Does Holacracy liberate employees from the shackles of traditional management structures so they can perform like entrepreneurial leaders? Well, for me the answer’s a definite no. 

It’s a paradox that for Holacracy to succeed employees need a leadership mindset. But if they have that mindset in the first place they don’t actually need Holacracy. Let’s have a look at why that’s the case.

The problem with Holacracy

Zappos’ leap into the deep end of Holacracy has generated many column inches and criticism in the last few months. Fortune, Forbes et al are lining up to point out the pitfalls of Holacracy and Zappos’ apparent troubles. It lost 29% of staff in a year. Employees are weary of change and instability. Management is not trusted. Holacracy, some say, is an overly complex system that creates confusion.

These criticisms may be true (and I’m sure there’s debate about that). But to my mind the critiques are missing the point. The real problem isn’t that Holacracy is a bad system. 

The problem with Holacracy is that focusing on a management system draws attention away from developing a mindset. Holacracy feeds into the misconception that by getting the ‘right’ management structure and system employees will tap into entrepreneurial leadership that’s stifled by traditional hierarchy.

Now I’m not suggesting that traditional hierarchies are a hotbed of personal leadership. And, yes if you want entrepreneurialism and employees taking the lead it might seem a good idea to create a system that doesn’t privilege managers and status. 

But leadership isn’t a system or a process. You can’t systemise leadership – it’s a mindset. And designing a system, process or methodology doesn’t give rise to leadership in employees. It kills it.   

The problem with organisational fads

Holacracy at Zappos is on the extreme end of organisational redesign, but it’s stories like this that serve as cautionary tales for companies who want their employees to take the initiative and lead. Zappos was famous for its employee focus and regularly ranked in lists of top places to work. 

So it’s strange that Zappos chose a system as a way to reinvent the company. Can adhering doggedly to a system be employee focused? Especially one as elaborate and complicated as Holacracy. I’d say no.

Reinventing management systems, processes and organisational structures is a fad right now. But if you have people who have a leadership mindset and you reinforce the behaviours of leadership, any management structure will work for you. Including hierarchical structures, because the manager at the top of that structure will have a leadership mindset which will allow him or her to give employees a platform to lead themselves. 

Being flexible, adaptable, and listening to employees doesn’t come from a system.

Leadership: it’s all in the mind

Creating buy in and leadership are not hard concepts to understand, the problem comes when people try to systemise them and turn it into a process. Holacracy puts the energy of a company (and its people) into a process in the hope it will create people who will start thinking and behaving like leaders. The much harder but self-sustaining way is to develop a leadership mindset.