agile project management vol. 7, no. 7 holacracy: a ...files.meetup.com/294893/holacracy a complete...

Holacracy: A CompleteSystem for AgileOrganizationalGovernance and Steering

by Brian J. Robertson

Agile methods have had a huge impact on the software industry

by evolving the way we think about software development,

and the results are hard to ignore. Now business leaders are

looking for ways to reap the benefits of agile principles in

whole-organization governance and management. This is

difficult without a tangible methodology to make agile

principles concrete and accessible. This Executive Report

examines the governance aspects of holacracy, which provides

a complete and practical system for achieving agility in all

aspects of organizational steering and management.

Agile ProjectManagement

Vol. 7, No. 7

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by Brian J. Robertson

Holacracy: A Complete System forAgile Organizational Governance and SteeringAGILE PROJECT MANAGEMENTADVISORY SERVICEExecutive Report, Vol. 7, No. 7

The emergence of agile tech-niques fundamentally shook theworld of software development.It changed not only the practicesof software development, butalso our understanding of howto think about the process in thefirst place. It helped evolve ourmental models of what softwaredevelopment is really all about.This shift has taken firm root inthe software industry and for goodreason. Successful agile imple-mentations have reported signifi-cant results, including: greaterproductivity, improved quality,higher morale, and products morealigned with market needs. Agilemethods make it possible forsoftware teams to systematicallyharness self-organization andembrace change, to incorporatefeedback throughout develop-ment, and to seize opportunities

that would otherwise be missed.Agile software developmentis truly a stark contrast to themachine-like predict-and-controlmethods of a waterfall approach.

For better or worse, agile methodsare also in stark contrast to theorganizational leadership, man-agement, and governancestructures of modern day busi-ness, which — like waterfallapproaches — rely on autocraticpredict-and-control managementand tend to fight change. Thisparadigm clash often createssignificant stress between agileteams and the rest of the organi-zation — stress that sometimesdestroys the agile adoption effortbefore it even starts. For organiza-tions that do manage to integratethe two paradigms and reap thebenefits of agile methods,

interesting questions often arisesuch as: (1) can we run the restof our organization on similarprinciples? and (2) what would ittake to make our entire organiza-tion agile?

Similar questions are being askedin boardrooms around the world,well beyond the software industry.In an era of rapidly increasingcomplexity and ever-shorter timehorizons to react, a more agileapproach to governing our organi-zations has significant appeal.Those who have seen the possibil-ities of agile software develop-ment have a leg up on answeringthese questions, though broaden-ing the approach from individualsoftware teams to the entiretyof an organization is still a monu-mental task. Fortunately, there areemerging methods that do for

entire organizations what agilehas done for software teams.Executives and managers seekingto harness agility throughout theorganization now have a startingpoint.

This Executive Report examinesthe governance aspects ofholacracy, a complete and practi-cal system for achieving agilityin all aspects of organizationalsteering and management. Thereport begins with an overviewof the agile way of thinking beforereviewing the challenges of tradi-tional governance methods andthen turning to an alternativesolution: holacracy.

WHAT IS AGILE?

Agile is not just about softwaredevelopment. Agile methodolo-gies include collections of specificprocesses and best practices forsoftware development, but theagile movement itself is tappinginto something far beyond how towrite code and manage releases.At its core, “agile” is an emergingway of looking at and being in theworld — a new understanding ofthe nature of reality and a newapproach to interacting with theworld around us. As Kent Beck,creator of Extreme Programming(XP) wrote, “XP is about socialchange” [4]. The universal values

and principles described in theagile movement begin to captureand elucidate this emerging newworldview, this social change, andthe specific practices of the agilemethodologies follow from those.The practices may get most of theattention, though they are reallyonly the footnote of what agile isall about: the output of a new wayof thinking.

The same principles and world-view behind agile software devel-opment are now taking hold inother aspects of human societyas well. Many in the agile spaceare already familiar with the leanmanufacturing movementsparked in the automotive indus-try and agile’s resemblance to it[15]. Other similar movementshave arisen during the past fewdecades in dozens of other indus-tries as well — each with its ownname and its own specific prac-tices, but each with a core under-standing and core principlesstrikingly similar to what we callagile. In fact, many researchersstudying human psychologicaldevelopment beyond the transi-tion to adulthood have describedan advanced stage or wave ofdevelopment that brings under-standing extremely similar to theprinciples behind agile. Notablemodels include Don Beck’s Spiral

Dynamics [3], Ken Wilber’s inte-gral psychology [17], and JaneLoevinger and Susanne Cook-Greuter’s exhaustive studies andmodels of human self-identitydevelopment [9, 14]. You caneven find a focus on what lookslike agile principles in thedevelopment described bymany spiritual teachers, frommodern American guru AndrewCohen to the great Indian sageSri Aurobindo. While agilemethodologies may talk aboutsoftware development, clearly theroot understanding behind themis anything but limited to thesoftware world.

Applying Agile Principles toOrganizational Governance

Can the principles of agile soft-ware development be applied toorganizational leadership andgovernance? Of course, though itwill be neither smooth nor sus-tainable unless those principlesare reduced to reliable domain-specific practices. Jumping backto software development for amoment, it is one thing to applyagile practices in a software team;there are many agile practicesand methodologies that specifyconcrete behaviors that anyonecan learn and apply. Agile “princi-ples” on the other hand are verydifficult to apply directly as they

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The Agile Project Management Advisory Service Executive Report is published by the Cutter Consortium, 37 Broadway, Suite 1, Arlington, MA 02474-5552, USA. Client Services: Tel: +1 781 641 9876 or, within North America, +1 800 492 1650; Fax: +1 781 648 1950 or, within North America, +1 800 888 1816; E-mail: [email protected]; Web site: www.cutter.com. Group Publisher: Kara Letourneau, E-mail: [email protected] Editor: Cindy Swain, E-mail: [email protected]. Production Editor: Tara Meads, E-mail: [email protected]. ISSN: 1536-2981. ©2006by Cutter Consortium. All rights reserved. Unauthorized reproduction in any form, including photocopying, faxing, image scanning, and downloadingelectronic copies, is against the law. Reprints make an excellent training tool. For more information about reprints and/or back issues of CutterConsortium publications, call +1 781 648 8700 or e-mail [email protected].

are abstract thoughts and projec-tions of a new mindset. It is thespecific practices that are moreeasily learned and applied not themindset. Often, folks new to agilefind it takes many years of apply-ing agile practices to truly under-stand the principles and themindset shift behind them.

Before any specific agile method-ologies came to be — before theterm agile was even coined —there were bold individuals strug-gling to apply agile principles insoftware development teamsthat had entrenched waterfallprocesses and practices. Thesepioneers had to use their gut-feelunderstanding of agile principlesand invent actual practices andprocesses to capture them. Beforethat happened, applying agile in asoftware team meant individualheroics: individuals who “got it,”who had a feel for a better way,pushed against existing systems tomake something happen. Whileheroic and sometimes helpful,such efforts rarely result in sus-tainable change, unless theysucceed in generating concreterepeatable practices and support-ing structural change. Fortunately,some of those early heroics didmanage to make that break-through and give rise to what wenow call the agile methodologies.

Likewise, anyone can applyagile principles to organizationalgovernance, though to movebeyond individual heroics, theywill first need to find concreteorganizational governance and

management practices thatembody those principles, aswell as a structure that supportstheir use and adoption. It is alsocritically important to recognizethat an agile organizational struc-ture and process is not at all thesame thing as no structure or noprocess. As is the case with effec-tive agile software development,an agile organization requires amore disciplined process thanthe traditional model, not a lessdisciplined one and certainly notanarchy. Thriving on the edge ofchaos and surfing the emergingwave of reality is extremely trickybusiness; doing it without gettingswept away in the tide requiressignificant discipline and acarefully crafted structureand process.

EXISTING GOVERNANCEOPTIONS

Let’s start by considering thestructure and decision makingof the modern corporation. Thereis a limited democracy in placeexternally: the shareholders electboard members by majority vote(weighted by how many sharesthey own), and the board, inturn, appoints a CEO by majorityvote. From there, all decisionmaking is autocratic, and the CEOessentially has supreme power.Typically, the CEO delegates someof his or her power to managers,creating what is akin to a feudalhierarchy. This hierarchy steersthe organization through top-down, predict-and-control plan-ning and management whereplans officially flow down from

above and accountability officiallyflows up from below. Thosegoverned have virtually no voicein the governance except by thegood graces of those aboveand no official way to ensurekey insights or perspectives theyhold are incorporated into plansor policies. At worst, this systemtends toward corruption anddomination. Even when the worstis avoided, this system still tendsto be both inflexible to changeand incapable of artfully navigat-ing the complexity most busi-nesses now face.

The real challenge of course isn’tin articulating the weaknesses ofthe modern approach — there’splenty of evidence for that — itis in coming up with somethingworthwhile with which to replaceit. Some companies attempt toskip an explicit power structureor use only a minimally definedone. That can work to a point,though there’s an insidious dangerto it. With no explicit power struc-ture in place, one will implicitlyemerge over time since decisionsneed to be made, and they will bemade — one way or another —and social norms will develop.The best you can hope for at thatpoint is a healthy autocratic struc-ture of some sort, though moreoften you end up with somethingfar more insidiously dominatingand ineffective.

So perhaps you try running theorganization via consensus? Thatdoesn’t scale at all, and the timeand energy required is often so

©2006 CUTTER CONSORTIUM VOL. 7, NO. 7

EXECUTIVE REPORT 33

impractical that the system isbypassed for most decisions,leaving you with the same prob-lems as having no explicit struc-ture. Even worse, sometimesconsensus can pull people towarda narcissistic space. What aboutsome kind of internal democracy?Democracy often results in thesame challenges and inflexibilityas autocracy but with a highertime cost. To make matters worse,the majority rarely know best, soyou’re stuck with ineffectivedecisions on top of the other

downsides of autocracy. Whileall of these approaches havesome merit, none are highlyeffective at harnessing true self-organization and agility through-out the enterprise.

Fortunately, there is anotheralternative.

HOLACRACY OVERVIEW

The sidebar “What Is Holacracy?”offers an in-depth definition ofthis system. However, granddefinitions aside, holacracy™ is a

very practical system for achievingagility in all aspects of organiza-tional leadership and governance.Holacracy includes an organiza-tional structure and concretepractices that fully embody agilevalues and principles. The remain-der of this report focuses on theorganizational governance aspectsof holacracy.1

Holacracy includes several corepractices for organizational struc-ture and governance, most ofwhich are based on or camefrom an earlier governance sys-tem called sociocracy (discussedlater in this report). The followinglist offers an overview of thesepractices:

Circle organization — theorganization is built as a “hol-archy” of semi-autonomous,self-organizing circles. Eachcircle is given an aim by itshigher-level circle and has theauthority and responsibility toexecute, measure, and controlits own processes to movetoward that aim.

Double linking — a lowercircle is always linked to thecircle above it via at least twopeople who belong to and takepart in the decision making ofboth the higher circle and thelower circle. One of these linksis the person with overallaccountability for the lower-level circle’s results, and



WHAT IS HOLACRACY?

The following in-depth definition of holacracy comes from its Web site [11]:

Holacracy is a next step in the evolution of human organizations. Itincludes a set of interwoven models, principles, practices, and systems thatenable a fundamental transcendence of virtually all aspects of modernorganizational dynamics. Holacracy embraces everything we’ve learnedabout organizations so far, and at the same time, represents a quantumleap to a higher order of organization, one capable of artfully navigating ina world of higher-order complexity and increasing uncertainty. The shift tothis new level of organization is as fundamental as the leap from themonarchies of old to the democracies of today, and, as with any such shift,it brings new possibilities, new challenges, and a vast stretch of unchartedterritory to explore.

From the root “holarchy,” holacracy means governance by the organiza-tional entity itself — not governance by the people within the organizationor by those who own the organization, as in all previous systems of gover-nance, but by organization’s own “free will.” With holacracy in place, thenatural consciousness of an organization is freed to emerge and governitself, steering the organizational entity towards its own telos, shapingitself to its own natural order. Every organization has its own individual“voice,” entirely and radically different from the voices of the people asso-ciated with the organization — just as the organization persists even asindividuals come and go, so too does its voice. The subtle sound of theorganizational voice is always there, struggling to tell us its needs and pur-sue its own purpose in the world, but it is usually hidden by a cacophonyof human ego. It can be heard sometimes when individuals come togetherin a transpersonal space — a space beyond ego, beyond fear, beyondhope, and beyond desire — to sense and facilitate the emergence of what-ever needs to emerge now. Holacracy requires that this transpersonal spacearise often and easily for organizational steering, and the many aspects ofholacracy all aim to facilitate this level of human dynamics.

1Holacracy is a trademark of TernarySoftware, Inc. Readers interested inaspects other than organizationalgovernance in the holacracy approachcan visit www.holacracy.org.


EXECUTIVE REPORT 55

the other is a representativeelected from within the lower-level circle.

Circle meetings — each circlemeets regularly to set policiesand delegate accountabilityand control for specific func-tional areas and roles.

Decisions by integrativeemergence — policies anddecisions are crafted in circlemeetings by systematicallyintegrating the core truth orvalue in each perspective putforth until no one present seesadditional perspectives thatneed to be integrated beforeproceeding under the then-current proposal.

Dynamic steering — holacracytranscends predict-and-controlsteering with dynamic steering.All policies and decisions aremade based on present under-standing and refined as newinformation emerges.

Integrative elections —people are elected to key rolesthrough an integrative electionprocess after open discussion.

The sections that follow addresseach of these elements ofholacracy in more detail.

STRUCTURE OF HOLACRACY

The first two concepts introducedabove, circle organization anddouble linking, are part of thestructure of holacracy. This sec-tion examines these two areasand gives instructions for buildingyour own holarchy of doublylinked circles.

Circle Organization

A circle is a semi-autonomousself-organizing team, which existswithin the context of a broader(“higher-level”) circle that tran-scends and includes it; therefore,each circle is a holon. (Seesidebar “Defining ‘Holon’ and‘Holarchy.’”)

Like all holons, each circlemaintains and expresses its owncohesive identity (it has agency),in this case by performing its ownleading, doing, and measuring;maintaining its own memory andlearning systems; and pursuingits own aim (which is set by itshigher-level circle). The rules ofthis circle organization apply at alllevels of scale. Some circles arefocused on implementing specificprojects, others on managing adepartment, and others on overallbusiness operations. Whateverlevel of scale a circle is focusedon, it makes its own policiesand decisions to govern that levelof scale (leading), it does orproduces something (doing), andit uses feedback from the doing toguide adjustments to the leading(measuring), all in an effort tocontinually reach toward its aim.

An Example

Figure 1 shows part of the tradi-tional organizational chart (orgchart) for my company TernarySoftware, which has pioneeredmuch of holacracy. Note that thistypical view of the org chart isstill perfectly valid, althoughwith holacracy in place, it isnow incomplete.

Figure 2 adds Ternary’s holarchiccircle organization to Figure 1,and Figure 3 is a different andmore accurate way of lookingat the same holarchy. Althoughthese aren’t common org chartviews, the actual structure

DEFINING “HOLON” AND “HOLARCHY”

A “holon” is a whole that is also a part of a larger whole. The term was coinedby Arthur Koestler [13] from the Greek “holos” meaning whole and “on” mean-ing entity and further expanded upon by modern philosopher Ken Wilber [16,18]. Examples of holons are literally everywhere. For instance, atoms are wholesin their own right, and they are also parts of molecules, which are parts of cells,which are parts of organisms, and so on. Similarly, letters are parts of words,which are parts of sentences, which are parts of paragraphs. In a company, spe-cific project teams are parts of a broader department, and departments are partsof the broader company. Each of these series is an example of a holarchy, or anested hierarchy of holons of increasing wholeness, where each higher-levelholon transcends and includes its lower-level holons. That is, each higher-levelholon is composed of and fully includes its lower-level holons, yet also addssomething novel as a whole and thus can’t be explained merely as the sum ofits parts.

represented is probably not allthat surprising. At the highestlevel, the directors plus the CEOform a Top Circle, which is com-parable in scope and function to a

typical board of directors. Belowthat, the executive team forms theGeneral Company Circle, withscope over all operational func-tions and domains except those

delegated to lower-level circles.In practice, the General CompanyCircle delegates much of itsaccountability and control downto department-level or project-level circles and retains keycrosscutting functions andaccountabilities itself.

Ternary Software has two primarybusiness lines: outsourced soft-ware development and agiletraining and consulting. At pre-sent, the General Company Circlehas retained control of the out-sourced software developmentbusiness for itself and delegatedcontrol of the agile business lineto a subcircle (the InsideAgileCircle). Both business lines drawupon the expertise and resourcesin the Development DepartmentCircle, where the company’s soft-ware teams and agile leadersreside (this department is furtherdivided into teams, per the dia-gram). There are other circlesbeneath the General CompanyCircle as well (for example, anOperations Circle); they havebeen omitted from these dia-grams for space reasons.

Double Linking

Decisions and operations of onecircle are not fully independent ofothers, since each circle is alsopart of a larger circle and sharesan environment with others at itslevel of scale. So a circle cannotbe fully autonomous; the needs ofits higher-level circle and lower-level circles must be taken intoaccount in its self-organizing



CEO

VP, Development VP, InsideAgile

Team Lead Team Lead …

Board of Directors

VP, Sales

Coordinator

Developers Developers © 2006 Ternary Software, Inc. All Rights Reserved.

Figure 1 — Ternary Software’s traditional org chart.

…

VP, Sales

Developers

Coordinator

Developers

© 2006 Ternary Software, Inc. All Rights Reserved.

Team LeadTeam Lead

VP, Development

Board of Directors

VP, InsideAgile

CEO

General Company Circle

Top Circle

Development

Department Circle

InsideAgile

Circle

Team

Circle2Team

Circle1

Figure 2 — Ternary Software’s org chart with circle structure.

process (its leading, doing, andmeasuring). To achieve this, alower-level (more focused) circleand a higher-level (broader) circleare always linked together by atleast two people who belong toand take part in the decisionmaking of both the higher-levelcircle and the lower-level circle.

One of these two links isappointed from the higher-levelcircle and is the person to whomthe higher-level circle will look tocarry its needs downward and tobe accountable for the lower-levelcircle’s results (this is called a“lead link” role). The other halfof the double link is filled by arepresentative elected from withinthe lower-level circle (called a“representative link,” or “replink”) and will represent thecontext of the lower-level circlewithin the broader circle’s deci-sion making and self-organizingprocesses. This linking continuesthroughout the holarchy of theorganization and perhaps evenbeyond, through double linksbetween the board of directorsand broader organizations, suchas industry groups or regionalgovernance groups.

Continuing the example fromabove, the arrows to the dashed-line boxes in Figure 4 show theaddition of Ternary’s representa-tive links on the org chart. Thelead links are simply the man-agers already in place in thetraditional hierarchy (i.e., the CEO,the VPs, and the team leads).

The Challenge of Whole System Self-Organization

The agile movement has longrecognized the value of self-organizing teams and for goodreason: self-organization is per-haps the most effective paradigm

available for thriving amidst highlevels of complexity and uncer-tainty. Indeed, it is nature’s way ofdealing with chaos. We need tolook no further than the naturalworld around us or even withinus to see literally thousands ofexamples of self-organizing


EXECUTIVE REPORT 77

General Company General Company Circle

Development Department

Circle

Project Team

Circle

InsideAgile

Circle

Top

Circle

Project Team

Circle

Project Team

Circle


Figure 3 — Another view of Ternary Software’s holarchy.

.

CEO

VP, InsideAgile

Team Lead …

Board of Directors

VP, Sales

Developers Developers

ToTToToppTp CircleTTT

GenGeral Company CircleGe

Development

DFDDepartment CircleD

InsideAgile

Circle

Team

Circle 1

Team

Circle 2

Team Lead Coordinator

VP, Development

.

…

Board of Directors

VP, Sales

Developers Developers

Coordinator


CEO

VP, InsideAgileVP, Development

Team Lead Team Lead

Top Circle

General Company Circle

Development

Department Circle

InsideAgile

Circle

Team

Circle2

Team

Circle1

Figure 4 — Representatives are elected to the next higher circle.

entities at work, at many levelsof scale simultaneously, all beauti-fully nested within each other innatural holarchies.

Of course, the elegance of natureisn’t so easily captured in ourorganizations. The big challengeof self-organizing teams — the“dark side” of self-organization —is that too much autonomy atone level of scale destroys theability to self-organize at a higherlevel of scale. Self-organizationrequires the entity in questionto have significant control overthe organization of its own workand processes; indeed, that’spart of the definition of self-organization. When an agile soft-ware team has full autonomy inthe name of self-organization, thatcan actually hinder the ability ofthe broader business-level or

department-level holon to self-organize at its level of scale — theteam is a part of it, and it needs tobe able to exert some control onits parts to achieve its own self-organization. This is frequently thefear seen around self-organizingteams — higher levels in the orga-nization also have a reasonableneed for control of their parts. Theneed for control is only half thestory, however. The benefits ofself-organization are also lost if ahigher-level holon dominates itsparts and interferes with their ownself-organization. That effectivelydestroys the lower-level holon’swholeness and puts all of itscomplexity on the higher-levelholon’s doorstep. That’s exactlywhat happens in most organiza-tions, and without the benefits ofself-organization throughout a

system, predict-and-control man-agement is the only tool availablefor trying to cope with the com-plexity (and it is a poor tool atthat).

The challenge then of achievingwhole system self-organization isto provide the autonomy eachholon requires to self-organize aswell as the control and respon-siveness to the broader holon ofwhich it is a part. This is preciselythe challenge solved by doublelinking the circles in the organiza-tional holarchy. Each circle per-forms its own leading, doing,and measuring — a completefeedback loop for self-steering.Yet to keep the overall systemwhole, these need to connect tothe steering processes in the cir-cles above it and below it (orequally accurate, in the broadercircle around it and those circleswithin it). More specifically, whenwhat one circle decides to do(e.g., “build this application”)is going to be performed by alower-level circle (for instance, adevelopment team), then thehigher-level circle’s doing links tothe leading process for the lower-level circle, to carry the needs andrelevant information downward.Likewise, the lower-level circle’sdoing and measuring needs tofeed back into the higher-level cir-cle’s measuring process, so it canadapt based on an understandingof the reality and needs of itslower-level circle. As we see inFigure 5, these connections arethe roles of the two links; the leadlink carries the doing of the higher



Leading

DoingMeasuring

Leading

DoingMeasuring

Lead Link

Leading

DoingMeasuring

Leading

DoingMeasuring


Lead Link

Representative Link

Figure 5 — Leading, doing, and measuring across circle levels.

level to the leading of the lowerlevel, and the rep link carries thedoing and measuring of the lowerlevel to the measuring of thehigher level.

With these links operating asconduits between levels of scale,this structure ensures that everycircle in the organization can actfully as a holon — as both a wholein its own right and as a part ofa broader whole. The result is abeautiful fractal pattern that pro-vides healthy autonomy andensures healthy communion atevery level of scale, with informa-tion flowing constantly up anddown through feedback loopsboth within and across circleboundaries. Just like nature.

Building Your Own Holarchy

Most companies are already orga-nized in a hierarchal fashion, andgetting from there to an initialholarchic organization is triviallysimple, at least structurally. Yousimply take the existing hierarchy,the existing org chart, and drawcircles around each level, just asis shown in the diagrams above.That is, you draw a circle aroundevery manager and those he orshe leads, and you end up witha series of overlapping circles,which is your starting holacratichierarchy (whether it’s the righthierarchy is another matter, andthat topic is discussed later in thisreport, though it’s a concern withor without holacracy). From thereyou run elections to completeyour double linking, starting fromthe bottom and working upward,

so that each elected individualthen has a chance to take part inthe higher-level election. You’vethen got a full holacratic structurefrom which to start. Alternatively,larger organizations are oftenadvised to start small, with just asubset of the organization or evena single team, and use that subsetas a trial ground for the newprocess.

So the real conversion challengelies not in a dramatic change tothe fundamental organizationalstructure but in adding the hola-cratic processes, and that’s goodnews. It means you can addholacracy incrementally and learnas you go, while building uponwhat you already have.

PRACTICES OF HOLACRACY

This section looks at the remain-ing practices introduced earlier:circle meetings, decisions byintegrative emergence, dynamicsteering, and integrative elections.

Circle Meetings

The members of each circle meetregularly to set policies and dele-gate accountability and controlfor specific functional areas androles. (See sidebar “Circle MeetingAgenda.”) The circle’s member-ship includes the circle’s lead link(appointed from the higher-levelcircle), any “home” members ofthe circle (those who work on thisteam), any lead links appointeddown to lead lower-level circles,and any representatives elected tothis circle from lower-level circles.

The primary role of circle meet-ings is to set policies and createstructure not to conduct specificbusiness or make decisions aboutspecific instances. For example,when a member of a circle facesa specific challenge on a specificproject, the role of the circle is notto resolve the specific challenge.Rather, it is to set up and refinepolicies and roles that, at best,move the team to a new levelwhere this kind of challengewon’t come up in the first placeor, at the very least, setup rolesand processes for handling thespecific challenge in questionoutside of circle meetings (per-haps in another more opera-tionally focused meeting orperhaps just via individual action,as appropriate). The circle doesthis in part by crafting and refiningpolicies for how specific businesswill be conducted (e.g., what soft-ware testing process will be usedor how we decide who gets whatprogramming task) and in partthrough defining who has whataccountability and control —the two must always go together.Limits must also be set (e.g.,Bob has accountability and con-trol for setting up and managingour source control system, and hemust schedule system downtimeone day in advance and aroundany planned releases).

To use a metaphor, circle meet-ings don’t deal with instances ofobjects, they define and refine theclass structure and interfaces ofthe organization based on datafrom “running the program” (i.e.,


EXECUTIVE REPORT 99

watching how the specific struc-ture plays out in reality). Circlesact as programmers for the orga-nization itself and are capable ofadjusting structure and roles aswell as interfaces in real time,even while the program runs.

Decisions by IntegrativeEmergence

Communication is a core value ofXP. It points out that the best deci-sion comes from being maximallyinformed. XP recognizes that all

stakeholders have important dataand important truths to contributeand that bringing together andintegrating these insights frommultiple perspectives builds amore encompassing understand-ing of our present reality. Thisallows for more effective actions,which take into account moreneeds and more constraints of thesystems and projects around us.In an organizational managementsetting, the traditional feudalstructure allows autocratic control

based on a single perspective,which runs the risk of missingimportant perspectives and infor-mation (often accidentally),effectively killing agility. Just asneither a customer nor thedevelopers can alone dominatedecision making and expect thebenefits of a truly agile approach,so too must an agile organizationintegrate multiple perspectives inits key policies and decisions.

A core understanding behindholacracy is that all perspectiveshave some value to contribute toorganizational steering and thatthe best decision will emergewhen the value in each perspec-tive available is integrated andharnessed. Thus, policies anddecisions are crafted by systemati-cally integrating the core truth orvalue in each perspective putforth. The word used to capturethis integrated state is called“consent,” and the measurementof when you have achieved con-sent is that no one involved inthe decision-making processknows of a reasoned and para-mount objection to proceedingwith the proposed decision. Allreasoned and paramount objec-tions must be addressed in thedecision-making process, givingeveryone involved in the processa voice in their own governance.That means the decision will bewithin the limits of tolerance of allaspects of the system, at least forthe time being. (See sidebars“Integrative Decision-MakingProcess: Short Format” and



CIRCLE MEETING AGENDA

The following is a template agenda for a typical circle meeting, taken from theholacracy Web site [11]:

Check in — the check in is a brief go around, where each person gives a shortaccount of his or her current mindset and emotional state to provide emo-tional context for others in the meeting and to help the speaker let go of anyheld tensions. No discussion is allowed. An example is: “I’m a little stressedout by my project today, but otherwise, I am doing fine.”

Administrative concerns — the facilitator checks for objections to the lastmeeting’s minutes and explicitly highlights the time available for this meeting.

Announcements and updates — circle members share any key informationrelevant to this circle meeting. Questions are allowed, and additional relevantinformation can be shared by others. Avoid discussion; instead, add specificitems to the agenda as necessary. An example is: “Last meeting we agreed tocheck in on the results of Proposal X; here are the results.”

Agenda setup — the facilitator lists preestablished agenda items on theboard and solicits additional agenda items for the meeting, then orders theagenda items and quickly establishes consent for the order.

Specific items — the group proceeds through each agenda item using theappropriate decision-making process (see sidebars “Integrative Decision-Making Process: Short Format” and “Integrative Decision-Making Process:Long Format”), and the secretary captures all decisions in the meetingminutes.

Closing — the closing is a brief go around, where each person reflects andcomments on the effectiveness of the meeting, providing measurement feed-back for the facilitator of the meeting process itself. No discussion is allowed.An example is: “We broke process a few times, though we did a good job ofgetting quickly back on track!”

“Integrative Decision-MakingProcess: Long Format.”)

Note that this is not at all thesame thing as consensus. Withmost consensus-based processes,

everyone must be “for” thedecision, and someone can“block” it, whereas consentrequires that all perspectivesbe integrated into the decision-making process until no one

knows of an important reasonto continue discussion now. Noone can “block” a decision; anindividual can just add informa-tion to integrate into the decision-making process. This is a critical


EXECUTIVE REPORT 1111

INTEGRATIVE DECISION-MAKING PROCESS: SHORT FORMAT

The following is the short-format integrative decision-making process (taken from [11]), used when a circle member has both atension to resolve and a specific proposal to offer as a possible solution:

Presentation — the proposer states the tension to be resolved and a possible proposal for addressing it. Clarifying ques-tions are allowed only to understand the proposal as stated; discussion and reactions are cutoff immediately by the facilita-tor, even those veiled in question form.

Reaction round — the facilitator asks each person in turn to provide a quick gut reaction to the proposal (e.g., “Love it”;“It needs to account for X”; “No specific reactions”). Discussion or responses of any sort are ruthlessly cutoff by the facilita-tor.

Amend and clarify — the proposer has a chance to clarify any aspects of the proposal he or she feels may need clarifyingafter listening to the reactions or to amend the proposal in minor ways based on the reactions (even if there were clearshortcomings pointed out, no amendments are needed at this stage and no major amendments should be attempted).Discussion is cut off by the facilitator.

Consent round — the facilitator asks each person in turn if he or she knows of any objections that must be integrated intothe proposal before the decision is made. An “objection” is a reason why the proposed policy or decision is outside a para-mount limit of tolerance of any aspect of the system. Objections are stated without discussion or questions; the facilitatorlists all objections on the board and ruthlessly crushes discussion of any kind at this stage. After the round is complete, thedecision is considered made if no objections surfaced.

Integration — if objections do surface, the facilitator starts a group discussion about the objection, with the goal of swiftlyfinding a way to integrate the core truth in the objection into an amended proposal that addresses both the objection andthe original tension. As soon as is practical, the facilitator (or another circle member) states an amended version of the pro-posal, and the process goes back to the consent round.

INTEGRATIVE DECISION-MAKING PROCESS: LONG FORMAT

The following is the long-format integrative decision-making process (taken from [11]), used when a circle member has atension or tensions, but no specific proposal to offer:

Form a picture — the facilitator and/or proposer clarify the core topic to be addressed.

Explore views — the facilitator asks for tensions and information from each circle member about the topic and chartsthem (a mind map works well for this). The facilitator then quickly seeks consent that the group has a clear picture of thetensions to address.

Generate proposals — the facilitator starts a process to generate a proposal or a set of proposals that addresses one ormore of the tensions on the mind map. The facilitator may do this via any means appropriate; common techniques includedialog and brainstorming or asking each person in turn, without discussion, what he or she would propose and listingeverything stated on the board. Once there are one or more concrete proposals, the facilitator uses the short formataddressed above.

distinction: consensus tends tofocus on the individuals and theirpersonal wants, whereas consentis about the decision or argumentitself and what’s best for thewhole, while recognizing that thebest way to get the best decisionis to listen to and integrate theinformation and perspectivesbrought by the individualsinvolved. With consent, the peo-ple involved don’t make the deci-sion per se; rather, they are thevehicle for attempting to surfacethe decision that wants to emergeanyway.

Consent as Threshold

As a rule in holacracy, all deci-sions must be made by consentunless consent is first given to useanother decision-making method.Thus, consent wraps and inte-grates other decision-makingstyles; groups may consent tosomeone having autocraticdecision-making power withinagreed-upon limits, to use democ-ratic vote, or even to allow chanceto decide — though consent is stillthe threshold. Any decisions touse another style can be revisitedvia consent as new informationpresents itself or the environmentchanges.

For example, you wouldn’twant your office manager callinga meeting every time he or shewanted to buy more pencils, soinstead you might create a policy(by consent) that grants thisindividual autocratic authority(and responsibility) to make

decisions related to keepingthe office up and running opera-tionally, within certain purchasinglimits. Likewise, programmers canbe granted authority to makeautocratic decisions on how toimplement features in code,within the limit that they needconsent of their team beforebypassing any agreed-uponprocess (such as writing unittests). Should this authority everprove too broad or the limits toorestrictive, the policy would thenbe revisited via consent, and theteam (the circle) would adaptappropriately.

On Sabotage and Stonewalling

One of the most common ques-tions about consent is what hap-pens if someone tries to sabotageor stonewall decision making, andfor good reason. These are issuesthat require significant concernwithin the governance systemswe know. In contrast, companiesusing holacracy tend to find sabo-tage and stonewalling just doesn’thappen in any significant way. It’snot that holacracy directly solvesproblems of politics, it just helpsan organization “outgrow” theneed for such things in the firstplace and helps individuals movebeyond fear-based reactions.Sabotage and politics becomeobsolete and no longer useful.

Aside from that overarchinganswer, if or when these kinds ofbehaviors do occur, the consentprocess not only prevents themfrom doing harm, but also actually

helps figure out where they’recoming from and why, so the rootissue can be addressed.

On Votes

Another common question isabout the “possible votes” in inte-grative decision making. At first itcan sound like there are two pos-sible votes on a proposed decision— “consent” or “object” — thoughthat’s missing a key point. Consentisn’t about “votes” at all; the ideaof a vote doesn’t make sense inthe context of consent. There areno votes, and people do not vote.People do say whether they knowof a reason why the proposeddecision is outside the limits oftolerance of any aspect of thesystem, and then decision makingcontinues to integrate that newinformation. This isn’t the same asmost consensus-based processes— either in theory or in practice— although it does sound similarat first, especially before an actualmeeting that seeks consent is wit-nessed. For example, in a boiler-based heating system, the boilerhas a natural limit of tolerance; ifthe water actually boils, the unitwill cease to function and mayexplode. That is a reasonableargument against allowing thewater to boil. This valid argumentmust be incorporated into thedecision making, because it’sabout something that won’t workwell, not about the boiler “want-ing” to keep the water belowboiling (if it had desires, it mayindeed want that but what’s



useful for decision making is whyit doesn’t want the water boiling!).

On Personal Support

Another key concept is thatconsent and the integrativedecision-making process aren’tabout personal support at all,one way or the other — theyare totally orthogonal to that. An“objection” isn’t a statement thatsomeone won’t support a deci-sion, nor is “no objection” (i.e.,“consent”) a statement that some-one will. It is just a statementabout whether or not someonesees something that is outside thelimits of tolerance of any aspectof the system. Most folks use per-sonal emotions and feelings ofsupport (or lack thereof) as cluesto why a proposed decision mayreally be outside a key limit of tol-erance for the system, and you’llsee others in the decision-makingprocess helping them try tounderstand their emotions. Theemotions become information —valuable to the whole group asclues to broader issues notyet articulated — but not asdecision-making criteria in andof themselves.

Ironically, personal support is typi-cally an output of the consentdecision-making process, eventhough (or maybe preciselybecause) it is orthogonal to thedecision-making process itself.

On Trust

The consent-based integrativedecision-making process relies

upon trust less than any of themore common decision-makingprocesses available. Again, trustis an output of the process, nota required input. In fact, aconsent-based process hasoccasionally been brought intoextremely dysfunctional compa-nies specifically to reestablishand build trust, and several com-panies in Holland using socioc-racy have seen impressive resultsin this regard.

Support and trust are both verypersonal, and integrative decisionmaking has an impersonal qualityto it. It’s about reaching decisionsthat do not fall outside the limitsof tolerance of the many aspectsof a complex system. It is quiteamazing how much personal trustand support such an impersonalprocess builds, largely by shiftingthe focus from the personal to themore practical, while still honor-ing emotions and treating themas important information to beunderstood and not hidden.

One of the most noticeabledifferences between seekingconsent versus consensus is inthe actual culture or “air” of adecision-making meeting. Theprocess helps people movebeyond fear and ego to meetin a higher emotional and culturalspace, so a group engaged inseeking consent has a palpablydifferent feel to it. It’s sometimesreported as feeling like thegroup is tapping into a largercollective understanding, whichis more than the sum of the

participants’ individual under-standings (and not the leastcommon denominator of the indi-viduals’ understandings, a feelingoften reported when seeking con-sensus). The process often does-n’t feel like arguing or convincingothers, although it may look thatway from the outside; instead, ittypically feels like the group isexploring a larger collectiveunderstanding together, until theright decision just emerges.

On Speed

When done well, reaching con-sent through integrative decisionmaking is usually faster than deci-sion making via any other means,including autocratic decision mak-ing. There are three main reasonsfor this. First, there is an explicitdecision-making process; whenfacilitated well, it helps a groupstay focused, avoid unnecessarydiscussion, and move swiftlythrough both exploration of anissue and actual decision making.Second, healthy autocratic deci-sion making often requires somedegree of consensus building toensure buy-in, whereas consentnicely dodges that need — every-one can trust the process itselfto result in any buy-in needed.Finally, and most importantly,it facilitates a change in the natureof decision making and processcontrol — the steering of anorganization or team — from thepredict-and-control model inheavy use today to an experiment-and-adapt model aligned with



agile principles. That changeseverything.

Dynamic Steering

Most modern decision makingand management structures arebased upon attempting to figureout the best path to take inadvance to reach a given aim(predict) and then planningand managing to follow that path(control). It’s kind of like riding abicycle by pointing at your desti-nation off in the distance, holdingthe handlebars rigid, and thenpedaling your heart out to getthere. Odds are, you won’t reachyour destination, even if you domanage to keep the bicycleupright for the entire trip.

In contrast, if you watch someoneactually riding a bicycle, you’llsee a slight but constant weaving.Riders are constantly getting feed-back by taking in new informationabout their present state and envi-ronment and constantly makingminor corrections in many dimen-sions (heading, speed, balance,and so on). This weaving is theresult of the rider maintaining adynamic equilibrium while mov-ing toward his or her aim — usingrapid feedback to stay within thelimits of tolerance of the manyaspects of his or her system.Instead of wasting a lot of timeand energy predicting the exact“right” path up front, ridersinstead hold their purpose inmind, stay present in the moment,and find the most natural path totheir aim as they go. This exampleand way of thinking are nothing

new to the agile crowd; virtuallyevery agile methodology includessome analogy or discussion alongthese lines.

For organizations, replacing mostup-front predictions (of the “right”policies, decisions, and so forth)with incremental adaptation inlight of real feedback providesmany benefits, including signifi-cant efficiency gains; higher qual-ity; more agility; increased abilityto capitalize on ideas and chang-ing market conditions; and per-haps most ironically, far morecontrol. And holacracy achievesall of this while meeting humanand social needs in a way mostworkers would never dare dream.

It’s important to note that tran-scending the predict-and-controlmodel is not at all the same asjust “not predicting” (no morethan riding a bicycle is a processof just “not steering”). It is insteadabout attuning to an appropriatetelos and being fully present in thehere and now and aligning actionswith the natural creative impulsethat then surfaces. Doing thisacross an organization requiresan enabling structure and a disci-plined process of continually tak-ing in feedback and adapting,even across multiple people andmultiple semi-autonomous teams.The doubly linked circle organiza-tion plus the integrative decision-making process used in holacracyprovide such a structure andprocess and, when paired with afocus on staying present andadapting continuously in a state

of flow, true dynamic steeringcan surface.

Dynamic Steering in Practice

Critical to both holacracy as awhole and dynamic steering inparticular is the rule that anydecision can be revisited at anytime. To truly reach consent dur-ing integrative decision makingwithout getting bogged down infear, there needs to be a valueplaced on making decisionsbased on the aim of the circleand the facts at hand, without toomuch speculation and anticipa-tion of what “might” happen andthen adapting when new informa-tion and understanding presentthemselves. This leads to a lot lessagonizing over the “perfect” deci-sion (predicting) and a lot morejust trying something and lettingreality tell you what the right deci-sion actually is.

The rule that any decision can berevisited at any time also removesmuch of the fear of decision mak-ing. Predicting the future is scary,especially if you’re stuck with theresults of your prediction. In con-trast, holding an aim in mindwhile living fully and continuallyin the present is not as scary. It ismuch easier to move beyond afear when you know it is safe tojust try it and then revisit it assoon as your fear actually beginsto materialize or when new infor-mation presents itself. Thischanges the nature of decisions,and that has the power to enablemuch more fulfilling and useful



emotional reactions toward boththe process and results ofdecision making.

The other practices of holacracycome into play here as well. Thecircle organization is critical toeffective dynamic steering, aseach circle owns and controlsits own decisions and policies,performs its own work, and thenadapts its decisions and policiesbased on real feedback. Doublelinking, with representativeselected via consent, enables adap-tation beyond the level of a singlecircle and in a manner integratedwith other circles. And circlemeetings provide a regular forumguaranteed to honor the consentthreshold and allow individuals toair and address their tensions.

An important corollary for achiev-ing dynamic steering is that thegoal of the integrative decision-making process is not to find thebest decision but just to find aworkable one — the best decisionisn’t the one we predict inadvance, it’s the one that realitypoints to over time. Dynamicsteering starts quickly with some-thing workable, then reachesgreat decisions by listening to real-ity and adapting constantly as newinformation and understandingarise.

Avoiding the trap of trying to findthe “best” decision up front freesthe circle to swiftly move fromplanning a decision to testing it inreality and integrating the resultingfeedback.

Finally, note that there are timeswhen some measure of predictivesteering makes sense. Integratingfuture possibilities into presentdecision making makes sense ifboth the probability of a costlypossibility arising is uncomfortablyhigh and if we can’t safely adaptlater once we have more informa-tion to work with. These casesare often best addressed by find-ing ways to ensure we can adaptlater, rather than reverting topredictive planning. When thesituation absolutely calls for it,however, sometimes the agile,

adaptive thing to do is to use apredict-and-control model; inthis sense, dynamic steering tran-scends (adds to) and yet alsofully includes predictive steeringmethods. It is a broader, moreencompassing paradigm, whichstill includes all of the value in theprevious approach. (See sidebar“Agile’s Focus on DynamicSteering.”)

Integrative Elections

There are several key roles thatmust be filled in a holacratic



AGILE’S FOCUS ON DYNAMIC STEERING

Like holacracy, the various agile methodologies all put a strong focus on dynamicsteering. The Agile Manifesto [1] lists a core agile value as responding to changeover following a plan — a value about adapting as reality ebbs and flows andnew information and new contexts emerge. The Agile Project Leadership Network[2] refers to it as continuously aligning to changing situations and maintainingcontrol through feedback, not prescriptive plans. Extreme Programming (XP) alsorecognizes a core value on feedback [4]: feedback allows our plans to be imper-fect at the start of a journey and quite good by the end; it gives us the data weneed to adjust our planned route based on the actual territory encountered,rather than trudging forward blindly with nothing but a map of what wethought the territory might look like.

The XP principles of failure, opportunity, reflection, and continual improvementalso relate to dynamic steering. We improve by continually reflecting on ouractual experience and progress, and XP recognizes failure as just new informationand an opportunity to learn and succeed in a bigger picture. As Thomas Edisonfamously said of his early experiments, he didn’t fail, he just learned a thousandways not to make a light bulb. Likewise, when a software developer compilescode, he or she often expects failure and uses the resulting compiler errors toquickly identify typos and other problems. Rather than spending time and energyensuring every attempt to compile is successful, the programmer simply puts anemphasis on coding fast, failing fast, and learning quickly from the failure. Failingfast at that level of scale allows the programmer to more swiftly succeed in thebigger picture to get that new feature working faster and more efficiently.

Dynamic steering is a core theme in each of the agile methodologies and in mostwriting on agile software development. Holacracy’s similar embrace of dynamicsteering beautifully meshes with and supports a core aspect of agile developmentand helps make agile development an extremely well-suited complement to aholacratic organization.



circle: a secretary to record poli-cies and decisions; a facilitator torun circle meetings and stick tothe holacratic process; and arepresentative link to the nexthigher circle. In holacracy, individ-uals are elected to these rolesexclusively through holacracy’sintegrative election process (thisis not a democratic majority-voteelection; see sidebar “IntegrativeElection Process” for moreinformation).

The circle may choose to use theintegrative election process forother key roles as well (and forother decisions entirely; at TernarySoftware, it is quite common tosee groups using an abbreviatedversion of the process for decidingwhere to go to lunch).

REQUISITE ORGANIZATION

Once an organization adoptingholacracy has all the basics inplace, a new series of questionsabout holacracy’s structure oftenarises. How do you know whatspecific circles an organizationshould have, and how many levelsthese should be organized into?Does it matter? The answer is astrong “yes,” it definitely does.This is an issue in any organiza-tion, with or without holacracy,but with holacracy in place thereis dramatically increased ability toboth find and harness an effectivestructure.

Requisite Structure

Building on the work of ElliotJaques [12], holacracy suggeststhat, at any given point in time, an

organization has naturally ideal or“requisite” structures that “want”to emerge. The closer the explicittangible structures are to thesenatural structures, the more effec-tive and trust-inducing the organi-zation will be. The most obviousstructure (and among the mostcritical) is the actual organiza-tional hierarchy, though there areothers as well. In addition to req-uisite structures, there also seemto be requisite processes and poli-cies. Getting any single structure,process, or policy “requisite” oftenrequires adjusting multiple others,each in the context of the others.It can be quite a puzzle!

Said another way, the organizationconsists of natural holarchies thathave emerged over time andevolve with time. It is extremely

INTEGRATIVE ELECTION PROCESS

The following is a template for the integrative election process (taken from [11]):

Define the role — the facilitator describes the role the election is for and the term of the role (although, as with alldecisions, the election can always be revisited before the term expires as new information becomes available).

Fill out ballots — each member fills out a ballot with his or her nomination, without discussion or comment. The ballotuses the form of “(nominator’s name) nominates (nominee’s name).” The facilitator collects all of the ballots.

Public gossip — the facilitator reads aloud each ballot and asks each nominator in turn to state why he or she nominatedthe person shown on his or her ballot. Each person gives a brief statement as to why the person he or she nominatedcould be the best fit for the role.

Nomination changes — the facilitator asks each person in turn if he or she would like to change his or her nomination,based on new insights that surfaced during the public gossip round. Changed nominations are noted, and a total count ismade.

Discussion — if the facilitator senses a likely choice — usually the person with the most nominations — then he or sheskips this step and moves directly to a consent round for that nominee. Otherwise, the facilitator asks for discussion toestablish a likely candidate for the role then proposes someone and moves on as soon as is practical.

Consent round — the facilitator proposes a specific nominee for the role and asks each person in turn if he or she con-sents to the proposed nominee filling the role, with the nominee in question asked last. If one or more objections surface,the facilitator either facilitates a group discussion about the objection to integrate it or simply moves on and proposesanother nominee for the role. Once no objections surface, the election is complete.



valuable to discover these naturalholarchies, and align the organiza-tion’s explicit structures and sys-tems with them as closely aspossible. This is not an arbitrarychoice; for any given organizationat any given point in time, thereseems to be one right answer andonly one right answer. Finding itis not creative work, it is detectivework; the answer already exists,it just needs to be uncovered. Thisprocess feels a lot less like explicitdesign than it does attuning towhat reality is already trying totell you. The closer a companygets to finding its unique requisitestructure, the more the organiza-tion tends to feel “natural” andthe easier self-organizationbecomes. Circles will feel morecohesive. They will have healthierautonomy and a clearer identity,and the natural functions within acircle’s identity will be more easilyhandled by it without creatingconflict with other circles’ identi-ties or autonomies. Each circlewill be able to more easily do itsown leading, doing, and meas-uring, with its higher-level circleable to more comfortably focuson the circle’s aim and specificinputs and outputs rather than thedetails of the processes going onwithin. Power and accountabilities(i.e., rights and responsibilities)will be very clear and explicit,both for each circle and each indi-vidual within each circle. Aligningwith requisite structure andprocess dramatically eases andenhances everything for whichholacracy already aims.

In the case of Ternary Software,the structure depicted in earlierfigures represents the staff ’s bestunderstanding of the organiza-tion’s requisite structure as of thewriting of this report. Note thatTernary’s staff didn’t “invent”this structure; no one logicallyconcluded what it should be.Rather, they merely “listened”to what naturally wanted toemerge — what was already truebut not yet recognized — andsimply aligned with that. Again, itwas detective work, not creativework, and the requisite structuredetected has evolved over timein true holacratic spirit.

Patterns in Requisite Structure

The specific requisite holarchywill vary heavily in different orga-nizations and will evolve overtime; circles come and circles go(there’s still one requisite holarchyfor any given organization at anygiven point, it just changes overtime). But while the naturalholarchy will vary, there areunderlying patterns to requisitestructure that apply in almost allsituations. These general patternsseem to relate to natural “laws”of holons and holarchies thatdon’t change with time or situa-tion, even though the specificholons and holarchies do.

One key pattern in requisite struc-ture is that the levels in the hol-archy will correspond to naturallevels or stages of developmentof the individuals working at eachlevel. In other words, a lead link

(manager) will have reached abroader stage of developmentthan the people in the circle heor she leads in one or more keyareas of development (primarilycognitive development or the abil-ity to hold and use perspectives ofvarying complexities, though otherareas of development are some-times relevant as well, such asmorals, self-identity, or technicalskill). Furthermore, this develop-mental difference between thelead link and those he or sheleads will cross one major stagetransition along the relevant linesof development. Keep in mindthat this is referring to an averagelevel of development along onlya few lines of development.Development is a messy affair;there are many areas of develop-ment that can be at many differ-ent levels simultaneously and,even with a difference in the aver-age, any given individual will stillbe more developed than his orher lead link in at least someareas (perhaps mathematically,musically, aesthetically, andso forth).

That’s a lot to digest, and this isjust scratching the surface. Theshort version is that each rung onthe corporate ladder will containpeople capable of cognitivelyholding and using a broader per-spective than those below — notjust incrementally broader, but agood, full rung higher. Those whohave had the misfortune of havinga boss who wasn’t capable ofholding and using the same leveland complexity of perspective as



themselves know firsthand howfrustrating a non-requisite struc-ture can be! The developmentaldifference makes the corporatehierarchy meaningful and natural,as opposed to the more commoncase of largely inconsistent orarbitrary hierarchies, which oftenresult in dysfunctional politics anddomination. Hierarchies whereeach tier is separated by onedevelopmental level seem to beideal. Those separated by morethan one level seem better thansame-level leadership but notideal.

This rule was empirically discov-ered, not logically concluded,though we can hypothesize manypossible explanations for it. It iscritical that a lead link be able toconnect the context in the lower-level circle to the broader contextin the higher-level circle, andthat requires the ability to take abroader perspective. It is also easi-est to be coached day-to-day fromsomeone one tier above your ownlevel of cognitive development;these individuals still rememberthe stage you’re at quite well,and you can more easily findvalue in the broader perspectivethey bring.

From the leader’s point of view,helping someone just one runglower in cognitive development ina day-to-day capacity is likely tobe more challenging and moreenjoyable than helping someoneseveral levels lower. Finally, thisone-tier difference of cognitivedevelopment at each hierarchal

level creates a major gravitationalforce for personal developmentthroughout the organization — itpulls people upward.

Related to that, in a requisite orga-nization the person watching outfor your broader development —watching to see when you’reready to take on a role in a higherlevel circle with all of the addedcomplexity that entails — won’tbe your immediate manager butrather your manager’s manager(your “manager once removed”).When accountability for guidingsomeone’s overall developmentrests with his or her manageronce removed, there is a lot lessdysfunction and a lot more trust inthe culture, and it helps acceler-ate individual development toboot. It’s hard for managers toknow when someone they leadday-to-day is ready to be theirpeer. Even more relevant, it’s easyto recognize a level of develop-ment significantly lower than yourown, but once someone gets nearor above your own level of devel-opment, it becomes increasinglydifficult to accurately and fairlyidentify when that person is readyto take on a higher-level role.

There are other requisite patternsin addition to these as well,though they are beyond the scopeof this report. Interested readersare invited to review the materialsgiven in the References and ForFurther Reading sections at theend of this report for moreinformation.

HISTORY OF HOLACRACY

Holacracy emerged amidst real-world trial by fire at TernarySoftware, an outsourced softwaredevelopment and agile consultingcompany founded in 2001. Theorganization’s charter was partlyto serve as an experimentalground for new methods inhuman organization — a livinglaboratory. The founders meticu-lously sought out, tested, and inte-grated new models and methodsin human dynamics and organiza-tion and pioneered new practiceswhere existing ones were lacking.Fueled by the founders’ back-grounds in agile software develop-ment, the company steeredtoward models and processes thatcaptured the agile mindset in tan-gible form and systematically inte-grated each new model andpractice with the others, resultingin the overall approach nowcalled holacracy.

Although holacracy as a whole isa relatively new model, it is largelyan integration and extension ofexisting models, many of whichhave rich histories. Much ofholacracy is a refinement ofsociocracy [8, 10], an organiza-tional governance systemoriginally envisioned in theNetherlands in 1945 as a way toadapt Quaker egalitarian princi-pals to secular organizations.Sociocracy was refined for corpo-rate use in the 1960s by GerardEndenburg, a Dutch electricalengineer who enhanced themodel with principles from



cybernetics — the science ofsteering and control — and used itto successfully manage theEndenburg Electrotechniek com-pany. The system designed byEndenburg was so successful thathundreds of companies have nowadopted the process. Dutch com-panies using sociocracy can evenget an administrative exemptionto labor laws otherwise requiringcompanies over a certain size touse a works council (similar to aunion) — the workers are alreadyrepresented through the socio-cratic method on a day-to-daybasis.

In addition to its roots in socioc-racy, holacracy incorporatesnumerous other models andprocesses as well. Much of theunderstanding and practicesaround organizational structureand management came fromJaques’s work in “requisite organi-zation” [12], and the understand-ing and language around holonsand holarchies came fromphilosopher Ken Wilber’s work[16, 18]. The focus on humandynamics and the importanceof integrative decision makingin holacracy came largely fromLinda Berens’s work in interactionstyles, psychological type, andtemperament theory [5, 6, 7].Ternary’s founders incorporatedthe work of these pioneers andothers, along with their own inno-vations and advances to each,while simultaneously interweav-ing them all together into a wholethat is more than the sum of itsparts — holacracy.

CONCLUSION

Organizations are increasinglyadopting agile software develop-ment practices because of theirability to harness feedback,adapt rapidly to changing realities,and navigate successfullyamidst greater complexity anduncertainty. While agile softwaredevelopment practices forgeahead and gain industry momen-tum, the corporate governancestructures they exist within lagbehind. Until recently, there havebeen relatively few cohesivewhole-organization systems forharnessing agility. Holacracy is acomplete and practical systemfor achieving agility in all aspectsof organizational leadership andmanagement and includes con-crete processes and practices thatfully embody agile values andprinciples. It integrates seamlesslywith existing agile software devel-opment methodologies, filling ingaps in process control anddecision-making systems notdirectly addressed by mostagile methodologies.

Holacracy also lays a foundationupon which other organizationalprocesses and systems can bebuilt or refined from an agilemindset. At Ternary Software, forexample, there are systems forsalary and compensation, strate-gic planning, hiring and firing, per-sonal development, performancereviews, and much more, all ele-gantly aligned with an agile world-view and agile processes. Startingfrom the groundwork of holacracy

opens possibilities for other sup-porting systems that don’t existwith a base of predict-and-controlmanagement.

The Next Evolution

At a more theoretical level, theholacratic structure and gover-nance system integrates thedistinction between for-profit andnonprofit companies and betweenpublic organizations and privateenterprise. Holacratic entities inte-grate both social and economicresponsibilities at the board level,and the process of organizationalgovernance happens everywherethroughout the system by every-one at the level of scale they oper-ate at, not by a large separate“government” or by separate“management.”

The holacratic structure and gov-ernance system also blurs the linebetween separate organizations.As more organizations adopt asimilar structure, they can easilyintertwine into a fractal, chaordic,2

multi-entity organization. Oncethis network gets big enough, ithas the potential to transcendwhat we currently think of asgovernment with a new type ofworldwide integrative powerstructure, all without a messyrevolution.

This structure has the potentialto profoundly advance humansociety, and it completely tran-scends many of the massive

2Chaordic refers to a system that isboth chaotic and ordered.



geopolitical and environmentalchallenges we now wrestle with— many of them just dissolve,and others at least become possi-ble to address with such a systemin place. Better still, this world-wide holarchic meshwork isbuilt on top of the governmentsand legal systems that alreadyexist. That means it can emergeincrementally, in its time, until anew integrative governance webspans the world, with every holonat every level of scale honoredand accorded appropriate rightsand responsibilities. What thismight mean for the individualswho live and work within thesesocial holarchies is also quite pro-found: suffice it to say, the poten-tial for individual transformationsuch a structure could help sparkis truly amazing.

Why Business?

The business world is often thelast place people look to sparkmassive social change, yet busi-ness drives the economy, govern-ment, and education and wieldsimmense power in today’s world.More than half of the 100 largesteconomies in the world today arecorporations, a type of entity thatdidn’t exist just a few hundredyears ago. Most people spend amassive percentage of their wak-ing time involved in a business ofsome sort; it is the container formuch of the culture we existwithin, and it has a dramaticimpact on our lives and our per-sonal development. Business isthe first type of truly global social

organization to emerge in theworld; it crosses geopolitical andethnic boundaries and has thereal potential to unite our worldin a truly global communion.None of this is meant to ignoreor excuse the atrocities commit-ted in the name of business, andthere have been many. If wethrew out early nations once wesaw their dark side, we’d be backto living in tribes, warring withand enslaving our neighbors.What’s needed is to move for-ward, not backward, and thatmeans embracing the businessworld and helping it evolve.

In Closing

As movements like holacracygain momentum, the pioneersat the forefront of this next socio-cultural evolution will face newchallenges and tough problems,ones there are no answers for yet.Fortunately, they don’t need tohave all the answers in advance;they just need to hold the ques-tion and be present in mind, body,and spirit. Then it’s not a matter ofcreating the right answers, but justlistening to what they already are.And it’s amazing what emergesthrough us once we get out of ourown way and truly start listening.

REFERENCES

1. Agile Alliance. “Manifesto forAgile Software Development”(www.agilemanifesto.org).

2. Agile Project LeadershipNetwork. “Core Principles”(www.apln.org/resources.html).

3. Beck, Don, and ChristopherCowan. Spiral Dynamics:Mastering Values, Leadership,and Change. Blackwell Publishing,1996.

4. Beck, Kent, and Cynthia Andres.Extreme Programming Explained:Embrace Change. Addison-WesleyProfessional, 2nd edition, 2004.

5. Berens, Linda, V.Understanding Yourselfand Others: An Introductionto Interaction Styles. TelosPublications, July 2001.

6. Berens, Linda V., andDario Nardi. UnderstandingYourself and Others: AnIntroduction to the PersonalityType Code. Telos Publications,July 2004.

7. Berens, Linda V.Understanding Yourself andOthers: An Introduction toTemperament — 2.0. TelosPublications, 2000.

8. Buck, John A., and GerardEndenburg. “The CreativeForces of Self-Organization.”Sociocratisch Centrum, 1987(www.sociocratie.nl/).

9. Cook-Greuter, Susanne.“Making the Case for aDevelopmental Perspective.”Industrial and CommercialTraining, Vol. 36, No. 7, July2004 (www.harthill.co.uk/publications.htm).



10. Endenburg, Gerard.Sociocracy: The Organization ofDecision-Making. Eburon, 1998.

11. Holacracy Web site(www.holacracy.org).

12. Jaques, Elliot. RequisiteOrganization: The CEO’s Guideto Creative Structure andLeadership. Cason Hall & Co.Publishing, February 1989.

13. Koestler, Arthur. The Ghost inthe Machine. Penguin, June 1990.

14. Loevinger, Jane, andAugusto Blasi. Ego Development:Conceptions and Theories. Jossey-Bass, June 1976.

15. Poppendieck, Mary, andTom Poppendieck. Lean SoftwareDevelopment: An Agile Toolkit forSoftware Development Managers.Addison-Wesley Professional,8 May 2003.

16. Wilber, Ken. A Brief Historyof Everything. Shambhala,6 February 2001.

17. Wilber, Ken. IntegralPsychology: Consciousness,Spirit, Psychology, Therapy.Shambhala, 16 May 2000.

18. Wilber, Ken. Sex, Ecology,Spirituality: The Spirit of Evolution.Shambhala, 2nd edition, 2 January2001.

FOR FURTHER READING

1. Powell, Gareth. “InformedConsent.” Agile DevelopmentMagazine, Spring 2006.

2. Robertson, Brian. EnlightenedBusiness blog, 24 June 2006(www.enlightenedbusiness.blogspot.com).

3. Sociocracy Web site. “Guide toPrinciples and Methods for CircleMeetings.” Sociocracy (www.sociocracy.info/MeetingGuide.pdf).

4. Wilber, Ken. A Theory ofEverything: An Integral Visionfor Business, Politics, Scienceand Spirituality. Shambhala,16 October 2001.

ABOUT THE AUTHOR

Brian Robertson is the founderand CEO of Ternary Software,Inc., an award-winning providerof agile training and consultingservices and project-based out-sourced development. In the fiveyears since its launch, Ternary hasranked as one of the 50 fastest-growing privately held companiesin the Philadelphia region for sev-eral years and won awards for itshigh growth, its sustainable envi-ronmental practices, and for beingamong the 15 best places to workin the region.

Behind the scenes, Ternary’sunique organizational designand management practices haveforged new ground in humanorganization, and Mr. Robertsonis known internationally for pio-neering holacracy, a system forharnessing agility in all aspectsof organizational leadership.Mr. Robertson frequently speaksat conferences, occasionally asa keynote, and his publishedwritings have been translatedinto several languages.

His 20-year background in soft-ware spans many roles, and hewas pioneering agile processesbefore “agile” was coined.Software has been a passion formost of Mr. Robertson’s life; hebegan programming at age sixand launched his first software-related business at age 12.He can be reached at [email protected].

Abou

t the

Pra

ctice Agile Project

Management PracticeCutter Consortium’s Agile Project Management practice provides you withinformation and guidance — from experienced, hands-on Senior Consultants — tohelp you transition (or make the decision to transition) to agile methods. Led byPractice Director Jim Highsmith, Cutter’s team of experts focuses on agile principlesand traits — delivering customer value, embracing change, reflection, adaptation,etc. — to help you shorten your product development schedules and increase thequality of your resultant products. Cutting-edge ideas on collaboration, governance,and measurement/metrics are united with agile practices, such as iterativedevelopment, test-first design, project chartering, team collocation, onsite customers,sustainable work schedules, and others, to help your organization innovate andultimately deliver high return on investment.

Through the subscription-based publications and the consulting, mentoring, andtraining the Agile Project Management Practice offers, clients get insight into Agilemethodologies, including Adaptive Software Development, Extreme Programming,Dynamic Systems Development Method, and Lean Development; the peoplewareissues of managing high-profile projects; advice on how to elicit adequaterequirements and managing changing requirements; productivity benchmarking;the conflict that inevitably arises within high-visibility initiatives; issues associatedwith globally disbursed software teams; and more.

Products and Services Available from the Agile Project ManagementPractice

• The Agile Project Management Advisory Service• Consulting• Inhouse Workshops• Mentoring• Research Reports

Other Cutter Consortium PracticesCutter Consortium aligns its products and services into the nine practice areasbelow. Each of these practices includes a subscription-based periodical service,plus consulting and training services.

• Agile Project Management• Business Intelligence• Business-IT Strategies• Business Technology Trends & Impacts• Enterprise Architecture• IT Management• Measurement & Benchmarking Strategies• Enterprise Risk Management & Governance• Sourcing & Vendor Relationships

Senior ConsultantTeamThe Cutter Consortium Agile ProjectManagement Senior Consultant Teamincludes many of the trailblazers in the projectmanagement/peopleware field, from thosewho’ve written the textbooks that continueto crystallize the issues of hiring, retaining,and motivating software professionals, tothose who’ve developed today’s hottest Agilemethodologies. You’ll get sound advice andcutting-edge tips, as well as case studies anddata analysis from best-in-class experts. Thisbrain trust includes:

• Jim Highsmith, Director• Scott W. Ambler• Christopher M. Avery• Paul G. Bassett• Sam Bayer• Kent Beck• E.M. Bennatan• Tom Bragg• Jens Coldewey• David R. Caruso• Robert N. Charette• Alistair Cockburn• Ken Collier• Ward Cunningham•Rachel Davies• Doug DeCarlo• Tom DeMarco• Khaled El Emam• Donna Fitzgerald• Kerry F. Gentry•Tod Golding•Sid Henkin• David Hussman• Ron Jeffries

• Joshua Kerievsky• Bartosz Kiepuszewski •Diana Larsen• Brian Lawrence• Tim Lister• Michael C. Mah• Lynne Nix• Siobhán O’Mahony• Ken Orr• Patricia Patrick• Mary Poppendieck• Roger Pressman• James Robertson• Suzanne Robertson• Alexandre Rodrigues• Johanna Rothman• David Spann• Rob Thomsett• John Tibbetts • Colin Tully• Jim Watson• Patrick Wilson-Welsh• Bob Wysocki• Richard Zultner

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