Federal leaders are in a quandary about how to improve employees’ engagement on the job. But there are answers out there. Author Daniel Pink, in a 2009 best seller, Drive: The Surprising Truth About What Motivates Us, says that focusing on three job elements is the secret to improving engagement: autonomy, mastery, and purpose.
But what does “autonomy” look like in the real world? One answer is self-managed teams. The concept has been around for decades, and there are success stories in the private sector. In fact, it has been tried in the federal government, starting with some of the Bill Clinton Administration’s Reinvention Labs. More recently, The Office of Personnel Management piloted a Results-Only Work Environment in 2010 with 400 staff, but it faltered and was curtailed a couple years later.
The Obama Administration has also encouraged the creation of Innovation Labs, which a number of agencies have adopted, where employees have some degree of freedom. But can greater employee flexibility—which can create greater engagement and job satisfaction—actually work in government? Is this the secret to attracting millennials to public service?
In an article in the current issue of Harvard Business Review, a team of researchers—Ethan Bernstein, John Bunch, Niko Canner, and Michael Lee—explore the hype and reality of a radical form of self-managed organizations: a holocracy. In a holocracy, it isn’t just small teams that are self-managed, but entire organizations.
Can it work? Yes, depending on the circumstances, note the authors. They point to well-known companies that are organized as holocracies: W.L. Gore, the creators of GoreTex; Zappos, the shoe company; and Morningstar, a tomato-canning company. These companies and more have found this approach boosts employee engagement and productivity.
They say that fundamentally, leaders are looking for two things from their organizations: reliability and adaptability. Reliability can mean adhering to rules to ensure standard approaches. This is important in a manufacturing environment. But this has to be balanced against adaptability, which allows continuous changes in order to adjust to a changing environment. This is being used in the software development environment and is currently being championed via agile approaches.
But finding the balance between reliability (which can devolve into red tape) and adaptability (which can lead to fragmentation and the loss of the advantages of scale) is not easy.
The authors write that some organizations that attempted greater self-management have pulled back: “Medium, a social media company that recently dropped holocracy, found that ‘it was difficult to coordinate efforts at scale.’”
However, the authors believe that some elements of self-organization can be helpful in organizations of all kind. “Look at circumstances in which it makes sense to blend the newer approaches with traditional models,” they suggest. “A piecemeal approach usually makes sense. Organizations can use elements of self-management in areas where the need for adaptability is high, and traditional models where reliability is paramount.”
What Do Holocratic Organizations Look Like?
Holocracies in the private sector share several common characteristics, according to the authors: “Members share accountability for the work, authority over how goals are met, discretion over resource use, and ownership of information and knowledge related to the work.”
Teams are the structure. They go by different names—circles, pods, cabals—but teams are the basic unit, not departments or divisions. The authors say teams “are the essential building blocks of their organization . . . Within them, individual roles are collectively defined and assigned to accomplish the work.” There may be different teams for different projects and functions, but there are many more of them. At Zappos, after it implemented holocracy, “150 departmental units evolved into 500 circles . . . The modularity allows for more plug-and-play activity across the enterprise . . . And the teams come and go as employees perceive changes in the organization’s needs.” These teams are not unlike task forces, “but without the surrounding matrix structure which has a way of holding ad hoc groups together even after they are irrelevant.”
Teams design and govern themselves. The authors note that “teams are nested within a larger structure, which they have a hand in shaping and refining. Holacratic organizations ratify a constitution—a living document outlining the rules by which circles are created, changed, and removed.” So the teams (or circles) don’t manage themselves; they are managed within a set of guidelines which they also help design.
“The constitution doesn’t say how people should do their tasks. It explains in a broad-brush way how circles should form and operate: how they should identify and assign roles, what boundaries the roles should have, and how the circles should interact.” Morningstar uses “colleague letters of understanding” which are employees’ work commitments to the organization. The terms are renegotiated at least once a year.
Leadership is contextual. “In self-managed organizations, leadership is distributed among roles, not individuals (people usually hold multiple roles, on various teams),” note the authors. Software is “used to codify the purpose, accountability, and decision rights of every circle and role, and the information is accessible to anyone in the organization.” At Morningstar, the use of Colleague Letters of Understanding “makes each individual’s commitments visible to everyone at the company.” As a result, an organization “is responsive to the requirements of the work rather than to the directives of any powerful individual.” In effect, self-managed organizations use “structuring processes (rather than a fixed structure) to maintain order and clarity.”
How Do Holocratic Organizations Operate?
The authors describe three operating principles for how holocracies operate:
Design roles that match individual capabilities within the organization. In traditional organizations, employees have defined roles. But “In self-managed systems, individuals have portfolios of several very specific roles” which they can revise to address shifting organizational and individual needs: “Zappos employees now have 7.4 roles, on average.” However, this role proliferation creates three kinds of complexity for individuals: It complicates doing the work because employees have to deal with fragmentation of their time and attention. At Zappos, each role has 3.47 distinct responsibilities, resulting in more than 25 responsibilities per person. To address this fragmentation, Zappos is trying out a People Points approach, where each circle is allotted a number of points (based on its perceived value to the business) and it uses these points to recruit people to take on certain roles, basically creating a market place for work that needs to be done.
This complicates compensation. Zappos is experimenting with basing compensation on the acquisition of skills badges by employees, as a reflection of their value to the business.
It also complicates hiring, both into the organization and into specific roles. To address this, Zappos created a Role Marketplace to post open roles and manage applications to fill them.
Make decisions closer to the work. Instead of sending messages up the hierarchy to get a decision, teams can go directly to those affected. This is called “going role-to-role.” However, all team members are not equal; some have more power than others, yet “everyone can see who holds each role and what people are responsible for.”
In this environment, employees have a hard time knowing who to listen to. Those who used to be managers may try to reassert control and this causes employees to ask themselves whether they should “follow the new system or listen to their old boss?” The authors say that for a holocracy to be successful, both managers and subordinates have to unlearn old behaviors, and employees have to learn to speak up.
There are some drawbacks, though: “If every circle has a monthly governance meeting . . . and if employees are in 4.1 circles, on average, the meeting time adds up.” The authors say that Zappos uses “a Slack bot to run governance meetings according to holocratic rules” and this cuts down meeting time and makes meetings more productive.
Respond to emerging needs in the market. Employees can initiate changes in their organization’s direction based on what they are seeing from their frontline work with customers. According to the authors: “Managing looks different in these structures. It is less about supervision and direction and more about designing, facilitating, and coaching.” One former manager at a company using a holocratic approach said, “You have to lead by example and round up the troops rather than rely on authority.”
However, the traditional approach of setting performance targets in advance is problematic. It is a ground rule of holocracy that you can revisit any decision whenever you want. As a result, “you will find it very difficult to drive other’s behaviors on the basis of targets defined in advance.” This would be antithetical to most government operations.
Finding the Right Balance
The authors conclude their article by noting: “Most organizations, particularly large corporations, should adopt these techniques in part, not in whole. . . . A great deal of piecemeal adoption is already happening. Procter & Gamble, for example, operates a complex matrix organization in order to integrate its many brand categories . . . . But it also has a vast open-innovation program in which people outside P&G’s walls organize themselves to solve problems for the company.” They say that some major corporations, such as Google and 3M use elements of holocracy in parts of their businesses. The choice to use this approach depends on: “What needs to be reliable? And what kinds of adaptation are important? What organizational forms will produce the right balance in this case?” And in government agencies, the tilt oftentimes is toward reliability, not adaptability. Yet there are places where some elements of self-managed functions could work, so the lessons from holocratic companies might be beneficial.