Holacracy? Sociocracy? What Are They?

Developers from three teams meet, and one of them proposes a new standard: every pull request needs two reviewers before it merges. An hour later everyone has commented, two people have reservations they cannot quite name, and the meeting ends with "let's run it past the CTO". The proposal comes back a month later, slightly different and a little more tired.

As long as the developers judge the standard by who handed it to them, the CTO decides. When they judge it by the goal all three teams share, they can decide themselves: will a second review help us ship working software, or will it slow us down more than it protects us?

A Dutch electrical engineer went looking for a way out of this meeting in the late 1960s. His answer rests on exactly that premise: a proposal and an objection are both measured against a shared aim. Sociocracy grew out of it, and Holacracy later grew out of Sociocracy. They share a root, and they differ in how a company adopts them, who picks the leader, and what an objection is measured against.

The engineer who wanted to run a company on feedback

During the war Gerard Endenburg attended Kees Boeke's school in Bilthoven. Boeke, a Dutch educator and Quaker, founded it in 1926 with his wife Betty Cadbury and ran it as a community in which pupils and teachers decided by consensus, together, until everyone agreed.

Endenburg went on to study electrical engineering and worked with radar during his military service. There he met cybernetics and the idea that a system corrects itself when it gets feedback. In 1968 he became managing director of the family electrical engineering company, and two years later he cut it from 160 to 100 people to turn it into a laboratory. From the school he kept the idea that everyone decides, and he changed its rule. A decision stands when nobody has a paramount, reasoned objection to it. That principle is called consent. It does not mean everyone is in favour; it is enough that the people who dislike a proposal can still live with it. Consent instead of consensus.

The shift was an engineer's. A system that gets no signal about its own errors cannot be steered. An objection is exactly that kind of signal: someone reports that the proposal would stop them from doing their work. A company that hears it early corrects course before the mistake gets expensive.

Feedback needs a reference point, though. A thermostat compares the temperature with its set point; a circle compares a proposal with its aim. That is why every circle in Sociocracy has a named aim, and an objection has to show how the proposal would harm it. "I don't like it" does not lead back to the aim, so it does not count.

This became the Sociocratic Circle Method, known today simply as Sociocracy. Teams (circles) decide the policies for their work by consent, and within those policies people do the work on their own judgement. Two people link each circle to the next: the leader and the delegate. Information flows both ways, and when the higher circle decides, someone speaking for the people below is in the room.

Holacracy turned it into a constitution

Brian Robertson founded a software company, Ternary Software, in 2001 and used it from the start as an experiment ground for new ways of organizing. Agile development was the base. In January 2005 he adopted the rest of Sociocracy's practices, working from Endenburg's books, and in 2006 he began calling what was emerging from it Holacracy. In 2007 he co-founded HolacracyOne, and in 2009 he released the first version of the constitution: a rule set a company adopts as a whole and that replaces the management hierarchy. Practices from David Allen's Getting Things Done arrived only in the third version. Holacracy is a registered trademark of HolacracyOne.

In his own account, Robertson missed two things in Sociocracy: criteria for which concerns count as valid objections, and a clear description of where authority sits in day-to-day work. He added both. Every role has a defined purpose and accountabilities. Whoever fills it may take any action or make any decision that enacts the role's purpose and accountabilities, as long as it breaks no rule in the constitution, such as the circle's policies or another role's domain. People derive their next task from the role's purpose themselves. On top of that sits a decision process in six steps: present the proposal, clarifying questions, reaction round, option to clarify and amend, objection round, and integration. And, in today's version of the constitution, four tests an objection must pass all at once. Would the proposal reduce the circle's capacity to enact its purpose? Would it limit the objector in the work of their role? Does the concern arise only with the proposal? And would the proposal necessarily cause the harm, or, if it only might, would the circle lack an adequate chance to adapt before the harm becomes significant?

Zappos introduced it by ultimatum

Holacracy's best-known test came at Zappos, the American online shoe retailer with about 1,500 employees. The human resources department deployed it first, in early 2013. In March 2015 Tony Hsieh sent staff a memo several thousand words long: anyone who decided by April 30 that Holacracy was not for them would get at least three months' severance. By the end of April about 210 people, 14% of the company, had accepted. In the end 18% of employees left with a buyout and another 11% left without one. Over a year, 29% of the staff turned over. In 2016 scores on the employee survey fell on 48 of 58 questions, and Zappos dropped off Fortune's 100 Best Companies to Work For list for the first time in eight years.

According to Quartz, the company had 460 circles and 4,700 roles. By March 2017 it had moved to an internal marketplace in which teams operate like small businesses with their own profit and loss. In early 2020 Quartz reported that Zappos was quietly moving away from Holacracy: it had dropped the rigid meetings and brought managers back, and it kept the circles.

Medium, the blogging platform, used Holacracy from 2012 and dropped it in March 2016. Head of operations Andy Doyle wrote that the system had begun to levy a small but persistent tax on both their effectiveness and their sense of connection to each other. As Fortune quoted him: "For us, Holacracy was getting in the way of the work."

In both companies the constitution arrived as a whole, every rule at once. A procedure for processing objections makes sense to someone who had an objection and nowhere to raise it. To someone who never lived that, it is another form to fill in.

David Allen's company adopted Holacracy in 2011. According to the profile on HolacracyOne's site, what appealed to Allen was that the system could do for an organization what GTD had done for the individual.

Sociocracy 3.0 went back to the pieces

Around 2014 James Priest and Bernhard Bockelbrink began assembling openly licensed material that combines Sociocracy with agile and Lean practices. Liliana David joined them later. They broke the method into separate patterns under a Creative Commons license. A company takes one pattern when it hits the problem that pattern solves, and the next one only when it needs it.

Here one question measures an objection. A proposal is accepted when it is "good enough for now and safe enough to try until the next review". The word that carries the weight is safe. The question is whether we will see a mistake in time and can undo it. Holacracy holds the same idea in its fourth test. Sociocracy 3.0 made it the main yardstick.

How they differ

Whole at once, or in pieces

Holacracy is one document, and a company adopts it whole. It is adopted by the people who hold power in the company, and according to the preamble of the constitution they thereby cede their power to run the company into its rules and processes. They can repeal it the same way. The name is HolacracyOne's trademark, but the text of the constitution is under a Creative Commons license, and companies adapt it into their own versions. A company writes classic Sociocracy down as a document and ratifies it too, but according to Ted Rau it chooses for itself how much structure it wants. Sociocracy 3.0 broke it into patterns that a company picks according to what is hurting right now.

Who picks the leader

In Sociocracy the higher circle selects a circle's leader, and the circle has to accept that leader by consent. It can also run the other way: the circle selects its own leader and the higher circle has to give consent. Holacracy takes a different path. The circle's leader (Circle Lead in the current version, formerly Lead Link) is assigned to the role by the leader of the super-circle, one person, without the circle's consent. Power flows down by appointment, as in the hierarchy Holacracy was meant to replace. Rau considers this the only truly unsociocratic element of Holacracy. The delegate who speaks for the circle upward is elected by the circle itself in both approaches.

What an objection is measured against

Sociocracy asks whether a proposal would harm the circle's aim. Holacracy spelled that question out into four tests an objection must pass at once. In Sociocracy objections are rarely tested this way. Sociocracy 3.0 reduced it to the question of whether a proposal is safe enough to try.

Which is easier to learn

Ted Rau, who teaches Sociocracy, describes the difference in practical terms. Holacracy comes with many parameters predefined, which makes it easy to learn. The freedom and choice in Sociocracy can overwhelm a newcomer.

What they share

Holacracy and classic Sociocracy both divide a company into circles, decide by consent instead of consensus, and link circles through two people. Sociocracy 3.0 has a separate pattern for each of these. Underneath sits Endenburg's thermostat: people steer by the aim of their circle or the purpose of their role, and measure every proposal and every objection against it. Without a shared aim, an objection becomes a personal opinion and the objection round becomes a vote on it.

The pieces that lasted solved somebody's pain

HolacracyOne today speaks of hundreds of organizations it has helped adopt Holacracy. Zappos kept its circles. Rau observes that many organizations describing themselves as inspired by Holacracy in fact meet the criteria for Sociocracy. And Sociocracy 3.0 is built precisely so that a team can take just the objection round, or just the question "safe enough to try".

At your next meeting with a proposal on the table, start with one sentence about what the teams in the room are for. After the clarifying questions, ask every objection two questions. Does this proposal stop you from achieving what your role is for, or are you worried about how it will turn out? And if we turn out to be wrong, can we undo it in time? The objections that hold up get resolved between the proposer and the objector in the meeting. The rest you hear out and move on. The proposal leaves the room decided. And that piece of Sociocracy stands a chance of lasting in your company, because it solves a problem you had before it arrived.