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

HolacracyOne's Spending Authorization - Base Process v1.0

Policy: Spending Authorization - Base Process

As a Partner, you may spend money or other fungible resources controlled by a Circle as follows:

Before you commit to the expense, you must explicitly announce your intent to spend by stating "As [Role], I intend to spend [amount] on [good/service/purpose]". You must post this in written form to a standard communication channel accessible by all Circle Members of the Circle and any Sub-Circles. You must then allow a reasonable timeframe for others to consider the potential expense before proceeding. During that time, you must answer any clarifying questions and consider any reactions shared about the potential expense, and any Partner may block your ability to proceed with the spending by escalating the expense for additional consideration. Once escalated, you may get spending authorization directly from the Circle's Lead Link, or via any process defined by the Circle for assessing escalated spending intents.

To use this process, the spending must clearly support the Purpose or Accountabilities of a Role you fill in the Circle, or in any of its Sub-Circles. You must also make the spending decision without interference from a personal conflict of interest or a blurred boundary between the Role you name and other Roles you fill. If another Partner might have reasonable doubt about whether such a conflict is present, then you must call out that possibility when announcing your intent to spend, and explain why you believe it's not the case.

In addition to authorizing specific expenses, you may also use this process to authorize another Circle or Role to control some of this Circle's resources, thus granting it a budget. It may then control that budget without further authorization from the original Circle, as long as any spending is aligned with the purpose specified in the original authorization. Any budget so delegated may later be reduced or eliminated entirely using this process in the original Circle, or by a decision of that Circle's Lead Link.

Another Policy in this Circle may further constrain or expand upon the process defined herein, and any conflicts will overrule this Policy. A Sub-Circle may also constrain or expand upon this process, however any additional spending powers or relaxed constraints only apply for spending resources controlled by that Sub-Circle and its own Sub-Circles.

[see policy here: https://app.glassfrog.com/policies/1499644]

4 Replies
Laura Frew
12/07/2016

In my humble opinion, this is one of the best-developed Apps we use at HolacracyOne. Some hate it, some love it. Both for legitimate reasons.

From the perspective of someone spending money: There's nothing like pitching the money I spend to the entire company to make me think carefully about what I buy. 

Under-informed or less thought-out spending decisions have a chance to be caught by my colleagues.  

It also taps into the wealth of organizational learning accumulated over time, as well as the individual expertise of any colleague. 

From an Org perspective: I see that better decisions are made. They aren't necessarily slowed down by the open discussion. Beginning with "I intend to spend..." means spending (under a certain sum according to the Extra Rules) will go through barring any escalation. The spender is not seeking consensus, or even necessarily feedback. Just giving others a chance to review the intention, ask questions and (if over a certain sum according to the Extra Rules) attest to whether or not they'd do the same.

Nor is it necessarily as exhausting as it may sound. A partner can process or not process spending intentions. For example, I'll carefully read, react to and consider spending intentions concerning the Training Circle, where I hold many roles, but will rarely spend time with intentions coming from the GlassFrog circle, where I hold no roles.  

In terms of shifting power structure, I see that having nearly total transparency around how company money is spent can go a long way in leveling the playing field. The fact that anyone in the company can escalate any spending decision can be a powerful equalizing force. I also see that it mitigates potential grumblings, resentment or confusion that can otherwise accompany spending decisions. (Why did he get that, but I didn't? Why is she spending so much money on that stupid thing?!) Answers to those questions actually exist are are accessible. So grumbling and resentment (either my own about my colleagues' decisions, or my colleagues' about mine) have little ground to stand on. 

Also - it is hard. It can be stressful to pitch every spending decision I make to the entire company. What if people think I'm stupid? In areas where I have little experience, I may worry it will appear I don't know what I'm doing. But if I don't know, chances are, a colleague will. My ego may take a hit, but organizationally, a better decision is made.  There are other worries: What if it doesn't pass? What if I run out of time? What if someone actively disagrees with me? We have slowly built out processes for these. 

My advice to anyone trying this system is to view it as a game -players throw intentions into the pot and together try to make the best decision possible. If a good, cost-effective decision is made, everybody wins. 

Have fun. 

Brian Robertson
12/07/2016

Here's an example of how we've extended the base policy of this app with our own custom limits and additional rules:  https://app.glassfrog.com/policies/8230766

Edward Ter Horst
12/08/2016

What the tension that lead to this?

Tyler Danke
12/08/2016

Purely Poultry actually adopted this policy a while back and is just now getting almost fully functional under this policy.

[@mention:529074100576659281] to answer your question What tension lead to this? We were trying to predict and control our spending in October of the prior year for all of following year. But our sales and spending did not match what we had budgeted. To only allow Lead Link to make all spending authorizations is not allowing all roles to energize their roles autonomously. When a role filler senses that they would like to spend money who do they go to? How do they process that and how do other roles get clarification and reactions to allow them to amend and clarify and object? 

This App is well done. The only suggestion that I might make is that the base process in itself is not a complete app. The Base process policy, the Escalated Process policy, Spending guardian role, and the Anchor circle Spending Authorization Policy  would be an almost complete app. The Extra Rules policy seems to be very extremely important and unique to each organization that the app should include an Extra Rules Policy that has some suggestions for what that policy could include but not actually the content. 

We also added an accountability to Accountant role of "Verifying expenses have been authorized. Reporting unauthorized spending." and to Accounts payable of "Keeping a record of authorized spending." We very likely will move the Accounts Payable accountability to Accountant given current tension sensed. 

Purely Poultry's Spending Authorization Extra Rules are here https://app.glassfrog.com/policies/8595259

The way our organization is structured it seemed to not make sense for our "People and Partnership" circle to have to get spending authorization to add partners or service the benefits that they are contractually obligated to receive. 

We determined Spending Authorization is needed for expenses. Spending Authorization is not needed for income and contra income accounts, cost of goods sold and contra cost of goods sold accounts, commissions, merchant account fees, or interest. Spending Authorization is not needed from Team Happiness for managing employment and independent contractor relationships.

On your escalated spending policy it mentions Slack specifically for the purposes of the App it would be best to state "communication channel". In our escalated spending authorization app, we specifically state Asana. 

Extra Rules Notes: This is where you would specify what your "communication channel, what roles or must be following (all partners?)

I think that this policy and app is much more palatable if you include in Extra rules something like the following:

A) Any partner can spend up to $30.00 per month without receiving PRIOR spending authorization. You still need to submit a spending authorization form, but no waiting period needed.

B) Up to $100.00, requires a waiting period of 1 business day after all clarifying questions are answered.
C) Up to $1,000.00 requires a waiting period of 5 business days after all clarifying questions are answered.
D) Over $1,000.00 requires a waiting period of 5 business days AND the approval of Spending Guardian.

 

Some expenses (premium glassfrog for example) are on a per user (or partner) basis and it does not make sense for a role to need to do a new spending authorization each time we add or remove partners. Yes this could be handled as part of the budget method but it isn't exactly what we were looking for.