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“Holacracy and Obliquity: contingency management approaches in
organizing companies”

Emil Velinov https://orcid.org/0000-0001-6073-1196

AUTHORS Vasko Vassilev
Igor Denisov

Emil Velinov, Vasko Vassilev and Igor Denisov (2018). Holacracy and
Obliquity: contingency management approaches in organizing
ARTICLE INFO
companies. Problems and Perspectives in Management, 16(1), 330-335.
doi:10.21511/ppm.16(1).2018.32

DOI http://dx.doi.org/10.21511/ppm.16(1).2018.32

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Problems and Perspectives in Management, Volume 16, Issue 1, 2018

Emil Velinov (Latvia), Vasko Vassilev (Bulgaria), Igor Denisov (Russian Federation)

Holacracy and Obliquity:

contingency management
BUSINESS PERSPECTIVES
approaches in organizing
companies
Abstract
LLC “СPС “Business Perspectives”
Hryhorii Skovoroda lane, 10, Sumy, The paper aims to examine the development of modern innovative management meth-
40022, Ukraine ods and practices such as Holacracy, Obliquity, Adhocracy and Sociocracy, which are
novelty in the Management science and practice. The study illustrates contingency ap-
www.businessperspectives.org proaches in designing, managing and developing agile companies from wide varieties
of industries. The paper sheds light on contemporary methods in organizing, planning
and setting goals of companies in a post-knowledge era. It is like an operating system
for business that requires the installation of different applications as applications for
hiring employees, for setting salaries, for planning or logistics. In the paper, literature
review on management innovations is conducted and subsequently statistical opera-
tionalization through STATA software has been employed to examine how particular
organizations design and set up their organizational structures such as lean, agile or
scrum. Paper results show that smaller companies are more agile and they tend to ac-
quire Holacratic Management models thanks to the fact that self-managing teams exist
Received on: 11th of October, 2017 internally and their organizational structures are flatter and more adaptive in compari-
Accepted on: 2nd of February, 2018 son to the multinational corporations. Consequently, the paper concludes with sugges-
tions on innovative management implementations for future development of compa-
nies and emphasizes the need for further research on what is the impact of Holacracy
and Obliquity on shaping the organizational culture of companies.

Keywords organizational structure, management innovations,

holacracy, obliquity
© Emil Velinov, Vasko Vassilev,
Igor Denisov, 2018 JEL Classification M10, M15
Emil Velinov, Ph.D., Assistant
Professor, Riga International
School of Economics and Business
INTRODUCTION
Administration (RISEBA), Riga,
Latvia. Skoda Auto University, In recent decades, the concept of the business environment in its broad
Department of Management and
Marketing, Mlada Boleslav, Czech
sense has been radically changed. The globalization processes in the
Republic. economy and the associated process of deregulation have led to the fact
Vasko Vassilev, Ph.D., Associated that the traditional foundations of the firm’s benefits, such as privileged
Professor, Department of Transport
Management, University of
or unique access to financial capital, labor, land or markets, have declined
Transport-Kableshkov in Sofia, in importance. In their place, a firm’s ability to build, hone, upgrade, le-
Bulgaria.
verage, and extend specialized productive knowledge – so-called capa-
Igor Denisov, Ph.D., Head of
Department of Management Theory
bilities or competencies – is increasingly viewed as important, particu-
and Business Technologies, Institute larly those dynamic capabilities that allow a firm to modify its existing
of Management, Plekhanov Russian
University of Economics, Russian routines, procedures, or capabilities. The emerging organizational para-
Federation. digm involves complementary changes in multiple dimensions. Recent
research has shown that traditional management approaches are inad-
equate to cope with a hypercompetitive and fast changing environment
(Rishipal, 2014). Each organization, which is willing to sustain in today’s
This is an Open Access article, constantly changing competitive environment, must continuously seek
distributed under the terms of the
Creative Commons Attribution-Non- for ways to improve its operations. In such a situation, it is necessary to
Commercial 4.0 International license,
which permits re-use, distribution,
focus on the rational use of all resources at the disposal of the company.
and reproduction, provided the Therefore, it is not imperial those firms that are largest or have the most
materials aren’t used for commercial
purposes and the original work is resources that do best, but rather those that are smartest, see new op-
properly cited. portunities, and develop new ways of doing business (Foss et al., 2012).

330
 Problems and Perspectives in Management, Volume 16, Issue 1, 2018

1. LITERATURE REVIEW nificantly less energy intensive and there is a posi-

tive correlation between increased quality of man-
1.1. Management innovations agement and total-factor productivity (Bloom,
Genakos, Martin, & Sadun, 2010). Therefore, the
Given that economies and organizations are be- paper firstly provides the results of the research
coming more and more complex, the environment on different approaches and implementations of
is changing faster, and the acceptable response management innovations (such as methods which
time is diminishing, the old management struc- are denoted as Obliquity, Adhocracy, Sociocracy,
tures simply are not able to cope with changes self-management, etc.) in international organiza-
and development. New methods and manage- tions, including world practices and various tech-
ment systems require a complex, rapidly develop- niques as examples.
ing, virtual business environment of the present
day. As economies and organizations are increas- 1.2. Holacracy, sociocracy
ingly becoming complex, environment is chang- and adhocracy
ing more rapidly, and acceptable response time is
diminishing, the old management structures are The paper aims to aggregate practices of different
simply failing to cope with changes and develop- companies of implementing recently emerged or-
ment. The process that Darwin once referred to as ganizational framework called Holacracy, socioc-
“adaption to change” is very similar to a process, racy and adhocracy as well as scientific literature
which is, in the context of rivalry between compa- studying this topic, to analyze them and to study
nies, considered as management innovation (Foss, the process of framework implementation, com-
2012). Management innovation is about finding panies performance, to examine the positive and
new, smarter, and more efficient ways of organiz- negative elements of this organizational structure,
ing activities in firms. Often, changes in the firm’s the problems arising along the implementation,
environment, such as the introduction of new and to ascertain why companies leave the struc-
technologies or consumer trends, create opportu- ture (Gouveia, 2016). So, consequently, the study
nities for management innovation. In general, the tries to draw a conclusion what is Holacracy, how
most successful firms will be those that discover it should be implemented, in which conditions (in-
and seize new opportunities and then succeed in dustries and optimal size of companies) it is best to
turning them into management innovations. This be implemented (Schwaber, 2015). The study aims
paper aims to examine the development of recent to aggregate practices of different companies, find
innovative management methods and practices common issues faced, and answer the following
and to address the structure of modern organiza- questions: What are the industries in which com-
tions in the context of a fundamental change in or- panies are expected to succeed with the current
ganizational structure. In the paper, various core organizational structure? What is the optimal size
benefits of innovative organization management of the company for this organizational structure?
are discussed and compared with other types of What are the most common problems companies
organizational structures. The importance of in- face while implementing or practicing modern ap-
novation and differences in management practices proaches in management?
for organizational effectiveness is widely accepted
(e.g., Janssen, Van De Vliert, & West, 2004; Yuan
& Woodman, 2010) The findings in the manage- 2. METHODOLOGY
ment literature indicate that management inno-
vations explain variations in productivity across We have employed quantitative statistical models
firms and countries (Black & Lynch, 2001; Cappelli in order to critically examine previous research
& Neumark, 2001). For example, there is a strong and answer the research questions stated by this
positive correlation between management prac- paper, whereas we collected secondary data on
tices and productivity (Bloom et al., 2010) or or- the practices of 97 companies worldwide. The list
ganizational structure and performance (Velinov of companies has been extracted from ‘Structure
& Denisov, 2017). Some research indicates that and Process-Organizational Development’ web-
establishments in better managed firms are sig- site (last updated June 14, 2017), along with the

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Problems and Perspectives in Management, Volume 16, Issue 1, 2018

information about the industry, number of em- Therefore, the purpose of our research is to con-
ployees, years since foundation and Holacracy sider sources of financial success and competitive
adoption. advantages that, although not completely absent
in strategic management, are based on the process
The paper aims at investigating information on of organization and management.
modern approaches of organizing across global
companies, whereas the data have been collected “It is not necessarily those firms that are largest or
based on previous research, books, articles, com- have the most resources that do best, but rather
pany reports, blogs, websites, or the case studies those that are smartest, those that see the new op-
provided by companies themselves, advisory firms portunities, and those that develop new ways of
or consultants in management science and practic- doing business” (Foss et al., 2012).
es. Recent studies have found that it is difficult to
find information about what time of organizational The process referred by Darwin to as “adaption
structure companies use unless they disclose this to change” is analogical to what nowadays, in the
information on their websites or reports (Velinov context of competition between various compa-
& Denisov, 2017). Moreover, the interest in a new nies, can be seen as “management innovation”.
organizational structure has rapidly expanded in Management innovation is about finding new,
last few years as the common problem the compa- smarter, and more efficient ways of organizing ac-
nies nowadays face is that if they decide to imple- tivities in firms.
ment Holacracy (Georges, 2017). There is no struc-
tured analysis of practices and cases, so new adopt- Management innovation practices can be por-
ers have to spend many hours looking for answers tioned into three spheres of management in-
and examples (Knopka Company, 2014). novations as defined by Nicolai J. Foss, Torben
Pedersen, Jacob Pyndt, and Majken Schultz in their
The findings of all relevant, high-quality indi- book “Innovating Organization and Management
vidual studies addressing one or more research New Sources of Competitive Advantage” (2013):
questions in form of scientific papers, books and Changes in strategy (such as goal-setting), HRM
articles as well as blogs and different conferences’ (people management, incentive structures, and
notes, presentations and interviews with found- communications), and Changes in organization
ers and CEOs of companies have been analyzed. (organizational structures and delegation).
The fundamental question in the field of strate-
gic management is “Why are some firms success-
ful – perhaps continually – while others are not?” 3. RESULTS
(Foss, 2012). In this regard, the paper argues that
more attention should be given to the role of or- Based on the statistical operationalization of 97
ganizational design and management processes companies which practice Holacracy, we can ob-
to understand corporate success (Van De Kamp, serve the following results.
2014). The search for corporate success serves as
the basis for organizational strategy. It is equiva- 3.1. Holacracy by industry
lent to the search for competitive advantage – the
potential to earn above-average returns. In the Table 1 shows that the majority of these compa-
management literature there is emerging discus- nies belong to Consulting and Education indus-
sion on the phenomena called “management in- tries (42.1%): these are Management Consulting
novations” (Birkinshaw, Hamel, & Mol, 2015). In firms (17.89%), Training/Coaching and Education
various management studies, there is a big discus- (12.63%), Startup Incubator, Co-working spac-
sion that academics and practitioners alike have es and IT education (11.58%). The second group
emphasized innovations in products, services and of companies is connected to Information
processes but they have paid much less attention Technologies and Digital Marketing (27.37%),
to management innovations as for example ap- among them are Digital, Hardware and Software
proaches in reorganizing and redesigning compa- systems (13.68%), IT and Agile Web Development
nies (Laloux, 2015). (6.32%), Digital Marketing and Online/Offline

332
 Problems and Perspectives in Management, Volume 16, Issue 1, 2018

Advertisement companies (7.37%). It is Notable 3.2. Holacracy by size of a company

that significant number of companies with
Holacracy are among Development, Aid and Table 2 shows the distribution of companies who
Nonp-rofit Organizations (7.37%), such as Belgian applied Holacracy by number of employees, ma-
company Durabilis (Investing in Base of the jority – more than 87 per cent are SME (small
Pyramid Market) or Swiss organization Euforia and medium sized enterprises with less than 250
(youth-driven social enterprise). Even companies employees – if Eurostat categorization is applied):
providing Financial Services (4.21%) show interest among them there are 22.73% of micro enterprises
in Holacracy, for instance young Russian account- and 45.45% – small companies.
ing company Knopka.
Table 2. Distribution by number of employees
A few companies from Retail and Consumer Number of employees Freg. Percent Cum.
Goods (3.16%) and Telecommunications (2.11%) 1-10 20 22.73 22.73
are also present: among them are shoe-retailer 11-50 40 45.45 68.18
Zappos from Las Vegas, and German Soulbottles 51-200 17 19.32 87.50
(production of plastic-free, eco-bottles). 201-500 7 7.95 95.45
501-1000 2 2.27 97.73
Table 1. Descriptive statistics of companies by 1001-5000 2 2.27 100.00
industry Total 88 100.00

Industry Freg. Percent Cum. Notes: N = 97, missing values = 9.

Development, Aid, Nonprofit 7 7.37 7.37
Digital Marketing and Adv. 7 7.37 14.74 Table 3 illustrates companies’ lifespan using
Financial Services 4 4.21 18.95 Holacratic model – when they have adopted
Hardware and software Holacracy and how long they have been using
13 13.68 32.63
systems, digital
IT, Agile Web Development 6 6.32 38.95 Holacracy.
Incubator, Coworking and 11 11.58 50.53
IT Ed. We can see that the companies wishing to use this
Management consulting 17 17.89 68.42
organizational model are mostly young: the year
Other 13 13.68 82.11
of foundation is on average – 2004, while the 50th
Retail and Consumer Goods 3 3.16 85.26
percentile is around 2007. Among outliers are the
Telecommunications 2 2.11 87.37
Training/Coaching/Education 12 12.63 100.00
oldest companies, such as, for instance, David
Total 95 100.00 Allen Company (1920), Oliver Valves Nederland
B.V. (1979), Kahler Financial Group (1981), and
Notes: Total number of observations  = 97, missing obser-
vations.
Scarabee Biocoop (1983–1984). The average num-
ber of years of implementation is 3.5, mostly be-
Among other companies (13.68%) are: Tourism, cause the companies have adopted Holacracy very
Live sports, Eco-chemical company, Eco-shops recently (on average – in 2012), with outliers such
and restaurants, Farming, Hospitality, Real Estate, as HolacracyOne (the inventor of Holacracy) and
Events Services, Oil & Energy, Insurance, Online Diamond Media, who have been using Holacracy
publishing, and Annual Conference. since 2007.
Table 3. Statistics on years

Variable Observations Mean Median Std. dev. Min Max

Year founded 86 2004 2007 12.5 1920 2016

Year of Holacracy implementation 44 2012 2013 2.14 2007 2016

beginning

Years of implementation (how long 44 3.81 3.5 2.24 1 10

Holacracy has been practiced)

Notes: N = 97, missing values 1 = 11, missing values 2 = 53.

333
Problems and Perspectives in Management, Volume 16, Issue 1, 2018

CONCLUSION AND RECOMMENDATIONS

The paper suggests that modern approaches in organizing such as Holacracy will work on a long-term
basis, and the negative effects will be minimized if it is a micro or small-sized company (2-50 employ-
ees) whose internal informal and ad hoc communication is not capable to catch up with the growth of
the organization. The ideal company is a young company with dynamic culture and self-driven employ-
ees who love their work, believe that their job has a better purpose (such as eco-productions, training/
coaching, or social or civic organizations) or it is a modern creative industry such as IT, software devel-
opment or digital marketing and advertisement. Collective Wisdom defined by Birkinshaw is crucial
for the company using Holacracy. And it is important to note that Holacracy is a good feature which is
possible to implement in one team or smaller department which needs more agile approach or it can
be a good experiment to test if Holacracy is suitable for your company. After all, we could add that the
management model should be a conscious choice to suit the task at hand and the challenges you face and
to enhance company distinctiveness.

In conclusion, we can state that no matter if Holacracy is chosen as an “operational system” or not, any
of Management Innovation modern practices mentioned in this paper is worth noticing, since as once,
supporting field of strategic management and organizational studies, which is called complexity theory,
Apello in his book “Management 3.0” noticed: “Complexity thinking adds a new dimension to our
existing vocabulary. It makes us realize that we should see our organizations as living systems, not as
machines” (Apello, 2011). In other words, we would like our companies not just to work as mechanism
which is ready to break due to a smallest mistake, but we want it to live, to be able to respond to chang-
ing environment and unpredictable problems. This can be compared to Machine Learning: we want our
mechanism/company to work well, and if there is an unexpected problem it should not stop as any me-
chanical soulless creation would do, but solve the problem by itself by learning, changing, and adjusting.

At the same time, the old-school of management, the one we got used to and the one which in many
cases we do not want to change, is the biggest obstacle to the adoption of flexible and learning structures
around the world. In the future, it would be interesting to investigate what is the impact of Holacracy
and Obliquity on organizational culture and organizational behavior across different companies and
how these two management phenomena will evolve in the future across variety of industries.

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