Have You Heard of “Holacracy”?

If you follow online retailer Zappos, you have. Zappos elected to move to this model of organizational design at the end of 2013. The reason: they want to remain adaptable as they grow (currently, 1500 employees) and not become mired in bureaucracy. By the end of 2014, they expect to have fully transitioned to this new structure and, more importantly, new mindset, of doing business. Zappos is not alone. Start-up companies like Medium and Precision Nutrition are adopting this community-based model and building their cultures around it.

What is holacracy? Developed by former software entrepreneur, Brian Robertson,  it is described as a “social technology for purposeful organization . . . [it] is a distributed authority system – a set of ‘rules of the game’ that bake empowerment into the core of the organization.” The system removes organizational titles and hierarchies. No more managers or supervisors. In its place is a new system of job accountability, distributed leadership, and governance powered by individual contributors across the organization. For an organization to truly adopt holacracy, they must adhere to a 30-plus page “constitution,” describing how the organization will function according to these principles.

Holacracy raises a number of questions for HR, OD, and business professionals. How is performance managed? How are pay increases given? How are disputes resolved? How are job duties assigned and evaluated?  One thing is certain—the eyes of the business world are on Zappos to see what happens next.