Jul 10, 2015 ยท 9 minutes

“Watching this community of enthusiastic happiness-seekers come together, we knew we had to figure out a way to collect that energy and so the happiness could keep flowing.

Now, the Movement…

That’s why we’re now a company, a company with a cause – to grow a movement that spreads and inspires more happiness in the world!”

- DeliveringHappiness.com

Zappos CEO Tony Hsieh (a Pando investor) talks frequently about the power of spontaneous “collisions.” Here’s a story he’ll love.

Earlier this week, having just finished reading Paul Carr’s 7,000 word critique of Hsieh’s Downtown Project and Hsieh’s decision to implement the “Holacracy” management theory at Zappos, I left the house to return a DVD.

As I wandered down the street, I overheard a small group of Austrians, seated around an outdoor table, rapt in discussion. I caught the words “Holacracy”, “tensions”, “pioneer” and “Zappos.”

“Are you talking about Holacracy?” I asked. They were, and asked me what I knew about it all.

I said I knew that Holacracy (from the Spanish, meaning ‘Hello, Cracy’) was some sort of horizontal business organization strategy. It had been adopted by a few notable companies, like Zappos, I said. (Like many a going concern, Holacracy owes a debt of inspiration to to an earlier era of science fiction).

The Austrians seemed impressed. How did I know?

I explained I was a journalist, and that one of my colleagues had written about Holacracy.

Serendipitously, they explained that I’d interrupted them in the middle of a meeting with a man from “Delivering Happiness,” the evangelizing consultancy spun off from Hsieh’s book of the same name. “Hello,” said the man.

Their meeting soon wrapped up, and they invited me to sushi.

The eight Austrians were visiting San Francisco, and later Las Vegas, to meet with companies and individuals at the bleeding edge of systemic management design. In due course they would meet with representatives from Delivering Happiness and Zappos to further their own Holacratic education.  

The Austrians represent about a third of the workforce of Beratergruppe Neuwaldegg, a Viennese management consultancy with a diverse portfolio of mostly German and Austrian medical, manufacturing, financial, media, marketing, communications, research, government and educational organizations. One of the services they provide is consulting with companies on how to implement Holacracy.

The consultancy itself has just entered its third year as a Holacratic outfit.  “Holacracy is a movement,” one of them said.

“The hardest part for us, the partners, was to let go of control and authority,” said Gerhard, putting his hand on Frank’s shoulder. (Gerhard and Frank are both listed as managing partners on the company’s website, where, curiously, Holacracy is never explicitly mentioned.)

Gerhard explained that he was enrolled in a HolacracyOne program, and that it has been a help despite the rigor of the course and its expense. He also didn’t really mind the 12% commission HolacracyOne takes from any subsequent consulting they do on Holacracy.

The consultants and I arranged to meet at the end of the week, before they headed on to Las Vegas to see the world’s largest Holacracy experiment face to face.

* * * * 

We reconvened yesterday at Impact Hub, located within the San Francisco Chronicle building. Thanks to Facebook, the group had learned that today is my birthday -- they greeted me with cupcakes and sang “Happy Birthday.” Then they laid out their Holacratic experience thus far.

Birthday songs notwithstanding, it seemed their enthusiasm had cooled somewhat since our previous meeting. It turns out several of them had subsequently read Pando’s Holacracy coverage.

“It was pretty interesting,” one holon said as others looked on.

The walls of their conference room were strewn with lists and diagrammatic notes scrawled on brightly colored paper and stuck to the walls in rows and columns. These were the artifacts of “harvesting” the insights and conclusions gained through their week’s meetings.

“One of the biggest misconceptions is that Holacracy solves any of your problems. It just provides a process for solving them. If you don’t follow the process..,” said Gerald, a younger consultant, with a shrug. “It won’t remove complexity. In the beginning it actually increases complexity a great deal. If you think it will decrease complexity, you are not ready.”   

“The media takes up a lot of the pain. It is a process of unlearning hierarchical thinking we’ve all learned since childhood. It’s a deep personal shift, and there is resistance,” said Christiane. 

I was reminded of Brad Pitt pouring lye on Edward Norton’s hand. Either retreat to your cave or stay with the pain.

It was the first time I’d ever interviewed six equals in a sitting. They never used titles and referred to everyone by first name, including Frederic (Laloux), Tony (Hsieh) and Brian (Robertson).

“Brian is said to be the inventor of Holacracy but he always says it is an evolution,” said Frank, “and evolution is smarter than you.”

In fact, as Robertson himself explains in this 2006 post, the system of “double-linking circles”  and “consent-based decision making” espoused by Holacracy are adopted from the Dutch concept of “sociocracy.” Amid his praise for sociocracy, Robertson notes that:

“Hundreds of companies in the Netherlands have successfully adopted it. Dutch companies using sociocracy are exempt from labor laws requiring the Dutch works councils (organizations similar to unions), because it is believed that the workers are already represented daily through the sociocratic method.”

 The Mount Sinai of Holacracy is Robertson’s former company, Ternary Software. In a Medium article from last summer Robertson explains:

 “[W]hile I certainly played a central role in discovering and capturing the rules of Holacracy, I maintain that I did not create them; the process was more like discovering some basic laws of physics, through a lot of experimentation.”

In between those two statements, Robertson tried and failed to obtain a patent on the Holacratic method. 

The Austrian consultants were alternately transcendent and practical in their descriptions of the discipline. They expressed admiration for Holacracy’s rigid rules, codified in its continually iterating constitution (current version 5.0). 

These explicit and expansive rules are what made Holacracy favorable to other similar systems Beratergrupp Neuwaldegg has encountered in its decades of systemic consulting. Though they are also what “make it unlikeable at some points,” according to Frank.

“It’s like DNA, the rules are the basic structure and yet we are all different. Or like sport, you have the rules and they don’t change, but within them you can have a million beautiful games,” said Gerald. 

(If you haven’t caught Adam Curtis’ BBC series “All Watched Over By Machines of Loving Grace,” this may be a good juncture.)

 At some point a diagram was drawn, with a square broken into quadrants labeled “Governance,” “Organization”, “Tribe”, and “Individual.” I was told that Holacracy works upon the top two squares -- governance and organization -- but doesn’t claim to bear on the other two. When I’d first overheard their discussion with the guy from Delivering Happiness, one of the Austrians was saying how Delivering Happiness “fit into the lower right hand quadrant (the individual).”   

Neuwaldegg doesn’t recommend Holacracy for all clients, though they adapt its principles for even the largest and most traditional organizations. Generally, they believe it better suited to early-stage, fast-growing companies that want to preemptively remove organizational bottlenecks as they scale. They advised that Holacracy is not recommended for old, established companies, unless there is a specific reason. Or for organizations that are in the midst of leadership crises. Or those out only for quick money.

The firm has implemented Holacracy at six companies, including itself. Apparently the movement is growing on the other side of the Atlantic, with “fifteen to twenty” companies in Holland, and French multinational food giant Danone in the midst of a pilot.

Leadership personality types also contribute to the success of implementation.

 “We wouldn’t advise transitioning to Holacracy in an organization where the CEO is very ego-driven, very concerned with power and prestige,” said Christiane.

What did they think of Zappos’ implementation? 

“We’d say Holacracy works at Zappos. We have 35 years of transformative work experience. On average, about a third of employees leave, so even though 210 employees leaving seems like a lot, it’s really not. Holacracy beautifully surfaces whether you are a fit or not. It surfaces quickly, but then you get to see the beauty of collective intelligence move the organization.”

“If you don’t have deep conflicts, there is no deep change.” (Apologies, reader, with six people all talking enthusiastically about Holacracy, at times I lost track of which member of the group said what as I furiously scribbled. The conversation had few gaps, though nobody ever cut anyone else off or seemed restless to speak. Whether that’s manners or Holacracy I can’t say.   

The Neuwaldegg firm became Holacratic around the same time as Zappos. Was it reaching a point of stability? 

“It’s still bumpy and I don’t think it ever won’t be,” said Gerald. “There is no such thing as stability or a place of no change. It’s challenging and frustrating, that there is no light at the end of the tunnel, but that is reality.”

 “We think distributed authority systems will become the norm,” added Christiane.

Gerhard expanded on the difficulty of releasing power -- not being able to make autocratic decisions, instituting a compensation change (this was voluntary and not a mandate of the Holacratic code).

They are sold on the soundness of the method, it seemed, though Christiane conceded that “whether it can really work or not remains to be seen.”

“It’s complicated. That’s why there are consultants,” said Frank, erstwhile managing partner.

And why those consultants need consultants, and so on. If it turns out that Holacracy works, a great time will be had by all. In the meantime, from HolacracyOne with their 12% commission, through Delivering Happiness to Beratergruppe Neuwaldegg to Danone, there’s a lot of money flowing between the organizations trying to figure it all out.