Alison Coleman assesses the pros and cons of the latest management trend holacracy, which abolishes the traditional hierarchy and places everyone on an equal level
Management structures and practices, like so many areas of business, are subject to fads and trends, with the 2014 'one to watch' potentially being holacracy.
The model is based on the tasks an organisation needs to accomplish, rather than the conventional reporting structure. People work in circles instead of ranks. They have no job titles, and can take on a number of roles within different circles, and everyone has a say in making the rules.
It sounds quite futuristic, but actually it isn't new at all. Inspired by management guru Brian Robertson, holacracy has been around since the early 2000s. What makes it newsworthy is the fact that one of the world's most successful online retailers Zappos, owned by Amazon, intends to move its organisational structure to a holacracy by the end of the year.
In a way, the announcement was no real surprise. CEO Tony Hsieh, who has built the business entirely around customer service, has always done things differently; asking job interviewees 'On a scale of 1 to 10, how weird are you?' and offering new recruits a cash incentive to quit as way of testing their commitment. And it is in a company that is culturally very open and transparent and big on personal responsibility that a holacracy has the best chance of working.
However, not everyone is convinced. Kate Russell, managing director of Russell HR Consulting, says: "Just because something can work doesn’t mean it will. I couldn't help thinking that Zappos' plans sounded like a recipe for utter confusion. There are people who would like to work in this very free-flowing style and may succeed. Others wouldn’t, and speaking as a very structured type myself, I’d hate it."
But then, hiring people who are suited to a holacracy is perhaps the single biggest factor in making the model work. And Zappos has always prioritised hiring people with the strongest cultural fit.
And a holocratic approach has worked well for a number of UK firms, including business consultancy Nixon McInnes, which, as founder Tom Nixon explains, was set up in 2000 as a truly democratic workplace very much in keeping with the Zappos culture of openness. Today it employs 16 people.
He says: "The key does indeed lie in hiring the right people, and that's not easy, so critics are right to be cautious. When we hired our first employee, a programmer, we showed him our bank account. He saw every aspect of our company finances, and that had an incredibly powerful impact. We still make all of our financial information available to all our staff."
The firm also has guest seats at board meetings, open to any employee who asks to attend.
"Often it's the guest employee who asks the most powerful question," says Nixon. "But it is also an arrangement that eliminates uncertainty, any sense of 'them and us' and builds trust."
As for the notion that a holacracy lacks leadership, he argues, nothing could be farther from the truth.
"Just because you are letting go of control, you still need to have accountability," says Nixon. "People have the opportunity to set goals and make promises, and they are accountable for keeping them. Research has shown that the extent to which people collaborate, share learning and knowledge and solve problems has a greater impact on the company's success and profitability. This is a way of organising a group of people to make collaboration happen."
Kevan Hall, CEO of business consultancy Global Integration, agrees that moving away from a hierarchical structure to focus on cross functional and collaborative working can help to deliver a more integrated service to global customers and supply chains, and encourage free thinking and decision-making, but it is not without its issues.
He says: "It can increase the number of meetings, conference calls, and emails; slow down the speed of decision-making, and cost more to maintain. The skills and mindset required for a flexible organisation can also be very different to the more traditional hierarchical model."
Others, while subscribing to the idea that holacracy has the potential to add value if everyone within it can work with it with its goal of 'consensual democratic values', doubt that it would work in practice.
"Consensual values are difficult for a husband and wife, let alone a whole organisation," says John McLachlan, managing director of Monkey Puzzle Training & Consultancy,
"That doesn't mean people can't work together in a general consensus, provided there is clear open and honest communication at all levels of the organisation. I believe that is achievable and it needs commitment and continual effort and focus."
He also concedes that the Zappos plan has merit and could work for some people, some of the time.
He adds: "It is an attempt at agile management which presupposes that the people involved in it can understand it, accept it and then actually do it. Whilst some people, including Tony Hsieh and others, can do it, it will not be for everyone, and in the UK with its formal structures and rules and love of titles it will be a hard sell. It also requires everyone to work together for the common agreed good human beings are human beings and self survival will always win out."