New leadership: Holacracy makes everyone a boss and creates freedom

In mid-2016, we decided to take a radical step in our management concept: Holacracy. In doing so, we largely disempowered ourselves as founders and gave everyone else at Raidboxes significantly more responsibility. Today, I’ll explain what prompted us to make this decision and why radical steps are sometimes necessary.

In mid-2016, Torben, Marcel and I decided to focus on a completely different management concept than before: holacracy. Some of you may have already heard of it – but probably mostly in a negative context. This is because there are really only two options with holacracy: Either it succeeds (as with Zappos) or it fails and is completely abolished (as with Medium). However, as the media prefer to report on failures rather than successes, I think it’s time for a first-hand experience report!

Holacracy for more freedom

Zappos, the American Zalando role model, relies on holacracy. When 20 per cent of the entire workforce leaves the company, it makes for a great (negative-sounding) cover story. The fact that the remaining 80 per cent are among the top employees and are probably much happier is unfortunately not reported.

Another headline that is often used for holacracy is “the organisation without a top floor” (negative). In reality, however, the exact opposite is the case: organisations that work with holacracy are full of new leaders. The better headline would therefore be: “Organisation with 100% executive floor”.

Research shows that every time the size of a city doubles, innovation or productivity per resident increases by 15 per cent. But when companies get bigger, innovation or productivity per employee generally goes down. So we’re trying to figure out how to structure Zappos more like a city, and less like a bureaucratic corporation. In a city, people and businesses are self-organising. We’re trying to do the same thing by switching from a normal hierarchical structure to a system called Holacracy, which enables employees to act more like entrepreneurs and self-direct their work instead of reporting to a manager who tells them what to do.

– Tony Hsieh, CEO Zappos

Holacracy actually promises more freedom in the company. For both new and old managers. In this article, I’ll show you exactly how this works. And I’ll explain why Raidboxes decided to take this extreme step.

Not in the mood for work – the reason for the radical cut

If you ask your friends how things are going at work, three out of five are probably pretty unhappy. The source of the dissatisfaction can usually be quickly identified if you listen carefully: everyone is annoyed by their superiors. Incidentally, the two satisfied people are usually managers themselves 😉

This subjective impression is confirmed when you look at the results of the Gallup Study 2016: 85 per cent of Germans don’t like going to work and usually just do their work by the book. And as the study has been collecting the same data for decades, it is easy to see that this fact has hardly changed in the past.

None of these findings are new and have been proven many times by science. It is not for nothing that leadership training programmes have been around for ages that are designed to remedy precisely such problems. However, in my opinion, such training can only alleviate the symptoms of a problem that can be found at a structural level. It is caused by the way many people work today.

Today’s managers – always in close combat mode

If you delve a little deeper into management theories, you will find that there are three types of leadership: dialogue-based, structural and cultural leadership. Dialogue-based leadership describes direct interaction between superiors and employees. Leading and maintaining dialogue is a major drain on resources in this form of leadership. In my experience, this is where leadership training often starts. However, direct interaction becomes less and less important when structural and cultural leadership are perfected.

Structural leadership, on the other hand, refers to everything that does not require direct interaction. This includes general, documented work instructions, but above all rules and the structure of the company itself. For example, if the management of a call centre decides to grant employees their own budget for discounts and special conditions, this creates more freedom for each individual and makes the organisation more decentralised.

Cultural leadership means creating values and visions according to which the company and its employees act. The culture of a company determines, among other things, which employees are selected. For example, if a company sets the value of transparency as a guiding principle (as Buffer does), then a team member who refuses to disclose their salary will have little chance in the company.

If structural and cultural leadership is emphasised, the consequence is less direct interaction, thus less potential for misunderstandings and more resources for the actual core tasks. The result: the team and management become freer and more satisfied. This is exactly what holacracy promises.

Four reasons for our holacracy decision

Holacracy emphasises cultural, but above all structural leadership, and reduces dialogue-based leadership to a minimum.

This promise was of course very tempting for us founders. And our personal experiences ultimately tipped the scales in favour of the decision:

1. Minimise personal frustration
2. More individual freedom
3. More freedom for us managing directors
4. Better scalability and more agility

1. minimise personal frustration

A few years ago, Torben – Raidboxes founder and Managing Director – asked his previous employer for a promotion with more responsibility. At the time, he had already been working for the agency from Münster for many months. And for a below-average salary, but with a 60-hour week. Instead of a promotion, however, he was given his notice. The signal: anyone who dares to show initiative or disagrees with the management’s assessment will be fired.

For Torben, however, this was a stroke of luck and exactly the right reason to start his entrepreneurial career. This frustration was formative for Torben’s entrepreneurial career and fuelled a strong desire to do better in his own company. He wanted to give his employees more freedom, more responsibility and overall more room for manoeuvre. Of course, always with the aim of increasing the satisfaction of both parties and the productivity of the company as a whole.

2. more freedom for the individual

A year and a half after our first failed start-up project, I was certain that I would never be employed again! The freedom just felt too good. I had never really had any bad experiences in an employment relationship, but even during job interviews after graduating, I often felt the need to do things differently – in my own way – and to be able to make the important decisions myself.

That’s why I have no desire to “hire” anyone. For me, the word alone symbolises standstill (“in place”). That’s why I want all team members at Raidboxes to feel like entrepreneurs. For me, that means: responsibility for results and budgets, the freedom to make mistakes and the freedom to get everything out of their area that they can and think is right.

And it is precisely such personalities that are needed to implement a holocratic organisation.

3. more freedom for the management

For Marcel, our CTO at the time with over 15 years of entrepreneurial experience, such things certainly also played a role. However, his experience was that the more employees there are, the more work managers have to do. With the result that there is less time for the really important things.

Reason enough to do everything differently at Raidboxes and organise the company in such a way that he is needed as little as possible to keep the day-to-day business running.

4. better scalability and more agility

In addition to the personal reasons, we are aware that agility is a must for us. In the hosting market, we are fighting as David against Goliaths. If we don’t grow fast, react extremely quickly to customer requests and create innovations, the big companies will suffocate us in the market.

The promises that the holocracy makes are therefore:

• More freedom for employers and employees
• More individual responsibility
• Little direct guidance
• as well as agility and scalability.

And that was exactly what we needed!

The start of the holocracy: it’s been worth it so far!

All these reasons have led us to take this radical step. Radical because, as managing directors, we have to relinquish our authority to issue directives in the traditional sense and concentrate much more on structural and cultural management in order to reduce our “tensions”.

Our conclusion after four years of Holacracy: it has paid off so far! Satisfaction in our team is very high and productivity has improved. However, you can already see that recruiting new team members is at least different from traditional organisations. You have to focus much more on the cultural factors of the people.

I explain exactly how holacracy works and how to take the first steps towards implementing it in my article“Holacracy in action – 5 steps to a high-performance team“. You can find more information and our presentation from WordCamp Cologne on the topic of holacracy here.

What is it like in your company or your circle of friends? Have you experienced the same problems? Are you perhaps even a founder yourself and have had good or bad experiences with similar concepts? I look forward to exchanging opinions!