Home Hospitality Holacracy or wholly crazy? Is a flattened hierarchy suitable to hospitality?

Holacracy or wholly crazy? Is a flattened hierarchy suitable to hospitality?


One concept in the hospitality sector, known for its traditionally very vertical hierarchical structure, is sparking discussion about the future of specific hospitality industry organizations. It’s called “holacracy,” a flattened organizational structure that seeks to distribute authority and empower employees at all levels. But is this innovative approach compatible with the hospitality industry’s complex, highly hierarchical dynamics? In this article, we examine the question: Is a flattened organizational structure suitable for organizations in the hospitality industry?

Challenges in hospitality:

Adaptability is key to staying competitive

Competition is intensifying in today’s fast-paced business landscape, it’s a mantra we hear often. Yet, the pace at which new technologies are emerging, consumer preferences shifting and market dynamics evolving is stunning. To stay ahead of the game, businesses must recognize the urgency of adapting to this accelerated pace of change. The ability to make faster decisions and demonstrate greater agility has become paramount. Hospitality firms no longer have the luxury of long deliberations and slow response times. Instead, they must embrace a mindset of adaptability and decisiveness, constantly scanning the horizon and swiftly adjusting their strategies to stay competitive.

There is increasing recognition that traditional organizational forms may be ill-equipped for this environment. This short opinion piece looks at a provocative new form of organization: Holacracy. We try to evaluate what promise it holds for hospitality and where the main barriers to its implementation may lie.

What is Holacracy?

5 key principles to understand this organizational system

Holacracy refers to an organizational system that aims to empower employees and distribute authority more evenly across the company. It represents a sharp departure from traditional top-down management approaches and offers a more flexible and self-governing structure. The key principles of holacracy can be summarized as follows.

1. Defining roles instead of focusing on traditional titles

In a holacratic organization, the focus is on defining roles rather than relying on traditional job titles. Roles are like hats people wear, representing specific areas of responsibility and authority. This helps create clarity about who does what and avoids the pitfalls associated with rigid job descriptions. Employees may fill several roles, and once in charge of a role, they are granted the leeway to make decisions and perform tasks autonomously.

— Source: Audrin et al. (2023). When the hierarchy folds: how employees may react. Journal of Business Strategy

2. From top-down management to a flattened hierarchy

Holacracy removes top-down hierarchies and decentralizes management and authority, replacing manager-subordinate relationships with fluid autonomous (self-organizing) teams to accomplish tasks and achieve company goals. Within holacracy’s self-management structure, there are nested ‘circles’ within which are ‘roles’ (see Figure). Circles operate as autonomous, fluid teams, where roles are defined around the work to be done rather than the person doing it. Employees might fill several roles that may fall into different circles, analogous to a cross-departmental position. Employees negotiate among themselves to ensure that roles are allocated to the most suitable person. Similarly, an employee can reject or exchange roles, offering specific tasks or the whole role to someone better suited to the job, in agreement with the members of the circle.

3. Frequent but focused meetings

Holacracy encourages constant evolution and improvement. The organization is seen as an adaptable system that can continuously learn and grow. Meetings are focal points in Holacracy’s governance, fostering transparency and agility. They take two forms: governance meetings and tactical meetings. Monthly ‘governance’ meetings focus on organizational structure, i.e., the creation, assignment, and redefinition of roles; on the other hand, weekly/bi-weekly ‘tactical’ meetings focus on goals and planning tasks to achieve them (including resource allocation). Both these meetings provide opportunities for teams to align their work, address tensions, and propose changes to roles and processes. They follow a strict set of rules and procedures to structure discussions and foster collaborative governance.

4. Transparency and accountability are key

Holacracy emphasizes transparency in roles, responsibilities, and decision-making processes. This fosters a culture of trust and accountability, as individuals are expected to fulfill their roles and be transparent about their work. In every company with holacracy, an extensive written document, known as a ‘constitution’, outlines how the company is to operate and defines every employee’s field of action. Constitutional rules are the same for everyone, regardless of position. To fulfill their roles, employees have free rein to take action/make decisions unless the constitution disallows it.

5. A holistic view of the organization

Holacracy promotes a holistic view of the organization, where each part contributes to the whole. Instead of focusing solely on individual departments or functions, holacratic organizations encourage collaboration and cross-functional cooperation. This helps break down silos and enables the organization to work as a unified system.

What could be the benefits of halocracy for hospitality?

The fundamental organizing principles of a holacracy point to a number of potential benefits for hospitality firms, which are summarized below.

Agility and adaptability could enable hotels to adapt more quickly and efficiently to guest needs, industry trends, and market conditions.

With its focus on roles and accountabilities rather than hierarchical positions, holacracy encourages employees to take ownership of what they are doing, which could empower frontline workers to deliver excellent guest experiences. Guest satisfaction becomes the remit of every employee, resulting in personalized and responsive service. This may ultimately lead to greater guest-centricity.

In a hotel, the fact that decision-making authority is distributed throughout the organization means that employees at all levels can contribute to decisions, share their expertise and take responsibility for their actions. This empowerment fosters a sense of ownership and encourages creativity and innovation at all levels of the organization. From a human resources viewpoint, it should result in greater employee engagement and improved employee retention rates.

Last but not least, hospitality organizations often have various departments and teams working together to provide a seamless guest experience. Holacracy encourages fluidity and flexibility in roles, enabling employees to collaborate across departments more effectively. This cross-functional collaboration fosters a holistic approach to problem-solving, facilitates knowledge sharing, and enhances teamwork and coordination

The potential barriers to implementation of the governance structure

While holacracy can offer benefits to businesses in the hospitality industry, its introduction may also pose several challenges and potential problems, including:

  • The hospitality industry has traditionally operated under a hierarchical mindset, where clear lines of authority and decision-making exist. Introducing holacracy may disrupt this established mindset and require a significant shift in organizational culture. This is especially the case in restaurants where the ‘brigade’, which is akin to a military formation, is omnipresent. Employees and managers accustomed to hierarchy may struggle to adapt to the decentralized decision-making and self-management principles of holacracy. This may lead to substantial resistance to change.
  • Holacracy replaces traditional hierarchical leadership with distributed leadership. While this can foster empowerment and engagement, it may also lead to ambiguity and confusion. Without clear leaders, employees may struggle to identify who is accountable for certain decisions or to whom they should turn for guidance. This can slow down decision-making processes and hinder overall organizational effectiveness. Lack of clear leadership and role ambiguity for employees may be the consequence. This problem may be exacerbated in situations where centralized decision-making may be necessary for quick responses, crisis management, or addressing urgent issues (e.g., Covid-19). Holacracy’s decentralized approach may not be suitable for every decision, especially those requiring immediate action or coordination across multiple departments. The absence of a centralized authority figure could lead to delays or inefficiencies in addressing critical, urgent matters.
  • In the hospitality industry, maintaining consistent and high-quality guest experiences is crucial. With holacracy’s emphasis on individual autonomy, decision-making, and decentralized authority, ensuring a consistent level of service and guest satisfaction may become more challenging. Without clear guidelines or centralized control, there may be variations in how employees interpret and implement guest service standards. As a result, the consistency of the guest experience may suffer.
  • Last but not least, implementing holacracy requires training and support for employees to understand the new structure and processes. The hospitality industry often has high turnover rates, especially for entry-level positions. Constantly training new employees on the intricacies of holacracy may be time-consuming and costly, potentially impacting operational efficiency and service quality.

Flattened management hierarchies in hospitality:

What are the key takeaways?

As is often the case, introducing a new managerial approach can be a double-edged sword. On the one hand, holacracy offers a unique organizational structure that aligns with the industry’s demands for flexibility, guest-centricity and adaptability. It empowers employees, encourages collaboration and fosters a culture of continuous improvement, which should ultimately enhance the overall guest experience and organizational performance. On the other hand, implementing it may be met with stiff resistance, lead to inefficiencies and, ultimately, be costly and detrimental to service quality.

An intermediate option may be to avoid the introduction of a full-blown holacracy while trying to draw on some of its basic principles. With the generational challenges in the workforce, hospitality managers need to be able to foster a more agile and empowered work environment. Employees need to be given the autonomy to make decisions but roles may still need to be clearly defined. By introducing a culture of trust, transparency and collaboration, managers may, in the end, cultivate an environment where employees can thrive and perform to the best of their abilities.

EHL Hospitality Business School
Communications Department
+41 21 785 1354
EHL

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