UPDATE: Kevin Sheridan published a version of his critique of Holacracy on LinkedIn here. Olivier Compagne wrote a blog titled Holacracy vs Hierarchy vs Flat Orgs and Tony Hsieh addressed the biggest misconception of Holacracy at Zappos.

Employee engagement expert Kevin Sheridan, who predicted the failure of the Zappos reorganization to a Holacracy. A Holacratic system eliminates traditional hierarchical management, and Sheridan sees four reasons why such a system can’t work, based on its impact on employees:

  1. Employees desire direction or recognition for their accomplishments.
  2. Employees desire coaching and mentoring for their career development so they can become managers if they go to another company.
  3. There is a lack of employee accountability.
  4. There is a lack of inspiration for employee engagement from authentic and caring managers.

These are valid concerns that arise when the organizational development community hears about a “no manager” model. Some of these issues were expressed previously, for example, in Steve Denning’s blog post, “Making Sense Of Zappos And Holacracy,” and addressed by HolacracyOne partner Olivier Compagne’s response, “Holacracy Is Not What You Think.”

In my research, I found an interview by First Round Review (reprinted by Fast Company) with Jason Stirman, a product designer at Ev Williams’ 50-person company, Medium, which adopted Holacracy in 2013. While it’s true that Holacracy doesn’t have any explicit rules for firing or compensation, in the interview Stirman addresses how he and Medium deal with the issues of individual recognition, authenticity, and accountability. Portions of that interview are quoted below.

On individual recognition: It is untrue that in a Holacratic organization there can be no recognition for individual achievement. Business Insider reporter Richard Feloni writes that “Zappos, for example, is still figuring out how compensation will work for the company. It is currently experimenting with HolacracyOne’s Badge-based Comp App, which assigns skills, talents, and capacities to badges, which have monetary value.”

According to Stirman, “In fact, the Medium team has already discovered something missing from the [Holacracy] system: praise and feedback. ‘Managers are usually responsible for giving people feedback, directing them, telling them good jobs, and all of these things are super important to a healthy environment. You need someone to call you out or validate you when you’ve worked hard,’ Stirman says.

“Even so, the founding team at Medium decided to take a Holacratic approach to the problem. ‘We created a few roles responsible for giving people regular feedback,’ he explained. ‘This is where we’re starting to skirt the lines of having people managers, because it certainly sounds managerial, but these roles aren’t responsible for people’s work. It’s more of a mentor relationship than a managerial relationship.’

“These roles are called ‘Domain Leads’ and are filled by experienced members of various circles like design and engineering. In addition to mentoring, they’re also largely responsible for hiring and firing. They work closely with the ‘Lead Links’ who define and fill roles in their circles to assess performance. ‘Domain leads are responsible for the people, not the work,’ Stirman says. ‘It’s something we’re trying out.’

“To supplement this tactic on the positive end, the company also introduced a “High Five Machine”—a dashboard where anyone can write in and praise a co-worker, streaming throughout the office. It’s an invention borne out of Holacracy, spun out of the unique needs this kind of system creates.”

On authenticity and caring: “Frustrated with poor results [at Twitter], he [Stirman] decided to go off script. He started spending one-on-one meetings talking to his reports about their lives, instead of their tasks, and productivity shot through the roof. ‘When you sit across a table from someone, ask them ‘What’s going on in your life?’ That will always remove more hurdles than asking them ‘What’s blocking you at work?’ he said.

“He started taking his reports out to lunch, to drinks, to coffee to see what was up. How was their wife settling into her new job? Did escrow close on their new house? This is the stuff that people bring into work with them but never talk about, Stirman says. As soon as you ask, the pressure starts to dissipate.

“In his pursuit of new experiments to run, he stumbled on the book Your Brain at Work, which espouses what’s come to be known as the SCARF approach.

“SCARF stands for status, certainty, autonomy, relatedness, and fairness. ‘”Basically, when a person is honest with themselves, they’re most motivated by one of those qualities,'” Stirman explains. ‘As a manager, you can figure out which one motivates which employee, and reward them accordingly. A lot of managers will look at their team and think, ‘We should do a round of compensation increases because everyone’s been working so hard,’ but this isn’t the best incentive for everyone.’ …’It turns out that some people really care about one and don’t really care about the others,’ says Stirman. ‘Once I had my team stack rank their priorities, I knew exactly how to reach them. All the little problems and personality clashes started to fade.’

“This willingness to break ranks with corporate wisdom set the stage for Stirman’s arrival at Medium, where clear communication, incentives, and accountability are the invisible wires keeping the organization sailing along.”

On accountability: “There’s a lot to like about Holacracy when you compare it to classic management frameworks, Stirman argues. He has firsthand experience. ‘”When I think about my role at Twitter as a manager, I had tensions all the time. And my team didn’t even have that many problems,'” he says. ‘”Still, between all the teams he oversaw, my manager was constantly putting out fires. No one had the time or interest to resolve my tensions. Now, the way we use Holacracy, people are genuinely happier, they feel listened to, and connected with the organization.'”

“For companies looking to reap these benefits by injecting the spirit of Holacracy into their existing format, Stirman has a few key suggestions:

“His focus on hearing people out about their personal lives and problems at Twitter is a prime example. It closely resembles a safe space to air tensions. In fact, he wishes he would have formalized his more personal, human approach so that people would have known they could share freely instead of carrying their issues around.

“Holacracy encourages people to work out their tensions and issues one-on-one or outside of meetings if possible. Given the rampant explosion of meetings in corporate environments (so much so that there are meetings about having too many meetings), this is an increasingly important tip. Tension meetings are defined as opportunities to air issues that couldn’t be resolved elsewhere. People should only address the group with topics that actually need others to weigh in or help find a path forward.

“Establishing mutual accountability can make a highly tiered workplace feel flatter, and more engaging.”

The question is, can Tony Hsieh successfully scale Holacracy from Medium’s growing startup to his 1500-person $1 billion enterprise at Zappos?