Forming Circles in Holacracy: From Need to Functioning Structure

A new circle doesn’t appear from nothing. It’s formed because a work area needs its own autonomy that it doesn’t have within the existing structure. Forming a circle is a significant structural step – and one that should be well thought through.

At SI Labs, we’ve formed circles that worked immediately, and others we dissolved after just a few months. This article summarizes what we learned along the way.

When Do You Need a New Circle?

Not every work area needs its own circle. A circle is overhead – it has structural roles, needs meetings, creates coordination effort. The question is: When is this effort worthwhile?

Clear Indicators for a New Circle

1. A Work Area Needs Its Own Governance

When an area needs its own roles, policies, and structures that it should be able to shape itself.

Example: The “Product” team is developing. It needs its own roles for UX, Frontend, Backend. Putting these roles in the large circle would be confusing.

2. Complexity Exceeds a Single Role

A role has grown too large. It needs not just more accountabilities, but an internal structure.

Example: The “Marketing” role has 15 accountabilities and is shared by 4 people. This isn’t a role problem anymore, it’s a circle.

3. Autonomy Makes Sense

The work area should be able to decide itself how it organizes, without burdening the parent circle with this.

Example: “Operations” should decide itself how it designs internal processes. The Anchor Circle doesn’t need to know.

When a New Circle Is NOT Needed

Just Because an Area Is Growing

Growth alone isn’t a reason. The question is whether own governance is necessary.

For a Single Project

Projects are time-limited. A circle is permanent structure. There are other mechanisms for projects.

For Political Reasons

“So everyone has their own area” isn’t a good reason. Circles emerge from work needs, not personnel needs.

Research Insight: Organizations tend to formalize structure too early. Piloting as an informal unit before formal circle formation can reduce the risk of wrong decisions. [1]

The Proposal Template for Circle Formation

A new circle is formed through a proposal in the governance of the super-circle.

What the Proposal Must Contain

1. Name of the New Circle

Descriptive, not fancy. “Product Development” rather than “Innovation Lab.”

2. Purpose of the New Circle

The central reason for existence. Why does this circle exist? What is its function in the system?

3. Initial Domains (optional)

Over which areas does the circle have exclusive control?

4. Initial Accountabilities

What does the circle owe the super-circle? What can the super-circle expect from it?

Example Proposal

“I propose to form a sub-circle ‘Customer Success’ with the following purpose: ‘Ensuring that customers achieve their goals with our products.’

The circle has the following accountabilities:

• Supporting customers during onboarding
• Collecting and evaluating customer feedback
• Proactively preventing customer churn

The circle receives the domain ‘Customer communication after contract signing.’”

Defining the Circle Purpose

The purpose is the most important thing. It determines everything else.

What a Good Purpose Is

Describes the function, not the activity

Not: “We do marketing.” But: “Building brand awareness and generating qualified leads.”

Is delimiting

Makes clear what the circle does – and what it doesn’t.

Is inspiring yet concrete

Neither too vague (“Making things better”) nor too narrow (“Writing blog posts”).

Purpose Template

“[Verb + Object], so that [desired result]”

Examples:

• “Ensuring product quality, so that customers can trust”
• “Attracting and developing talent, so that the organization can grow”
• “Providing technical infrastructure, so that other circles can work”

Anti-Patterns in Purpose Definition

Too broad: “All external relationships” – that could be anything.

Too narrow: “Publishing LinkedIn posts” – that’s an accountability, not a purpose.

Person-related: “Peter’s work” – circles don’t belong to people.

Establishing Initial Roles

A new circle needs roles to function.

The Structural Roles

These exist automatically:

• Lead Link: Assigned by the super-circle (often the person who proposed the circle)
• Rep Link: Elected by the circle (after the first meeting)
• Facilitator: Elected by the circle
• Secretary: Elected by the circle

The Initial Functional Roles

This is where decisions must be made: What roles does the circle need to fulfill its purpose?

Start minimal: Better fewer roles and add as needed. Too many initial roles create complexity.

Derive from the work: What work needs to be done? This work becomes roles.

Don’t derive from people: “We have three people, so three roles” is wrong. Roles come from work.

Example: Initial Roles for “Customer Success”

• Role: Onboarding (Introducing new customers)
• Role: Support (Answering customer inquiries)
• Role: Success Management (Proactively maintaining customer relationships)

These three roles cover the purpose. More isn’t needed initially.

Setting Up Links

The new circle needs connections to the rest of the organization.

Lead Link

The super-circle (through its Lead Link) assigns the Lead Link of the new circle. This person:

• Represents the super-circle’s purpose in the new circle
• Assigns the initial roles
• Ideally leads the first governance meeting

Rep Link

The Rep Link is elected in the first or second meeting. The first meeting can still happen without a Rep Link, since there’s nothing to carry upward yet.

Cross Links

Only set up when a real coordination need exists. Not prophylactically.

The First Governance Meeting

The birth of the circle. The process follows the normal governance meeting format.

Agenda for the First Meeting

1. Check-in: How does this moment feel?
2. Orientation: What is our purpose? What roles do we have?
3. Facilitator Election: Who moderates governance?
4. Secretary Election: Who keeps the records?
5. First Tensions: What else do we need?
6. Check-out: What do we take away?

What Should Happen in the First Meeting

• Everyone understands the circle’s purpose
• The structural roles are filled
• First clarities about the work emerge

What Does NOT Need to Happen in the First Meeting

• Having all roles perfectly defined
• Having all policies established
• Having everything clarified

The circle will develop. The first meeting is a beginning, not a conclusion.

Common Mistakes in Circle Formation

From our experience:

Mistake 1: Forming Too Early

Symptom: The circle exists, but there isn’t enough work or complexity.

Consequence: Governance meetings have no agenda. The circle feels superfluous.

Prevention: First test informally as a working group. When real governance needs arise, formalize.

Mistake 2: Too Many Initial Roles

Symptom: The circle starts with 10 roles, half of which remain empty.

Consequence: Confusion about who’s responsible for what. Overhead without benefit.

Prevention: Start with 3-5 roles. Expand as needed.

Mistake 3: Purpose Too Vague

Symptom: The purpose is “Making things better” or “Ensuring quality.”

Consequence: Nobody knows what the circle really does. Conflicts with other circles.

Prevention: Formulate purpose concretely and delimitingly. Sharpen when in doubt.

Mistake 4: Lead Link Not Committed

Symptom: The Lead Link sees the role as a side job.

Consequence: Roles aren’t assigned. Priorities not clarified. The circle drifts.

Prevention: Lead Link must understand this is a serious responsibility.

Mistake 5: Circle as Copy of Old Department

Symptom: The old department is converted 1:1 into a circle, with all old structures.

Consequence: The benefits of Holacracy aren’t realized. Old patterns continue.

Prevention: Think fresh. What does the circle really need? Not what did the department have?

Research Insight: The most successful Holacracy implementations start small. Pilot circles that develop their own structures are more sustainable than large, top-down designed circle landscapes. [2]

Circle Formation at SI Labs

Forming circles is an important part of our Holacracy practice. Our experiences:

What We’ve Learned

Start small. We’d rather form circles late than early. When the tension is big enough, the need becomes obvious.

Purpose is negotiable. The initial purpose is a first attempt. It will change as we understand more.

The first person shapes the circle. Who starts as Lead Link influences the circle’s culture. This should be considered.

Typical Challenges

• The transition from informal group to formal circle is sometimes bumpy
• People identify circles with persons rather than work
• The balance between enough structure and too much structure isn’t always clear

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Research Methodology

This article is based on the Holacracy Constitution, research on organizational design, and over ten years of experience with circle formations at SI Labs.

Source selection:

• Holacracy Constitution and official materials
• Studies on organizational structure and design
• Practitioner experiences from the Holacracy network

Limitations: Our experience comes from a medium-sized consultancy. In larger organizations, the formation process may look different.

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Disclosure

SI Labs GmbH has practiced Holacracy for over ten years. We have formed numerous circles and dissolved them again.

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Sources

[1] Velinov, Emil, et al. “Implementation of Flexible Organizational Structures.” Proceedings of the European Conference on Management, Leadership & Governance (2021): 348-355. [Conference Paper | Case Studies | Citations: 1 | Quality: 45/100]

[2] Robertson, Brian J. “Holacracy.” In The Management Shift, edited by Vlatka Hlupic, 145-168. Chichester: Wiley, 2012. DOI: 10.1002/9781119197683.ch9 [Book Chapter | N/A | Citations: N/A | Quality: 60/100]

[3] Bernstein, Ethan, et al. “Beyond the Holacracy Hype: The Overwrought Claims and Actual Promise of the Next Generation of Self-Managed Teams.” Harvard Business Review 94, no. 7/8 (2016): 38-49. [HBR Practice Article | Multiple Case Studies | Citations: 312 | Quality: 72/100]