Holacracy Community of Practice Archive, 2015-2019 Community Holacracy Web Site

Holacracy and profit?

In a "normal" company the goal is profit for the shareholders. In other words the managers are tasked with directing the work so that positive economic results (profits) would be produced and passed on to shareholders (investors, founders etc.). This may seem at odds with Holacracy with its emphasis on purpose (which by necessity must be more than just profit) and openness (so probably accounting etc. would be open to everyone etc?). I would like to hear from shareholders/founders/ex-CEO-s who do run their for-profit businesses on Holacracy. I would like to ask some questions about how you approached this topic when adopting Holacracy. 

14 Replies
Brian Robertson
01/08/2019

I don't see these as conflicting; in fact, the most effective way I know of to generate the best possible financial results for investors is to run a purpose-driven company, and put serving that purpose above maximizing short-term profits.  There's a bunch of research out there that confirms this now as well.  John Mackey's book Conscious Capitalism has a lot to say on this topic, and I really like how he puts it; you might find that worth a read.

- Brian

Bernard Marie Chiquet
01/08/2019

+1 on Brian's comment. In addition, new laws called Pacte make no longer short profit for the shareholders the main goal, and the Civil Code is evolving at least in France towards companies driven by a mission, called "Raison d'Être". 

Andy Brandt
01/08/2019

Hey [@mention:449693036223847456] So good to see your reply here. Been a while since the workshop in Dec 2014. 

 I know what you wrote is true, profits are better if there is a purpsoe and Holacracy is not incompatible with generating profit in principle, but this is not exactly what I am looking for. I am looking to hear from practitioners how they deal with questions regarding this from their shareholders/founders or implementation details (eg. how to process and work towards a set of business KPIs set for execution by the board based on their financial roadmap, budgets assigned by them etc.). 

[@mention:449833773917801859] - we are not in France, so this doesn't apply to us. 

Pam H
01/08/2019

One of the things I like about Teal organizations including Holacratic ones is that they can focus on the good of all their stakeholders (including monetary gain for the benefit of all stakeholders). So instead of just investors/shareholders, this includes employees, partners, volunteers, clients, suppliers, communities, and sometimes even their competition. Some Teal organizations have gotten SO financially abundant that they felt like they could train their competitors to be more Teal and it would only make more of all the abundance, instead of put their organization in any sort of compromised position. They taught their competition  how to follow the same principles as their own Teal practices and that felt like they were just getting even more of their own organization's purpose accomplished in the world. That is abundance! An example is Buurtzorg, a Teal nursing organization, (pg 114-115 of Laloux's illustrated 2016 version of Reinventing Organizations) whose CEO trained 2 of their competitors about their Teal practices for free. I think we should all aspire to be that financially abundant that we can help all our stakeholders. If we can reach ultra abundance, we could even choose to help our competitors help promote our Teal/Holacratic Purpose in the world. I believe part of that recipe for the future will be moving toward being more like worker-owned cooperatives, except using Holacracy instead of Democracy, in LLC legal structures. Worker-owner-partners want their whole organization to thrive more and benefit more, including monetarily, including investment back into the organization and its people.

Max
01/09/2019

Hello, [@mention:590725801077679128]!
I'm afraid that it is really difficult to explain Teal/Holacracy benefits to people who hadn't mature. On the Orange level (where main measure is money) need to speak on the same language, need to come down from the "Teal Sky". And maybe there will no proof that Holacratic approach improve KPIs, increase profits or make NPS better. If you or your shareholders want to adopt Holacracy just for profit and use this metric to track success, may be your time is not came yet. Possible you need another tools and practicies to pump up you level.

Maybe I wrong, but I realy facing similar issue and this my conclusions at the moment (I'm working at commercial bank with headcount above 15 000 employees).

Tyler Danke
01/09/2019

I am working on incorporating the book Profit First into my business. It doesn’t put Profit above purpose, instead it kinda forces the business to generate profit out of sales. I have not developed it into our governance yet but I am working on it.

lets say you have a role that decides the percentage of sales or gross mArgin that goes to owners compensation, operating expenses, “profit” and saving up for taxes. And other roles operating expenses need to stay inside that allocation. 

Ivan Matosyan
01/10/2019

[@mention:590725801077679128] For-profit Holacracy company is not different in that matter. Profit is an expresion of a successful serving to the customers outside of the company in the enviroment/market in which company operates. Profit is a must-have.

As shareholders are stakeholders, as such its a role which has its own expectations on a company, that said it could be and usualy is return on investment. I find it totaly ok to make that expectation explicit to the general company circle, so that it can align to it as to other expectations e.g. social responsibility.

If you have any more specific question, would be glad to discuss it further.

P.S.: I am a shareholder and a "regular" partner of our org. filling lots of roles. If org. will not fulfill my expectations on ROI, I might consider withdrawing my capital out of it, but still staying as a regular partner. I fill about it as an old way of thinking, and would like to transition some time to model of all partner = shareholders = profit is what you get for your work, I think H1 has model like this and Encode.

Andy Brandt
01/10/2019

[@mention:576648489231374882], thank you for your ideology-free reply. Your perspective is what I was looking for. 

Specific questions:
- did it require any amendments to the Constituiton?
- did it cause any specific policies/domains etc. in the GCC?

(Of course as far as you are willing to share those, if you prefer to do directly please PM me).

[@mention:456167666726491228], thanks for sharing - the book you mention is this one? It would be great to learn how that was incorporated into your governance.

Ivan Matosyan
01/11/2019

Hello [@mention:590725801077679128],

1. We did not do any constitution amendments yet.
2. We dont have any specific policies/domains yet to address it.

Now we use the basic construct of Holacracy. Domain "All Company property & ordinary business affairs" and Lead Link's accountability "Allocating the Circle’s resources across its various Projects and/or Roles".

We, as a Board transfer our expectation about finances on LL of GCC with his appointment to that role or role-fits further in the future. I can imagine in the future to make a policy to above mentioned domain about finances in a Board circle, which GCC will have to follow. E.g. Operational expenses can be maximum of 80 % of a gross profit margin.

What to you think? What are your ideas about it?

Andy Brandt
01/11/2019

I was thinking about introducing two amendments (to 4.1):

- making it explicit that Ratifiers can select/change the Anchor Circle LL,

- creating special policies that I would call Core Policies for lack of a better name that come from the Ratifiers and can be changed by them. Something like this:

Amendment 2: Core Policies
The Core Policies are Policies that apply to the whole Organization. The Ratifiers can at any time add, amend or remove Core Policies. No Circle or Role can change, repeal or act against those Core Policies.
Upon change to Core Policies all Policies in the Organization must be changed to align with the new Core Policies. This is done through the normal governance proces of the Anchor Circle and its sub-circles. The Lead Link of each Circle has a duty to bring the discrepancy between Circle's Policies and the Core Policies as a Tension to be resolved in the next Governance Meeting.
The Core Policies are kept in the governance records of the Anchor Circle and if doubts arise as to their meaning are interpreted by the Anchor Circle's Secretary.

[those are just ideas at this stage]

Tyler Danke
01/12/2019

The second amendment would seem to me to be very difficult to maintain. If at all possible I would avoid constitutional amendments.

Tyler Danke
01/12/2019

Yes the book I was referencing is https://profitfirstbook.com/ 

Ivan Matosyan
01/13/2019

[@mention:590725801077679128]

1. I would choose to have board as an anchor circle. Or do not do anything, since there are usualy local goverment laws, that can solve this, e.g. shareholdelrs appoint managing director.

2. I think that there is no need to amend. Policies as defined in the constitution §1.4 made in an anchor circle apply to a whole organization, so they are core policies in a sense.
And "core policy" of all is actualy the constitution or some other documents needed to officialy estabilish company e.g. https://www.holacracy.org/wp-c...ent-v16-redacted.pdf

(https://medium.com/@chrcowan/a-holacracy-bootstrap-guide-9558d5896c34 second section; https://blog.holacracy.org/a-h...ructure-cc4dddad3c1c )

so IMO, ratifiers has enough options to cast their influence on their organization.

Andy Brandt
01/13/2019

Thanks for your input.

Well, I don't think the Ratifiers have enough ongoing influence. They need a tool from outside of the Anchor Circle to set policies just like normally shareholders/board give direction to a company by giving goals to the CEO and other executives. And I think they need a tool that does not require them to get familiar with Holacracy or any other details on how the organization is run (after all, as a shareholder/investor you principally do not care - within reason - how the company you invested in is run in details as long as it meets your expectations in terms of dividend, share price increase or both, sometimes expressed in a financial roadmap with general product/service targets).