by Eric B.

Holacracy At VSE

VSE has been practicing Holacracy for several years, and in that time we have gone through many of the growing pains an organization faces when transitioning from a traditional, or top-down hierarchy management structure, to what’s known as a distributed authority or self-organizing enterprise. Here we provide you with an explanation of Holacracy: what it is, how it functions, and why we adopted Holacracy at VSE. We also give you insight into the value of the self-organizing enterprise when it comes to innovation.

What is Holacracy?

Holacracy is a methodology for structuring, growing, and governing an organization. In practice, it serves as a peer-to-peer “operating system…empowering all employees to take a leadership role and make meaningful decisions.” It brings individual accountability to the forefront, increases transparency, agility, and streamlines decision-making.

You can see how Holacracy works here.

Why Holacracy?

Our mission--people innovating for positive impact in the lives of individuals and communities--is what guides us at VSE. As a deliberately developmental organization, we look for opportunities to help each other, as employees and partners. We are also seeking to consistently develop and constantly improve what our brands and services can offer to customers and people outside our organization through innovation. So, if our mission is our compass, then Holacracy is the engine. It’s the vehicle that allows us to drive quickly and maintain a distributed authority--to perform, innovate, and evolve our whole enterprise.  

Innovating With Holacracy

As a for-profit and purpose-driven enterprise, VSE applies Holacracy throughout the organization, including Novotorium, our venture studio and business incubator. Novotorium (Novo) uses Holacracy to “unpack” purpose, differentiating, clarifying, and organizing work around that new company, startup or venture’s given purpose, without managers. Replacing a conventional management system in this way happens to mediate one of the biggest new venture risk factors: co-founder conflict.

Novotorium works with entrepreneurs in 3 ways:

1. The Bootcamp: Novo convenes a bootcamp on a regular basis that prepares entrepreneurs to move their organization towards purpose. The bootcamp achieves this through educating entrepreneurs on using new legal and financial instruments. Novo sets up and helps to establish working Holacratic process and lay the new company’s foundation as a deliberately developmental organization.

2. Partnership Model: Novo provides an opportunity for existing startups who haven’t found product market fit, but do have enough traction to join Novo as a venture and benefit from its services and assets.

3. As Outside Investors: In some circumstances, Novo will act as an outside investor purely funding purpose-driven organizations.

Advantages of Novo’s Investment Structure

An investment from Novo is unlike any other capital option. First, Novo only makes investment in purpose-driven enterprises. Second, the operating agreement differentiates ownership from decision-making rights, using Holacracy’s peer-to-peer structure as a model and inspiration.

What does that mean? Well, when the authority structure of the organization is distributed via Holacracy, capital contributions don’t provide the investor (Novo) with anything special, except for an opportunity to benefit from that organization’s long-term success.

In other words, we are incentivizing and aligning long-term interests, rather than short-term gain and power plays. As an investor, Novo surrenders the same decision-making authority to the organization as its founding members.

Interested in Distributed Authority and Holacracy? Let us know your thoughts on innovation and self-organization in the comments.