Employment Challenges in a Holocratic Work Environment

Many Silicon Valley start-up companies, as well as larger companies such as Zappos, have moved from a traditionally structured work environment to a “holocracy” model. Essentially, while there are lots of variations, a holocracy model is a “boss free” business environment that focuses less on a structured workplace with traditional job descriptions and job titles, and more on creating self-organized “circles” of workers that concentrate on specific goals. Each circle of workers is a self-organized entity with the authority to manage itself, and the circle is ultimately part of a larger circle within the company. In addition, there is a general principle of transparency in the organization’s rules and decision-making. For companies that are able to tolerate a high level of adaptability, have motivated workers, and are established and mature enough to bounce back if things do not work out as anticipated, this is a highly attractive work model. However, this organizational model raises a host of potential employment issues, a few of which are highlighted below:

  • What are the risks of operating a business without job titles and descriptions? Job descriptions play an important role in numerous employment compliance matters. For example, without a job description, for an employee who needs an accommodation due to a disability, the employer and employee may have a difficult time establishing the particular accommodations that the employee needs. Similarly, an employer will have a difficult time in denying particular accommodations if an employee cannot meet the undefined “essential functions” of the job. As a further complication, in a holocracy the entire “circle” (as opposed to a single manager or Human Resources manager) conceivably could have access to the employee’s confidential health information, which could lead to privacy and confidentiality concerns as well as an increased risk of retaliation or allegations about retaliation.
  • The problem with transparency on employment issues. While transparency is an overall positive value, of course, employees have a right of privacy that must not be violated and there are various employment laws and regulations that are designed to ensure that their privacy is respected. Therefore, there needs to be a balancing of the value of transparency with employee rights and applicable employment laws. Similarly, it is often the case that employers should avoid obtaining private information about employees, among other reasons so that they cannot later be accused of using that information in employment decisions. In other words, there are legitimate limits to “transparency” that must be considered in any holocratic model.
  • Who makes difficult decisions in tough times? While things will likely run smoothly when the economy is strong and the business is thriving, the holocratic model becomes potentially problematic when difficult decisions such as layoffs, pay cuts, and reducing hours need to be made as there is no hierarchical structure.
  • Who holds the under-performers accountable? Although employers dream of a workforce comprised of highly motivated individuals, inevitably there will be workers who do not pull their weight or get their job done. A holocratic model does not use a structured counseling, review and termination process, which makes it more difficult to have a standardized process leading to termination of an employee, and problems with respect to creating documentation of notice of performance issues and/or the reasons for termination (particularly in the event the employee subsequently sues for wrongful termination and/or discrimination claims).

The shift from a traditional work structure to a holocratic model may be a successful decision for many companies, and is certainly an engaging empowerment tool, but when considering the model, a company needs to think through these critical employment issues. If you would like to discuss them, and successful strategies that allow the balancing of a holocratic management model with employment compliance, we invite you to contact us.