Circle Design in Holacracy: Structuring for Autonomy

Circle design determines how your organization is structured, who does governance with whom, and where decisions are made. Good circle design enables autonomy where it’s needed and coordination where it’s necessary. Bad design creates either silos or paralyzing coordination loops.

The circle structure is Holacracy’s skeleton. If you think of roles as the organs, circles are the limbs and torso that hold everything together. In role mapping, you define what gets done. In circle design, you decide who does governance together.

Fundamental Principles of Circle Design

Principle 1: Circles Emerge Around Purpose, Not People

A circle exists because there’s a shared purpose, not because certain people want to work together. The circle’s purpose guides all governance decisions.

Right: “This circle exists to operationally support our customers.”

Wrong: “This circle exists because Sarah, Tom, and Lisa work well together.”

Principle 2: Circles Need Autonomy

A circle should be able to make most decisions that affect its work. If a circle constantly has to ask the parent circle for permission, it’s not a real circle.

Test: Can this circle make 80% of its governance decisions itself? If not, it’s too dependent.

Principle 3: Circles Need Clear Boundaries

A circle must know where its jurisdiction ends and another’s begins. Unclear boundaries lead to conflicts and duplicate work.

Test: When a tension arises, is it immediately clear which circle should process it? If not, the boundaries are unclear.

Research Insight: An empirical study with 43 qualitative interviews in Swiss holacratic organizations shows: The question of how much autonomy sub-circles should have is one of the most common governance tensions. Organizations often iteratively develop the right balance between central and decentral, with the first draft rarely being optimal. [1]

When a Sub-Circle Makes Sense

Not every group needs its own circle. A sub-circle makes sense when:

Criterion 1: Clearly Delineated Purpose

The potential sub-circle has a purpose that clearly differs from the parent circle.

Example: The Anchor Circle has many roles around customer support. These roles share a common purpose: “Make customers successful.” → A “Customer Success” circle makes sense.

Criterion 2: Own Governance Needs

The roles in the potential sub-circle regularly have governance topics that only affect them.

Test: Would a monthly governance meeting of the sub-circle have enough agenda? If yes, a separate circle makes sense. If not, the roles can stay in the parent circle.

Criterion 3: Sufficient Size

A circle needs at least 3-4 roles to function. Smaller groups produce too little dynamic for effective governance.

Exception: A two-person circle can work if the two work intensively together and have many governance topics.

Criterion 4: Coordination Need

The roles in the potential sub-circle need to coordinate frequently. Without this coordination need, a shared circle isn’t necessary.

Test: Would these roles communicate regularly even without a formal circle? If yes, formalize it with a circle.

When a Sub-Circle Doesn’t Make Sense

Too Small

Fewer than 3 people/roles. A circle with 2 people has too little perspective diversity for good governance.

No Distinct Purpose

The potential sub-circle can’t clearly distinguish its purpose from the parent circle. “We just do marketing” isn’t a sufficient purpose if the parent circle is already “Marketing and Communications.”

Purely Organizational Reasons

“We want our own meetings” isn’t a good reason. Meetings can happen without a sub-circle.

Career Reasons

“I’d look better as a circle Lead Link” is definitely not a good reason.

The Anchor Circle

The Anchor Circle is the top circle encompassing the entire organization. It has special properties:

Anchor Circle Purpose

The Anchor Circle’s purpose is the entire organization’s purpose. It’s not changed through governance but by the owners/ratifiers.

Roles in the Anchor Circle

The Anchor Circle contains:

• Lead Links of all directly subordinate circles
• Rep Links of all directly subordinate circles
• Anchor-specific roles (e.g., “Legal”, “Finance” that are relevant for everyone)
• Roles not assigned to any sub-circle

Governance in the Anchor Circle

Governance in the Anchor Circle concerns organization-wide topics:

• Structure of top-level circles
• Organization-wide policies
• Roles that operate across circles

Typical Circle Structures

Structure A: Functional

Circles are organized by function: Marketing, Sales, Operations, Product.

Anchor Circle
├── Marketing Circle
├── Sales Circle
├── Operations Circle
└── Product Circle

Advantages: Clear, familiar, functional expertise bundled

Disadvantages: Silos, customer journey fragmented, coordination between circles needed

Structure B: Customer-Oriented

Circles are organized by customer segments or products.

Anchor Circle
├── Enterprise Customers Circle
├── SMB Customers Circle
├── Self-Service Circle
└── Shared Services Circle

Advantages: End-to-end responsibility, customer focus

Disadvantages: Duplication of functions, less specialization

Structure C: Matrix

Combination of functional and customer-oriented circles.

Anchor Circle
├── Product A Circle
│   ├── (Product A specific roles)
├── Product B Circle
│   ├── (Product B specific roles)
├── Marketing Circle (for all products)
└── Operations Circle (for all products)

Advantages: Flexible, uses both organizational logics

Disadvantages: Complex, many cross-links needed

Which Structure to Choose?

The “right” structure depends on your context:

• Startup with one product: Functional is often sufficient
• Company with multiple products: Customer-oriented or matrix
• Service provider: Often by customer types or projects
• Agency: Often project-based with functional shared services

The Design Process

Step 1: Role Inventory

Start with role mapping. You need an inventory of all roles before you can design circles.

Step 2: Identify Natural Clusters

Which roles work closely together? Which share a common output or customer?

Method: Lay out all roles on a large board. Push together what belongs together. See which clusters emerge.

Step 3: Formulate Purpose for Each Cluster

Each potential circle needs a purpose. If you can’t formulate a clear purpose, it might not be a standalone circle.

Step 4: Analyze Dependencies

Which circles will be heavily dependent on each other? Where will many cross-links be needed?

Warning: Too many dependencies between circles are a sign of wrong design.

Step 5: Determine Depth

How many hierarchy levels should the circle structure have?

Recommendation: Start flat. Two levels (Anchor + sub-circles) are often enough. Add depth only when real governance autonomy is needed.

Step 6: Assign Lead Links

Each circle needs a Lead Link. The Anchor Circle’s Lead Link assigns the Lead Links of sub-circles.

Criteria for Lead Links:

• Understands the circle’s purpose
• Can set priorities
• Is respected by circle members
• Avoid automatically choosing former managers

Step 7: Elect Rep Links

Rep Links are elected by circle members. Plan an election process for each circle.

Special Topics

Super-Circles and Sub-Circles

The relationship between circle levels is central:

Super-circle has:

• Authority over the sub-circle’s purpose
• Can assign Lead Link
• Receives Rep Link from the sub-circle

Sub-circle has:

• Governance autonomy within its purpose
• Can define its own roles and policies
• Sends Rep Link to super-circle

Cross-Links

When two circles need to interact intensively but neither should be a sub-circle of the other, cross-links can help.

Example: The Marketing circle and Product circle need close alignment. A cross-link allows a role from one circle to participate in the other’s governance.

Domains Between Circles

When multiple circles need to access a shared resource, there are several options:

Option A: Domain in Anchor Circle with policy for access Option B: Shared role in multiple circles Option C: Dedicated “Shared Services” circle

Research Insights on Structural Design

Designing Flatter Structures Effectively

Research on organizational design shows: Fewer hierarchy levels can foster innovation, but the risk of dysfunctional structures is high [2]:

Key Design Questions:

• How are decision rights distributed?
• What coordination mechanisms replace hierarchical direction?
• How are conflicts resolved without escalation to superiors?

Critical Finding: “Systematically thinking through a series of classic organization design questions to shape a custom-tailored design is more promising than adopting any one fashionable management approach wholesale.” For circle design, this means: Don’t simply copy other Holacracy implementations – design for your context.

Scaling Without Hierarchy Growth

A theoretical analysis in the Strategic Management Journal examines how organizations can grow without proportionally adding hierarchy [3]:

Three Levers Against Hierarchy Growth:

1. Expanded leadership capacity: Investment in technology and culture that enables leaders to coordinate more areas
2. Self-managing teams: Teams that produce few conflicts requiring managerial resolution
3. Self-contained teams: Teams that generate few conflicts between themselves requiring escalation

Implication for Circle Design: The third lever (self-contained teams) is most effective for growing organizations. Design circles so they produce as few cross-circle conflicts as possible – clear boundaries are more important than internal optimization.

Evolutionary Structural Design

Holacracy research emphasizes the evolutionary nature of organizational design [4]:

Core Principles:

• Organic organization: Structure evolves through continuous adaptation, not major redesigns
• Tension-driven evolution: Structural changes are triggered by experienced tensions
• Integrated decision-making: Structural decisions use the same governance process as role changes

Practical Consequence: The initial circle design doesn’t need to be perfect – it needs to be good enough to start. The governance processes will improve it.

Common Design Mistakes

Mistake 1: Copying Old Departments 1:1

Symptom: The “Marketing” circle corresponds exactly to the old Marketing department

Problem: Old silos are perpetuated

Solution: Think fresh. What structure would make the most sense today?

Mistake 2: Too Deep Hierarchy

Symptom: 4+ levels of sub-circles

Problem: Information must flow through many levels, Rep Links are overwhelmed

Solution: Structure flatter. Critically question sub-sub-circles.

Mistake 3: Too Many Circles

Symptom: Every team is its own circle, even if it only has 2 people

Problem: Overhead, many Lead/Rep Links, complex coordination

Solution: Consolidate. Not every group needs circle autonomy.

Mistake 4: Too Few Circles

Symptom: Everything happens in the Anchor Circle

Problem: Overcrowded governance meetings, too little autonomy for teams

Solution: Decentralize. Create circles where independent governance makes sense.

Mistake 5: Unclear Boundaries

Symptom: Constant discussions about which circle a topic belongs to

Problem: Conflicts, inefficiency, frustration

Solution: Clear domain definitions. When in doubt, clarify explicitly in the super-circle.

Evolution of Circle Design

The initial design is rarely perfect. Plan for evolution:

Use Governance

Circle structure can be changed through governance:

• Found new sub-circles
• Merge existing circles
• Dissolve circles
• Change Lead Links

Regular Review

Every 6-12 months: Is the current structure working? Where is there friction?

Review Questions:

• Which circles have barely any governance agenda?
• Which circles constantly have governance backlog?
• Where do domain conflicts frequently occur?
• Which cross-links are used very intensively?

Indicators of Structural Problems

Time for re-design when:

• A circle has had no governance changes in 6 months
• Governance meetings regularly last over 2 hours
• More than 30% of agenda items concern cross-circle topics
• Rep Links complain about overload

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Research Methodology

This article synthesizes insights from a research database of 655+ academic papers on Holacracy and self-organization (2012-2025). Studies were selected based on:

• Methodological rigor: Empirical studies with clear methodology preferred
• Structure focus: Studies on organizational design and circle structures prioritized
• Practical relevance: Case studies and application-oriented research included

Database queries:

./scripts/research/paper-search.sh "holacracy circle structure design" --contextual
./scripts/research/paper-search.sh "self-organization organizational design" --contextual

Limitations: Specific research on circle design methods is limited. Our recommendations rely heavily on practical experience and general organizational design research.

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Disclosure

SI Labs has practiced Holacracy since 2015 and consults on circle structuring. This experience informs our perspective but may also lead to bias.

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Sources

[1] Pfister, A., Schwarz, P., & Wüthrich, C. (2021). “Change the way of working. Ways into self-organization with the use of Holacracy: An empirical investigation.” European Management Review, 18(4), 455-472. DOI: 10.1111/emre.12457 [Empirical Study | Sample: 43 interviews | Citations: 43 | Quality: 76/100]

[2] Reitzig, M. G., & Maciejovsky, B. (2022). “How to get better at flatter designs: considerations for shaping and leading organizations with less hierarchy.” Journal of Organization Design, 11, 5-14. DOI: 10.1007/s41469-022-00109-7 [Conceptual Paper | Sample: Theory synthesis | Citations: 24 | Quality: 48/100]

[3] Reitzig, M., & Wagner, S. (2023). “Scaling nonhierarchically: A theory of conflict-free organizational growth with limited hierarchical growth.” Strategic Management Journal, 44(5), 1298-1319. DOI: 10.1002/smj.3541 [Theoretical Model | Sample: Formal theory | Citations: 6 | Quality: 40/100]

[4] Chen, L. (2018). “On the Essential Characteristics of the Innovation Oriented Management Mode: Holacracy.” DEStech Transactions on Social Science, Education and Human Science. DOI: 10.12783/dtssehs/seme2017/18028 [Concept Paper | Sample: Literature review | Citations: 5 | Quality: 50/100]