Can Companies Run Like Democracies?

Photograph by David Leventi/Gallery Stock

If democracy is rule by the people, most companies are pretty autocratic, argues entrepreneur Brian Robertson. Executives make decisions and managers help them implement those plans—everyone else’s ideas get lost or are held back by bureaucracy. To deal with this problem, Robertson has developed an organizational concept called “Holacracy” that does away with traditional management in favor of an organization with distributed power, governed by a constitution. “It’s not just about running meetings differently or being better managers; it’s changing the fundamental power structure,” he says.

There is, for instance, no functioning chief executive officer, as we conventionally think of the role. ”There might be a spokesperson or an external facing guy, or other roles, but there is no such thing as a guy who is at the top who does all the things that we think of a CEO as doing,” Robertson explains.

Sounds like the work of a poli sci PhD, but Robertson, 34, actually dropped out of high school to work in tech and just felt that traditional corporate structures limited his creativity. “I don’t like being subject to the partial perspective of a boss,” he says. Having co-founded a Philadelphia for-profit company called HolacracyOne in 2007 that teaches other companies how to adopt his method, Robertson insists he’s not in charge and is merely a “pioneer” in the method. HolacracyOne has about 100 clients and licenses other people to teach it, too. In 2012, the company made about $700,000 in revenue.

A few things to understand about Holacracy:

The constitution rules. Ironically, Robertson believes the best way to do away with office politics and red tape is to implement a constitution. This is how Holacracy differs from boss-free models, such as at game company Valve, that do away with structure. As the constitution is the heart of Holacracy, this system is bound to disagree with those who don’t like guidelines. Robertson suggests that organizations use the Holacracy constitution as a template, adapting it as needed; the blueprint outlines how power is distributed, how the company operates, and how teams relate to one other, and it suggests processes for changing how things function. There are governance meetings, but not everyone has to go—each team appoints a representative.

Everyone is in charge. Instead of having a few senior managers in charge of all processes, each worker has the authority (or the right) to carry out certain roles. Employees are expected to turn to the appropriate person for approval only when necessary. For instance, one person might have the authority to approve certain expenses, and someone else might have the authority to fire people—these figures aren’t necessarily more “senior” than anyone else. The overall company strategy is determined by a group of people, but the goal is for each worker to be able to carry out his or her function as autonomously as possible. To do this, employees must know what authority they have, what is expected of them, and what limits they need to honor. A process is set up for roles to evolve as the environment changes. (Some companies might already operate like this; Holacracy formalizes it.)

Decisions do not rely on consensus. Consensus is hard to achieve and the end result is often a watered-down idea that’s hard to implement, says Robertson. Rather than try to reach an agreement or even a majority, any proposals brought up at meetings are automatically approved unless someone brings up a valid argument against it—rather like a wedding ceremony.

“Facilitators” and “secretaries” enforce the constitution. During the early stages of implementation, enforcement is typically up to an external coach, but the goal is for everyone in the organization to get into the habit of working this way. “Facilitators” are chosen to play referee during governance meetings and and “secretaries” can interpret the constitution. The idea: There shouldn’t be a babysitter.

In a traditional structure, “You are limited by the guy at the top and their capabilities,” Robertson explains. By distributing power across the organization, other people can make more meaningful contributions to the company and get things done more effectively. The system is very liberating, once people get used to it, he says. Let’s just hope his constitution doesn’t allow some of the unnecessary bottlenecks that ours does.

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