This explainer was written by our Founder, Bud Caddell.

Short answer: people aren’t ants and organizations aren’t immune systems.

This week, Tony Hsieh issued a challenge to every Zappos employee:

Self-organize or leave the company.

We’ve been operating partially under Holacracy and partially under the legacy management hierarchy in parallel for over a year now. Having one foot in one world while having the other foot in the other world has slowed down our transformation towards self-management and self-organization. While we’ve made decent progress on understanding the workings of the system of Holacracy and capturing work/accountabilities in Glass Frog, we haven’t made fast enough progress towards self-management, self-organization, and more efficient structures to run our business. (Holacracy is just one of many tools that can help move us towards self-management and self-organization, but simply abiding by the rules of Holacracy does not equal self-management or self-organization.)

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After many conversations and a lot of feedback about where we are today versus our desired state of self-organization, self-management, increased autonomy, and increased efficiency, we are going to take a “rip the bandaid” approach to accelerate progress towards becoming a Teal organization (as described in the book Reinventing Organizations).

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Self-management and self-organization is not for everyone, and not everyone will want to move forward in the direction of the Best Customers Strategy and the strategy statements that were recently rolled out. As such, there will be a special version of “the offer” to everyone who reads Reinventing Organizations and/or meets some other criteria (outlined towards the end of this email).

Before I share my reaction, I think it’s fair to share my biases. I’ve worked in an organization run via Holacracy and at my firm NOBL, we bring elements of sociocracy, Holacracy, and other self-governing tools into our client organizations to increase their ability to execute ideas amidst a world of constant change.

I believe in the values of self-organization and self-management because I believe in the power of human agency. I believe that organizations should do everything they can (within reason) to empower the abilities and ambitions of their people.

The intent of what Tony Hsieh is doing is admirable. I sincerely don’t want that to be lost in the debate over its execution. Zappos has in many ways been a pioneer of human agency (and has done much to prove its business value for other organizations). But this mandate has left me wondering, if this change is so beneficial, and Zappos has already been operating this way since 2013, why is a top-down mandate even needed? Clearly, teams are either struggling under this system or are outright refusing to participate.

I don’t believe Holacracy should be used as a whole-cloth organizing model and I don’t believe self-organization (more generally) should necessarily be mandated like this.

Here’s why.

• Holacracy, itself, is too complex, dogmatic, and rigid. It feels like playing a game of Management Dungeons and Dragons. Everything you already understand about working in teams is reinvented with confusing language (e.g. circles, tensions, IDM, etc.) and a confusing process. Because of this frustration, some companies are trying to pioneer a cognitively slimmed down version. Blinkist, for example, calls theirs Holacracy Lite.
• There isn’t enough choice in the market yet. For now, Holacracy and GlassFrog (their software tool) are really your only option when it comes to self-management and self-organizing tools. GlassFrog allows you to capture who’s on your team, what role they play, and what ultimately happens among the team. That’s beneficial. Unfortunately, the tool (like the model) is overly complex. We’ve actually signed up clients to use GlassFrog, but we train them to ignore core components of the Holacracy dogma (more on that in a second). Until a better tool exists (or a market of tools and models exist), it’s too soon to mandate its use. Zappos MUST mandate GlassFrog because it’s the only tool that currently exists. Holacracy.org has done the world a great service by taking the lead, but just as the Agile movement grew and diversified, it’s time for variation here as well.
• Self-management must come first. Self-management means allowing a team to dictate how they get their work done. Self-organization means giving all teams the ability to form, evolve, and disband on their own. Self-management is a step towards self-organization, but it shouldn’t be implemented in parallel. When we coach organizations, we start by putting the elements in place which foster self-management (including better talent, ways to measure teams, aligned metrics for all teams, a way to capture what the team is doing, etc.) and then move on to self-organization. In terms of Holacracy or GlassFrog, that means we start with training team Tactical meetings (very akin to Agile) but we do not introduce Governance until we feel like the management layers of a firm are capable and ready to let go of how teams are formed and structured. We’ve found that this phasing is absolutely critical to our success rate in helping organizations adopt new practices.
• Context is everything. Teams should operate in ways that feel natural for their culture and for the challenge at hand, not just in ways suited for the tools available. A key component of our work is evaluating the culture of a place — the shared (and discordant) reality of the people doing the work — to design a way of working that suits those people and their unique context. We end up borrowing from various models to design a cohesive process (and handbook) for how teams organize, do their work, and align with one another. Holacracy and GlassFrog are one-sized at the moment. And even though Tony Hsieh is a fan, his teams are likely diverse and therefore have diverse needs and contexts. It’s a thin line between order and homogenization.
• People aren’t ants (and organizations aren’t immune systems). Yes, human organizations share traits in common with other complex adaptive systems. But humans create their own added layers of complexity (individual t-cells don’t worry about the future or carry their own emotional baggage), therefore human organizations are frustratingly unique. This latest trend of CEO managing by book report is nothing but demotivating for the rest of their workforce. Management books sell because of pithy anecdotes and clean flowing arguments. Organizations change because of messy, protracted, and often political human interactions (inside baseball: this is why we only take on org design projects if we can embed on-site with our clients for at least 3 months and for large organizations we only focus on one team at a time).

With all of this in mind, here’s four things I might suggest to Tony and teams:

1. Focus on self-management first. Get teams running autonomously and in-alignment with one another. This is a huge endeavor all by itself. Borrow best practices from Spotify and others but adapt these practices to your own culture and unique challenges.
2. Adapt your own model. Rather than mandating homogeny, use the internal frustration in a productive means by designing a simpler, more flexible, and more culturally tailored system than Holacracy. You’re a tech company, you could roll your own tool as well and move off GlassFrog. There’s an enormous market out there for software to help organizations balance management and adaptation, either spin out a group to focus on this or invest in a partner. You’ll not only have a better system (and happier people), but you’ll have valuable IP.
3. Dedicate a Complexity Reduction Officer (CRO). Humans are interesting: we love to create complexity and yet we struggle under its weight. Models like Holacracy were created by people who tend to enjoy complex processes (D&D for instance) — the rest of us are different.Organizations, especially ones operating with explicit rules, need someone whose full-time job is to kill unncessary complexity in how the work gets done. Think of it as constant physical code refactoring.
4. Tell more human stories. This one’s more of a nitpick. The memo that was issued (in my opinion) talks far too much about models and tools and not enough about the human benefit (and human stories) of these new ways of working. Change is a political process and change is a cultural process. With more than a year of this way of working under your belt, surely you have stories of how its changed teams for the better? Tell those stories. And then tell those stories some more.