Two thousand years ago, a Roman legion was a body of about four thousand soldiers, led by one general and managed by fifty centurions. If that sounds familiar, it is. This basic military hierarchy, with a few refinements added for efficiency during the Industrial Revolution, remains the basis of most corporate structures.
However, the concept of a permanent structure based on a traditional hierarchy is being challenged by innovative alternatives that promise greater agility, creativity, and employee engagement. One such emerging structure is holacracy, a system that distributes authority and decision-making across self-organizing teams. However, holacracy is just the tip of the iceberg in the realm of non-traditional organizational structures.
In this article, we will examine other corporate structure models beyond holacracy, exploring their potential benefits and challenges. HR professionals need to understand these models to help guide business owners and human resource teams in support of new structures that will empower employees and foster innovation.
Holacracy: A Brief Overview
The term holacracy was coined by software company founder Brian Robertson, who organized his company’s system of decentralized management into a set of principles for organizational governance.
Holacracy is a management philosophy that seeks to distribute authority and decision-making throughout an entire company. It replaces traditional hierarchical structures with a system of self-organizing teams or circles. Each circle has its own defined purpose, and members within a circle have specific roles and accountabilities.
Distributed Governance
One of the key principles of holacracy is decentralized or distributed governance, which emphasizes regular and structured meetings where members discuss and adjust roles, responsibilities and policies. Any participant may propose changes, as distributed governance includes every team member at every level of the organization, not just those at the “top.” This approach to constant structure seeks to foster adaptability, transparency and accountability throughout the organization.
HR Benefits of Holacracy for Companies and Employees
- Increased Agility and Flexibility: Holacracy promotes a more agile and flexible organization by distributing decision-making authority. A flatter organization can respond quickly to changing market conditions. Agile employees can create special teams to meet customer needs or address emerging opportunities without waiting for approval from higher-ups.
- Enhanced Employee Engagement: Holacracy emphasizes individual roles and accountabilities, which helps give employees a sense of ownership, team membership and purpose. This increased autonomy can lead to higher levels of engagement and job satisfaction.
- Transparency and Open Communication: Regular governance meetings help ensure that information flows freely within the organization. Transparency also helps avoid information silos by encouraging open communication and making it easier to keep everyone on the same page.
- Adaptive Learning: Holacracy encourages a culture of continuous improvement. Through regular circle meetings, employees are encouraged to provide feedback, propose changes and learn from each other, helping to foster a culture of adaptive learning.
Challenges of Holacracy
- Resistance to Change: Implementing holacracy may require a significant shift in mindset and culture. In a large organization, resistance from employees accustomed to a traditional hierarchy may present a challenge as managers and workers alike struggle to adapt to such a radical change. HR professionals must proactively address these concerns and provide needed support during the transition.
- Role Ambiguity: The emphasis on individual roles and accountabilities can sometimes lead to role ambiguity, especially in dynamic environments where responsibilities overlap and workers have a degree of autonomy in selecting their projects. This requires a robust communication and feedback mechanism driven by the HR team.
- Governance Meetings: While governance meetings are essential for transparency and adaptability, they can be time-consuming. HR professionals need to ensure that these meetings are structured and efficient to prevent them from becoming a source of frustration for employees. Because governance meetings are structured, they may seem slow, but they can help produce decisions and results at a faster pace.
- Lack of Centralized Leadership: Holacracy does away with traditional hierarchical leadership roles, which can result in a lack of centralized decision-making. While this is intentional, it sometimes creates isolated pockets of resistance, which can lead to challenges in aligning the organization toward a common vision and strategy.
Beyond Holacracy: Exploring Alternative Organizational Structures
Teal Organizations
Building upon the ideas of holacracy, Frederic Laloux introduced the concept of teal organizations. Teal organizations go beyond the structural changes of holacracy to encompass a more holistic transformation in organizational culture and consciousness. Teal organizations apply the following principles:
- Self-Management: Like holacracy, teal organizations distribute authority across teams in a new future of work based on a more temporary structure, allowing for self-managed organizations with distributed decision-making.
- Wholeness: The philosophy of teal organizations places emphasis on the whole person by valuing individuals for their unique strengths and fostering an environment where employees can bring their authentic selves to work. This can facilitate open dialogue, creativity and idea generation for creating innovative programs.
- Evolutionary Purpose: Teal organizations seek to align their purpose with the natural evolution of the organization, adapting and growing in response to changing circumstances.
Matrix Organizations
With traditional management models, communication typically flows one way: down. Matrix structures involve employees reporting to both functional managers and project managers simultaneously. This creates a dual reporting relationship that allows for increased flexibility and two-way communication.
Benefits of Matrix Organizations
- Enhanced Cross-Functional Collaboration: Matrix structures encourage collaboration across different functions in large to medium-sized organizations, promoting a holistic approach to problem-solving and innovation.
- Specialization: Flat structures better allow employees to form ad hoc teams and work on projects that align with their expertise, allowing for resource allocation and specialized contributions to specific initiatives.
Challenges of Matrix Organizations
- Role Ambiguity: Like holacracy, matrix organizations can suffer from role ambiguity due to the lack of a traditional hierarchy. Clear communication and well-defined reporting relationships are crucial in flat companies in order to help mitigate this challenge.
- Conflict and Power Struggles: Dual reporting relationships can lead to conflicts and power struggles if not managed effectively, especially in small to medium-sized companies. Even in larger organizations, HR professionals must provide conflict resolution mechanisms and training to promote a harmonious work environment.
Network Organizations
The Academy to Innovate Human Resources (AIHR) defines a network organization as a decentralized company structure that operates as a network of autonomous businesses, as opposed to a traditional centralized hierarchical structure. In a network organization, work is organized around networks or communities of employees with shared interests or skills. This structure allows for greater fluidity in team formation and project involvement.
Networks may be vertical (worker to manager), horizontal (worker to colleague), assignment-based (existing for a single project or objective), third-party (a temporary structure working with contractors or vendors) and partnerships (working with another organization to benefit both parties).
Benefits of Network Organizations
- Flexibility: Network organizations are highly adaptable, allowing for quick responses to changing market conditions or project requirements.
- Knowledge Sharing: The emphasis on communities of practice helps foster knowledge sharing and collaboration among employees with similar skills or interests.
Challenges of Network Organizations
- Coordination Issues: With teams forming and disbanding based on project needs, larger organizations may face challenges with workforce coordination. Effective communication and project management are crucial to overcoming this obstacle.
- Sense of Belonging: Employees may struggle with a sense of belonging if they frequently move between different project teams. HR professionals should focus on fostering a strong organizational culture to help counteract this potential issue.
Checklist for Supporting Alternative Organizational Models
Understand the Organizational Context
Before recommending or implementing alternative structures, HR professionals must thoroughly understand the organization’s current state, its goals and its industry context. This includes assessing the company culture, employee skillsets and readiness for change.
Customize Implementation
When it comes to exploring alternative organizational models, there is no one-size-fits-all approach. HR professionals should work closely with leadership to tailor the chosen model to the specific needs and goals of the organization. This could involve strategies like phased implementation by location or department to help manage changes more effectively.
Emphasize Training and Development
For employees to adapt successfully to new structures, they need the necessary skills and mindset. HR professionals should invest in training programs that focus on collaboration, adaptability and communication skills. This can help overcome challenges like role ambiguity or resistance to change.
Communicate Effectively
Clear and transparent communication is vital during the transition to alternative management structures. HR professionals play a crucial role in ensuring that employees understand the reasons behind the changes, the expected benefits and their role in a radical new structure. Regular communication channels, such as town hall meetings or internal newsletters, can help manage expectations and address concerns.
Build a Culture of Continuous Improvement
Alternative organizational structures often rely on a culture of continuous improvement and learning. HR professionals can facilitate this by encouraging feedback, providing resources for skill development and recognizing and rewarding innovative efforts. Creating a culture that values experimentation and learning from failures is essential for the success of nontraditional structures.
Leverage Enabling Technology
Implementing alternative structures may require new technologies to facilitate communication, collaboration and project management. HR professionals should work with IT teams to identify and implement the right tools to support the chosen structure effectively.
For example, developers such as GlassFrog have developed software that is specifically designed to align with holacracy’s self-management and distributed governance practices. Similarly, Matrix Management 2.0 supports the base operating model for matrix organizations.
Monitor Results and Adjust Toward Strategic Goals
Once an alternative structure is in place, HR professionals should continuously monitor the effectiveness of the new structure and gather feedback from employees throughout the entire company. Regular evaluations and data collection can help identify conflicts, training gaps and areas that need improvement, helping to ensure that the structure aligns with the organization’s evolving goals.
Organizational Structure as a Key to Unlock Workforce Potential
As businesses strive to compete in a turbulent, rapidly changing business environment, the readiness to explore alternative organizational structures is a strategic necessity. Holacracy, teal organizations, matrix structures and network organizations represent just a few examples of the diverse approaches to the future of work that have the potential to deliver a strong competitive advantage.
Because each model comes with its own set of benefits and challenges, the key for HR professionals is to carefully assess the organization’s context, customize the implementation and provide the necessary support for employees to adapt, learn the structure and thrive in the new work environment.
For businesses looking to navigate these changes, Higginbotham offers a range of HR services designed to support HR professionals and organizations. Our HR consultants can offer guidance in understanding and implementing alternative organizational structures, helping to facilitate a smooth transition that aligns with your company’s goals. Talk to a member of our HR team and learn more about how we can support your journey toward organizational transformation.
