Can the trendy management philosophy holacracy save the agency business?

Last year, a gathering of WPP leadership in Langkawi, Malaysia, was treated to an unusual session by Social@Ogilvy managing partner Thomas Crampton. Titled “Should we depose of Sir Martin Sorrell?” the session advocated implementing certain facets of holacracy, a management philosophy that eschews hierarchy in favor of self-management.

“I was looking for solutions,” said Crampton, who heads a global team within Ogilvy that focuses on innovation. “We needed to figure out how we can repeat innovation and not keep doing the same thing all the time.” (For the record, Sir Sorrell is very much still around, and so is Crampton.)

The agency world is being pummeled at both ends: from clients who demand they do everything quicker and become more agile as well as from younger employees who demand a flexible work environment. Could holacracy be the answer?

Power to the people
Holacracy has been around since 2007, but it broke into the mainstream consciousness when Zappos and its CEO Tony Hsieh embraced it in late 2013. The management philosophy espouses giving individual “souls” (workers) multiple “roles” and the authority to make decisions. There is a hierarchy — and like other more traditional structures, there are bosses. The difference is, the structure can be changed by anyone and everyone. Reorganizing, then, happens constantly and consistently. And while there are still bosses, in the form of “lead links” who head circles (not departments), those bosses can’t tell their circles how to do their jobs. Think “Lord of the Flies” meets “Office Space.”

And that has struck a nerve in the ad industry, where clients are demanding nimbler structures and more innovation — and a place that’s not known for missing trendy fads.

“The buzz about holacracy within marketing circles is very much indicative of the pinch agencies, staff and brands are all feeling,” said Justin Tobin, founder and president at DDG. “Agencies are being faced with increasing demand from clients for flexibility in the products and services they offer. This requires a certain level of agility that can be very difficult to achieve in a typical hierarchical organization.”

And an industry-wide talent crisis — record turnover rates and increased competition from tech companies and startups — means there is also a more urgent need to attract young employees. That talent, said Tobin, often rejects the idea of being a cog in a hierarchical machine.

Crampton said he was trying to avoid “the innovator’s dilemma,” a Clayton Christensen concept about how innovators often fail if they don’t keep anticipating future needs. He said certain facets of holacracy, like people who keep rethinking their roles and responsibilities, do work for the agency business.

“For a large organization like ours, you have to have a bastardized or compromised version.”

An unobtainable ideal
There are many reasons a pure holacracy is difficult to implement: For starters, it often requires such a large-scale retooling that businesses just can’t afford the time spent. “It’s too convoluted and disruptive,” said Crampon. He has focused on having a few dozen global executives practice most aspects of holacracy. About 900 people within the organization worldwide are part of the system to some degree. “Sometimes, they don’t even know they’re in it because it’s a softer approach,” he said.

At Eleven, which has also half-invested in holacracy by reinventing management to distribute responsibility to the “high middle” part of the organization, CEO Courtney Buechert said it’s best to go down the middle, rather than absolute.

The idea of holacracy was first crystallized in 2007 by a software engineer named Brian Robertson, who was in turn inspired by a description of the theory in a book by Arthur Koesterler. A study by consulting firm Structures and Processes found 47 known cases of organizations implementing holacracy as of July, including co-working spaces, tech companies and even the Office of the Chief Information Officer of Washington State. But people say the media hoopla surrounding organizations like Zappos, by far the largest company to implement holacracy, has also made the practice feel trendy.

Perhaps the most-well known agency holacracy experiment was at Undercurrent, a strategic advisory and consulting firm that shuttered late this summer. It took the company about three months to roll out. The organization also practices the transparency — especially about salaries — that comes with most holacratic structures. In a transparency report, managing partner Clay Parker Jones wrote that self-management under holacracy actually created very sustainable and consistent growth. But other staffers say that because implementing holacracy can be such a dense and time-consuming task, they didn’t find it worth it.

Tobin of DDG said that companies are now realizing that a lack of flexibility can be detrimental, making holacracy a very attractive option. Jim Cuene, president at GoKart Labs, said that the autonomy and self-direction holacracy can provide could be good for the agency business.

“Millennials want to do a lot of things, and they work harder than many others. What they want is the chance to step up, make a presentation or do a deck,” said Jeff Fromm, president at FutureCast and co-author of marketing to millennials. “They learn that in an environment that embraces holacracy because it’s about a currency of ideas.”

Finding a middle ground
Many are put off by holacracy’s extremism. Even at Zappos, the bastion of the idea, many managers left, confused by their new positions. A TNR article about Zappos’ next evolution also reported that the loss of employees hurt teams. Those who stayed behind wondered about whether their roles would still exist in coming years.

But some agencies are finding ways to take the spirit of holacracy and match them to more traditional management structures. Global indie agency Mother has long promoted an egalitarian approach: Few people have titles; credit lists for creative are never released (they just read “Mother”); and people move their workspaces around every few weeks. It’s not holacracy, but it’s closer to a democratized, everyone-is-responsible state, say observers. Mother declined to comment for this story.

“We’re still waiting to see how great leadership happens in a holacracy,” said Cuene. Holacracy also demands an adherence to a pretty strict code of behavior. And for creative companies, ideas can’t take hold with “rational agreements” or “constitutions,” said Cuene.

That makes sense: Most companies adopting holacracy tend to be tech companies like Medium, not creative companies. The myriad rules surrounding holacracy are convoluted and mostly abstract. Even at Zappos, not every meeting is run in a holacratic way; the practice is just a stepping stone toward a larger organizational state called “Teal,” which focuses on self-actualization. 

And don’t forget the egos. One agency head of talent said that since most shops start staffers at low salaries and the promise is usually one of fast growth, many enter the business waiting to become higher-earning managers. Strip that way from them, and they have nothing to strive for. “Egos are pretty central to our business,” this head said.

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