Holacracy is a management framework for organizations codified into a constitution — the “rules of the game” for working in the organization.
Holacracy is a form of constitutional management, a radically new approach to management with implications that are worth understanding before jumping in.
Constitutional management
Constitutional management is a term aptly coined by late Holacracy Master Coach Bernard Marie Chiquet:
Constitutional management is a managerial framework in which people in authority (e.g. CEOs) adopt a constitution for the organization. This constitution determines how authority is exerted through rules and processes that apply to everyone, including themselves.
— Bernard Marie Chiquet, Institut iGi
This simple yet radical shift moves the organization from a management based on subordination to a constitutional management.
Conventional Management
Typically, the CEO has the power to determine who has authority and how it is exercised throughout the company, either by virtue of the organization’s legal statutes or by delegation from the board. However, the CEO has the ability to change these rules at any time and is not bound by them.
Managers have the power to determine who has authority and how it is exercised within their own teams, provided they operate within any constraints set by the CEO or higher-ups.
Individual team members, in turn, are responsible for carrying out their work within the limits set by their manager or any higher-ups in the organization.
Constitutional Management
The CEO typically holds formal authority over the organization through the organization’s legal statutes or through delegation from the board.
The CEO may choose to delegate their authority to a constitution, which then grants authority to everyone in the organization based on the constitution’s rules. This shift in authority can be seen as making the constitution the “boss” in a sense.
However, the CEO retains the power to rescind their delegation of authority or modify the constitution, but it requires an explicit act to do so.
Whether or not constitutional management is a good fit for an organization largely depends on the specifics of the constitution being considered.
Holacracy is one example of constitutional management, and the first example of a mature constitutional management framework.
Why should you care about a constitution?
One crucial role of leadership is to provide clarity to others, enabling them to carry out their tasks efficiently. By adopting a constitution, you are signaling to the rest of the organization that you have established fundamental rules for how the organization will operate, and you are committed to making them transparent and clear to everyone. Furthermore, you are prepared to follow these rules, just like anyone else in the organization.
This change is not only symbolically powerful, but it also has practical consequences:
- It creates a level playing field by making sure that everyone follows the same explicit and transparent rules. As a formal power holder, you commit to following the same rules as everyone else, even if you’re having a bad day.
- Writing down the rules is not easy because it forces clarity. The main advantage of doing so is that it provides everyone with access to that clarity.
- Writing down the rules makes it easier to reflect on them, and therefore to evolve them.
- By writing down the rules, it ensures that the organization’s knowledge and decision-making processes are not dependent on any one person. This allows for a smoother transition of leadership roles and greater continuity in decision-making.
- The power holder who adopted the constitution retains the ability to modify it at any time. However, any changes must be made publicly and communicated to the rest of the organization. This helps prevent leaders from changing the rules on a whim and ensures that any modifications are done deliberately and thoughtfully.
- Documenting the rules in a constitution can be very beneficial during the onboarding process for new staff, as it provides clear guidelines for how work is done and who has authority over what.
While a constitution can be valuable, it’s only beneficial if it’s effectively put into practice. If it’s simply a document with general statements of intent, it’s likely to be disregarded over time. The more specific and actionable it is, the more helpful it will be. To see an example, take a look at the Holacracy constitution.
How to transfer authority to a constitution?
When adopting constitutional management, it is critical for the constitution to be anchored in the legitimate formal authority of the organization. Without this important step, the constitution carries no real authority and its adoption is meaningless.
Where the formal authority resides depends on the legal statutes of the organization.
If the organization has a board of directors, this is typically where the authority resides, and the board can delegate its full authority to the constitution.
However, if a CEO is nominated by the board to run the company and wants to delegate authority to the constitution, they must first clarify which authority is delegated to them by the board.
Some organizations are formally run with collective decision making processes, e.g. a majority vote of all members for important decisions. In that case, that same decision making process (e.g. majority vote) must be used to adopt a constitution, as it is where the legitimate formal authority comes from.
There are many variations of legal statutes across jurisdictions in the world. As long as you are able to ratify a constitution via the legitimate formal authority of the organization, you can shift to constitutional management.
Even if you do not have the authority to ratify a constitution for the entire organization, it may still be possible to ratify one at your level. For instance, as a director of a division within a company, you could potentially ratify a constitution for your division. However, it is crucial to have a clear understanding of your delegated authority, as only that authority may be delegated further to a constitution for your division.
It seems complicated and bureaucratic…
It may seem that way, but what is the alternative? Every organization has some “rules of the game”, whether they are explicitly codified or not. Without a constitution, what are the rules of the game?
In most companies, the rules governing how work is done are implicit and unclear. They are ultimately subject to the discretion of the boss, and can vary on a whim. As a result, employees may constantly feel the need to verify the unspoken rules set by their superiors and have no solid ground to assert any meaningful autonomy.
I often felt that the toughest problems always fell to me, even though there were people who were equally—or even more competent than myself.
Michael DeAngelo, Deputy Director for Washington Technology Solutions
The higher you are in the organization’s hierarchy, the more “implicit rules” feel comfortable because you have authority to make them up on the fly. For others who are subject to those rules, it is much less comfortable and efficient. A lot of energy is spent to avoid stepping on toes, protecting one’s turf, and manage conflicts created by these unclear boundaries.
While developing a constitution is a significant project, using a (good) constitution makes it easier to work together because the rules of engagement are clear and people don’t need to spend energy constantly navigating them.
The Holacracy framework is a pre-made constitution so you don’t have to create one from scratch: Explore the Holacracy framework.