave,” he said.

Sounds revolutionary, but it isn’t. Holacracy borrows management concepts such as sociocracy and consensus decision-making. Robertson argues that there are differences, that Holacracy adds accountability and speed. (A Holacracy coach parses all in an online video at holacracy.org ).

“In the first one to two years, you’re going to lose people. It’s a change period. And 86 percent of the Zappos people turned down a ton of money to stay,” Robertson said.

Adopters stress that Holacracy is easier to use at a smaller company.

“We use our own version internally,” said Skip Shuda, co-founder of Philly Marketing Labs, a digital marketing agency. “We are 10 people building e-commerce sites, and people have to quickly fill roles with established operational order. And anyone can raise a high-level problem even without having a solution, even interns.”

Shuda took the three-day Holacracy training but doesn’t pay for its software. “How it scales? That’s a challenge,” he said.

Holacracy has a few hundred customers and last year had between $2 million and $3 million in revenue from consultant-coaching and training, licensing and software tools, Robertson said. Some clients are departments within large corporations such as Dannon and Starwood.

“The book is not a moneymaker. It was years in the making. It’s a tool that’s cheap if you can’t afford to come to training,” Robertson said.

Work without titles is not new. Outdoor gear company REI functions as a cooperative. W.L. Gore & Associates, makers of Gore-Tex, and Wikipedia are bossless organizations. Some call the notion “wiki management,” and in the software development world, Agile management.

Holacracy has a constitution, available online at GitHub.com.

Some, such as Shuda, take what they like and leave the rest. Others, such as Bud Caddell, worked in an organization run using Holacracy — NOBL, his product innovation and organizational design firm, incorporates self-governing tools.

“Holacracy feels like playing a game of Management Dungeons & Dragons,” Caddell wrote earlier this year. “Models like Holacracy were created by people who tend to enjoy complex processes — the rest of us are different.”