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Holacracy: Implementing self-organization in crypto companies

  • By Dilip Kumar Patairya
  • Published on February 28

What is holacracy?

Holacracy is a corporate governance system in which team members create separate, autonomous, complementary teams to carry out duties and achieve organizational objectives. A flexible organizational structure is preferred over a corporate hierarchy, allowing staff members to make crucial decisions within their sphere of influence.

Post-COVID-19, the organizational structure of companies has shifted to accommodate remote employees. Most crypto companies that have come into being within a decade have an inherent remote work structure where a big chunk of employees work remotely and anonymously. A decentralized autonomous organization (DAO) in the Web3 ecosystem enables the distribution of decision-making, management and entity ownership.

How holacracy works

Holacracy is a system of flexible positions — each with broad authority within their designated area of duty — that intends to replace the rigidity of a traditional command structure. A holacracy is characterized by a sequence of nested rings, each representing an autonomous team with many roles, unlike the conventional pyramid-shaped structure.

Instead of having set job duties, those working in a holacracy may have multiple roles, each with a distinct function and one or more domains and accountabilities. The CEO of a firm might play a leadership role on one team and a subservient role on another since every member has several duties. Every circle has regular governance meetings where any disputes are settled.

Role leads can make critical decisions independently of the management chain of command. This leads to the development of what is known as the golden rule in holacracy: in the absence of regulations prohibiting it, one has complete authority to make any decision or take action for carrying out the role.

Pros of holacracy for crypto companies

The following are a few advantages of using holacracy methodology:

Encourages openness

Transparency is another advantage of the integrative decision-making process. It’s simpler to establish clear expectations when there aren’t higher tiers of management. Organizational values, performance indicators and operational updates can be shared across homogeneous organizations without navigating the bureaucratic obstacles seen in hierarchical corporations.

Encourages participation among staff members

Employee engagement is increased when management hierarchical structures are eliminated, and team members are included in decision-making. Team members are more likely to feel devoted to the expansion and improvement of the company when they get the chance to talk about various facets of it.

Promotes creativity

In a holacratic organizational culture, team members can experiment with various creative endeavors and initiatives because specific job definitions do not constrain them. This degree of adaptability promotes original thought and creativity.

Cons of holacracy for crypto companies

Although holacracy techniques have benefits, not all businesses are a good fit. Before introducing holacracy into a Web3 company, one needs to take into account these drawbacks:

Over-dependence on self-control

There are benefits and drawbacks to self-governance in a holacratic setting. Although self-management fosters creativity among team members, it may appear daunting and limiting to workers who are used to receiving direction and directives from higher-ups.

Missing accountability

In a holacratic organization, it can be difficult to hold team members accountable because there is no senior management. Measuring accountability and performance is also made more challenging by employee mobility within roles.

Loss of time in meetings

An essential component of the holacracy organizational structure is tactical meetings. Team members can keep each other informed about project schedules and fresh ideas by attending each circle’s regular meetings. Employees work in multiple circles at once; thus, meetings become more frequent and divert team members’ attention from more crucial tasks.

Application of a holacracy model in crypto

As a decentralized management structure, holacracy replaces an organization’s top-down, centralized hierarchy of managers and employees, making it the perfect fit for DAOs. Holacratic governance is very much implementable in crypto. 

The Terra Classic (LUNC) community first published the draft of the new holacratic governance adoption back in October 2022 in an attempt to make the organizational culture more democratic after the Terra collapse in June 2022.

Web3 is gradually taking the world to a future where leadership is decentralized and open-source, and central authority is absent. HolacracyOne lists 180+ organizations that have adopted elements of holacracy. These include the likes of online retailer Zappos and Swiss-based digital agency Liip. However, whether crypto organizations can make up a large chunk of the list is yet to be seen.