Would holacracy be effective in your organisation?

Would holacracy be effective in your organisation?

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In light of Decathlon Hong Kong’s revelation that aspects of its HR are self-managed by a committee, Jerene Ang examines the feasibility of such organisational structures.

Recently, Decathlon Hong Kong revealed it has no HR department or HR head. In its place, the sporting goods retailer has an HR committee where employees from various teams come together to recommend a HR policy, recruitment policy or process. The size of the working group varies from time to time based on the need, urgency, and availability of members.

While this isn't a formal committee, Marc-Antoine Lepley, CFO at Decathlon Hong Kong claims the HR committee helps them move fast, make decisions together and implement them straight away.

This decentralised and team-based structure Decathlon Hong Kong adopts when it comes to HR follows the footsteps of a number of corporations such as Google, 3M and Zappos, which have attempted similar organisational models, says Goh Wee Kwong, Assistant Vice President, Human Capital Leadership Institute. One such model is Holacracy.

What is Holacracy?

According to HolacracyOne, the company spearheading the development of the practice, Holacracy is a new way of structuring an organisation - one which replaces the conventional management hierarchy and distributes power throughout the organisation. Holacracy, it claims, gives individuals and teams freedom while staying aligned to the organisation’s purpose. This is done by providing a concrete framework for encoding autonomy, agility, and purpose-alignment into the organisation’s DNA.

This transfer of autonomy to non-management staff supports inclusiveness and offers more opportunities for ordinary staff to access a platform where they can contribute proactively and take ownership in their work, Goh says.

“This positive effect facilitates the building of trust, improving engagement and contributes towards agile decision making and task execution for the organisation,” he adds.

In the case of Decathlon Hong Kong, he observes the exclusion of certain talent management tasks from the jurisdiction of the committee - including compensation and benefits, labour legislation, succession planning, as well as disciplinary actions and terminations.

“The nature of these tasks and information involved either carry a high degree of personnel information sensitivity or require central business control and require experts with specialised knowledge of labour laws and labour force relationship management to manage them,” he says.

What type of organisation is Holacracy suitable for?

Apart from the consideration of sensitive information, the success of concepts such as Holacracy depends on an organisation’s business model as well as culture and belief systems, says Thiveanathan K, Chief Human Resources Officer, UTAC Group.

Likening it to concepts such as ‘open office’ or ‘work from home’ or ‘performance management without rating’, Thiveanathan notes that organisations that jump into embracing such concepts without first examining the fit to business model and culture may be faced with obstacles, end up allocating more resources to substitute what is missing, or abandon the concepts altogether.

Similarly, for Holacracy, while there are success stories (i.e. online shoe and clothing retailer Zappos), there are also organisations that have decided to move away from the organisation model (such as online publishing platform Medium). So, what type of organisations are structures such as Holacracy suitable for?

Regardless of organisation culture, Goh opines that it is possible to introduce measures to adopt a decentralised team-based structure such as Holacracy.

“The key is in understanding how the dominant cultures within your workforce is likely to influence behaviours and then introduce expectations and rules of engagement for both management and employees involved,” he says.

In terms of organisation type, Goh thinks that a pure decentralised team-based structure may offer a less viable option for most companies, with the exception of start-ups or small enterprises. For the majority of organisations, the most pragmatic path would be a hybrid comprising of a traditional structure for managing the strategic or regulatory nature of the business and a contemporary decentralised component which self-organises and focus on tactical and operational matters, he says.

Striking a balance: Reliability vs adaptability

According to an article published by Harvard Business Review in 2016, titled ‘Beyond the Holacracy hype, it boils down to reliability and adaptability. Authors Ethan Bernstein, John Bunch, Niko Canner, and Michael Lee wrote: “Deciding where to apply self-management in an organisation hinges on three questions: What needs to be reliable? What kinds of adaptation are important? And what organisational forms will produce the right balance in this case?”

When looking to answer these questions, the factors to consider are “business and operational risks, confidentiality, importance, regulatory implications, market or environmental stability and work or processes complexity,” Goh says.

The most important part of the puzzle - the mindset, commitment, and resolve of managers. Goh explains this is central to the success of the organisation model given that such self-management structures would require leaders to forgo some extent of control which they have been used to holding and get accustomed to the psychology of letting go.

Apart from the degree of leadership appetite for decentralised decision making process, Thiveanathan notes that the degree of leadership investment in developing team member capabilities to support such a culture also plays a part.

The Asian context

In the Asian context, Thiveanathan observes that work is, more often than not, relationship-based, be it in dealing with team members, unions, government institutions, or vendors and customers.

“When trust is present within the teams, it is not uncommon to see Asian businesses using a hybrid approach with traditional/ figurehead leaders supported by cross functional teams who are relatively independent,” he says.

A hybrid approach: How UTAC mixes traditional hierarchy with self-management

In semiconductor manufacturing organisation UTAC, people practices are founded on the principle of ‘Sense & Simplicity’ and towards facilitating line managers to partner in delivering our people practices effectively, Thiveanathan shares.

While UTAC has clearly defined organisational structure consisting end-to-end supply chain, manufacturing, sales & marketing, research & development, and other core support functions (including HR), the concept of Holacracy is ingrained in its various working groups.

One example can be seen in the cross-functional team led by HR, which has successfully developed and maintained its learning management system in Singapore, and is now in the process of launching the same in Thailand and Taiwan.

“This autonomous team worked independently, guided by a project charter and sponsored by the HR /IT leaders,” Thiveanathan says.

Other projects driven by such cross-functional autonomous groups include an automation / cost saving project sponsored by a site, as well as a major factory consolidation project in which HR is a key member.

For these projects, the teams work within the agreed charter and updates the CEO on a monthly basis. The teams decide on resources, timing, cost, investment etc., with very little intervention from management.

“At the moment, a major factory consolidation project is underway and it is entirely managed by an autonomous cross functional team – in which HR is a key member. The team works within the agreed charted and updates the CEO on monthly basis. The team decides on resources, timing, cost, investment etc., with very little intervention from management,” he says.

“In our experience, the above approach works well within work group levels. They are able to function both as autonomous wholes and as dependent parts of larger ‘whole’. Having said that, given our operating model and culture, we don’t foresee a team working totally independently, without a formal leadership structure responsible for defining mandates and facilitating charters,” he concludes.

Note: Unless otherwise stated, the views and opinions expressed in this article are those of the author and interviewees and do not necessarily reflect their official policy or position. The author and interviewees are neither affiliated with, nor endorsing holacracy in their expression of views.

Photo / iStock

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