Holacracy in Practice: 3 Major Challenges and Solutions for Effective Implementation

Holacracy in Practice: 3 Major Challenges and Solutions for Effective Implementation

Imagine a company where everyone has a voice, not just the people at the top. That’s what holacracy is all about. It’s similar to how a community takes care of a neighborhood. Each team (or “circle”) manages its own projects and decisions, just like how families take care of their own homes. Sounds too good to be true? To a certain extent, it is, because there are several great challenges to overcome for holacracy to work.

Although holacracy has become increasingly popular over the years, with big names like Zappos, Valve, Mercedes-Benz, and Amazon adopting it, there are several hurdles to consider if you’re thinking about making the switch. In this article, we’ll explore the challenges of holacracy and offer solutions for effective implementation.

Challenge 1: Mistaking non-governance for non-action

From the viewpoint of an organizational leader, leaving your teams to manage their own projects and decisions sounds a lot like doing nothing. If a leader in a holacracy chooses not to engage, it can harm the organization by causing a lack of clear direction, stalling decision-making processes, creating confusion around roles and responsibilities, impeding conflict resolution, and ultimately, leading to a decline in team morale and productivity.

Leadership in a holacracy shouldn’t be absent; rather, it should take on a different form, focusing on facilitating, guiding, and ensuring the health of the system as a whole. This closely resembles the Taoist concept of “wu wei” (non-action). Wu wei doesn’t mean literally doing nothing or being lazy. Instead, it recommends an approach to action that works in harmony with the natural way of things, or simply put, “going with the flow.” In essence, Holacracy is a more sophisticated system of organizational development that moves away from traditional human governance to a system governed by clear rules and processes. Therefore, one of the main roles of a leader in a holacracy is to uphold these rules and processes. If a leader is unclear about their new role within a holacracy, non-action becomes an unavoidable consequence.

**Solution: **As a leader, you should be well aware of the new role you’re gonna take on. In a holacracy, your job moves away from the traditional top-down style to a more supportive and guiding role. This means leading the organization with clear processes and rules. Your task is to keep the holacracy’s structure working well, promote open decision-making, and help everyone understand what they’re supposed to do. Think of yourself more as a coach or mentor, helping teams navigate the organization’s shared decision-making and self-management, rather than calling all the shots. So, leadership in a holacracy is all about creating a supportive environment where everyone feels they can make a difference to the organization’s success.

Challenge 2: Transitioning too soon

I’ve noticed that some leaders get really caught up in the latest organizational trends. They might stumble upon a new way of organizing a company, dive deep into it by themselves, tweak it a bit, and then roll it out without thinking about how it fits into the bigger picture. Or, they read a book like “Reinventing Organizations,” fall in love with the idea of teal organizations, and rush to make big changes. As a company leader, if you’re just acting on what you personally want or dream up, you’re basically just hoping for the best.

It’s crucial to understand that an organization isn’t just a set of gears in a machine but is made up of people. And people need time to adapt to change. Establishing an open culture where feedback is freely exchanged takes time, and frankly, not everyone is cut out for this system.


The shift to holacracy needs to be gradual. Start by establishing a culture of transparency, empowerment, continuous learning, and fostering an environment where every team member feels valued and engaged in decision-making. Once you have created this atmosphere, experiment with specific departments. Identify employees who are open to trying the new system and evaluate its effectiveness. Over time, much like a snake shedding its old skin, it may become necessary to part ways with employees who can’t adjust to the new way of doing things.

Challenge 3: Overreliance on Systemic Innovation

In the journey toward adopting holacracy, a common pitfall for organizations is the overreliance on systemic innovation, such as holacracy itself, as a silver bullet for organizational growth and improvement. Leaders might be tempted to believe that by simply changing the organizational structure to something more dynamic and flexible, they can unlock unprecedented levels of creativity, productivity, and growth. This belief can overshadow the multifaceted nature of growth, which also depends on market strategies, customer relationships, product innovation, and employee skill development.

The allure of systemic innovation like Holacracy is powerful; it promises a departure from the rigid hierarchies that many blame for stifling creativity and agility. However, focusing too much on the system rather than the people within it and the external factors affecting the organization can lead to a form of tunnel vision. Organizations might find themselves in a constant state of internal adjustment, trying to perfect their Holacracy practice, while losing sight of the competitive and rapidly changing market landscape.


Make sure to keep a balance between adopting new systems like holacracy and focusing on strategic business growth. While you’re implementing holacracy, don’t lose sight of what’s happening in the market. Stay up to date with market trends, keep innovating your products and services to meet customer needs, invest in your employees’ skills beyond just the new organizational structure, and work on building stronger relationships with your customers. In simpler terms, don’t put all your eggs in one basket with systemic innovation. It’s beneficial, but remember to be realistic about what it can achieve.

How to Experiment Holacracy with Huddles

Not familiar with Holacracy but interested in giving it a try with your team? No problem. Huddles.app is an AI tool for meeting notes that’s built on the ideas behind advanced organizational methods like holacracy. It supports openness, spreading decision-making power, self-management, and learning through doing. You’ll see these concepts in action throughout the software’s design and in the meeting agenda templates we offer. Try out our meeting templates here.

    Author: Leona Smith

    Certified Global Holacracy Coach

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