Case Study Report: Liip: The Path to Holacracy (Case Study Sample)

Case Study Report: Liip: The Path to Holacracy
Frank Y. Cheng
Dhillon School of Business, University of Lethbridge
Case Study Report: Liip: The Path to Holacracy
1 Introduction
This case study aimed to examine the transition from a team-based hierarchical organizational structure to a holacratic organization at Liip AG, a Swiss-based digital agency. The case outlines the benefits of a holacracy at Liip and the challenges the company has and continues to encounter in its implementation of holacratic structure. The case is described through the eyes of Laurent Prodon, Liip’s current Lead Link of the Lausanne office and former Scrum Master, as he reflects on his ten-year journey at the company.  
Liip was founded in 2007 by four co-founders as a digital agency providing a broad range of web services and applications, including website creation, application (app) development, data and analytics, user experience, digital strategy, and e-commerce. Within the first ten years, Liip had grown from a small firm with 20 employees based in two offices in Zurich and Fribourg to nearly 150 employees and three additional locations in Lausanne, Bern, and St. Gallen. Its business volume grew by about 25 percent annually, with sales reaching as high as CHF15 million. To manage large complex projects in a highly dynamic environment, Liip adopted a team-based approach to project execution early on. Two years after its founding, the firm implemented the Scrum framework to develop agile platforms that would be constantly improved rather than focusing on overloaded processes and dry planning.
The adoption of the Scrum framework was one of Liip’s initial steps towards self-organization and holacracy. The Scrum process entailed a flat organizational structure with only two layers. The first layer was a top management team comprising six people and responsible for company-wide decision-making, while the second layer consisted of independent project-specific teams comprising five to twenty employees. Each project team, led by Scrum Master, focused on project value with the aim of maximizing the project’s return on investment (ROI) rather than the initial client specifications. This methodology ensured that the company delivered a usable product to the client as soon as possible instead of taking time to deliver a perfected version after a lengthy process of programming and testing. In addition to the Scrum Master, the team comprised a product owner responsible for defining the product features, programmers, developers, and testers. The top management did not interfere with the team’s work and only got involved when the project team’s cost remained unprofitable for several months. Even then, management did not dictate solutions for improvement but instead worked with the project team to identify reasons for the negative financial status and develop strategies to improve performance.
In 2015, Liip started transitioning from partial to full self-management or holacracy, guided by the work of Frederic Laloux. The company’s top management felt that holacracy was more suitable for the demands of a fast-changing world as decentralized control would allow for greater adaptability and flexibility, quicker responsiveness to client demands, and increased efficiency. In January 2016, Liip began the gradual introduction of the holacratic organizational structure. Liip’s holacratic structure comprised a decentralized system consisting of small teams or circles that took responsibility for their own governance. Within the circles were multiple self-selected and fluid roles which replaced assigned positions and job descriptions in the former hierarchical structure. The role of lead link was responsible for assigning roles and allocating resources within a circle. Employees would hold governance and tactical meetings to facilitate role coordination and ensure continuous improvement. Tensions or conflicts that employees observed during their work would be resolved in these meetings. However, the company retained the Scrum methodology to execute projects.
Liip realized several benefits from the holacracy. The new structure empowered employees to take more responsibility. Additionally, employees who had been quiet in the old paradigm emerged as effective facilitators. Middle and lower-level employees also took on the more unpleasant tasks previously performed by the executive management, such as providing negative feedback to underperforming peers. Having retained the Scrum process, Liip remained highly flexible and adaptable, and its financial performance remained stable. However, the new structure was not without its challenges. Employees had to learn many new things about self-organization while still executing client projects. Employees also have to make tough decisions, particularly regarding firing. In an organization where the power vests with each individual rather than a top management team, employees would have to fire themselves. Deciding to fire oneself can be a hard decision to make. Moreover, employees struggled with finding a sense of belonging and identity in the new structure. Although questions about the sustainability of holacratic structure at Liip linger, Liip believes in self-organization and is determined to implement holacracy fully.
2 What is holacracy? How does it function?
Organizations, marketplaces, and business models have evolved due to rapid technological changes in recent decades. In today’s post-industrial world, organizations are faced with new challenges such as the need for greater interconnectedness, increasing complexity, economic instability, increased pressure to be ethical and sustainable, and the need for quicker responsiveness to local demand (Robertson, 2007). The top-down hierarchical model that seeks to achieve success and stability through rigorous planning and centralized control is becoming less effective in providing the agility needed in this era of rapid change (Robertson, 2007). Among the various attempts to replace the top-down management framework and maintain the balance between hierarchy and collaboration is Holacracy, a recognized management model that has now been implemented by several companies such as Zappos (online fashion retailer), Pantheon Chemical (eco-chemicals), David Allen Company (consulting), and the Swiss digital agency, Liip AG.
Holacracy is a decentralized organizational structure that distributes authority and embeds self-organization and flexibility into the processes and rules through which an organization goes about its business (Velinov et al., 2018). Developed in 2007 by Brian Robertson, holacracy replaces the traditional management hierarchy with a system based on holarchy. A holarchy is a series of nested circles or teams (Bernstein et al., 2016). Each circle, or Holon, is a whole or self-organizing entity but is also connected to the more significant part of a larger whole (Mutlu, 2017). With each circle, roles are grouped together around a specific function, such as a department, locality, business line, project team, or support function. Circles may contain sub-circles but are all contained within the “General Company Circle,” the largest super-circle (Mutlu, 2017).
74295041465500Figure 1: Holacracy’s Circle Structure
Instead of the traditional top-down management, holacracy distributes authority to self-organizing teams throughout the organization while at the same time staying aligned with the organization’s vision and mission. Hierarchically structured organizations consist of a chain of superordinate and subordinate roles. A role is a formalized behavior pattern predefined by management according to their anticipation of the position. While superordinate or managerial roles have higher authority and power to make decisions, subordinate roles are characterized by duties, and each employee is limited to one specific job (Yew, 2019). On the other hand, a holacracy defines roles based on needs and work rather than people. One person can hold several roles simultaneously based on their passion and skills. In a holacratic structure, roles are frequently defined and redefined. Whenever a new role is defined, a member of the organization is assigned to fill and execute it. The member has the control or authority to do what is needed to execute the accountabilities of that role. Thus, as opposed to the hierarchy system, holacracy differentiates individuals from the roles they fill (Yew, 2019). As Jena McGregor asserts, “holacracy aims to organize a company around the work that needs to be done rather than around the people who do it (McGregor, 2014).”
However, doing away with management and hierarchy in favor of self-management poses several important questions. For example, it may not be clearly visible who is accountable to who, who calls the shots, how makes the decisions, who is responsible for hiring and firing, who and how is performance measured and evaluated, who and what prevents employees from slacking, and who deserves and decides a bonus or salary increase. Thus, self-management calls for reinventing the organization, particularly with regard to decision-making processes, performance evaluation, compensation practices, and information flow (Robertson, 2007).
Holacracy is based on trust, responsibility and accountability, collective intelligence in decision-making, and wholeness. Trust means that employees relate to one another on the assumption of positive intent. It is the default means of engagement between co-workers (Radojevic et al., 2016). While employees have freedom and authority to make decisions, they are expected to be responsible and accountable to the organization. Emp...