From Departments to Circles: The Holacracy Migration

Converting departments to circles is one of the most critical steps in Holacracy adoption. The most common mistake: Departments get translated 1:1 into circles. This almost never works because departments and circles are based on fundamentally different logics.

At SI Labs, we went through this migration ourselves – and later helped other organizations with it. Understanding the Holacracy framework is essential before starting this transformation. This article shares the key insights.

Why Departments Don’t Become Circles 1:1

Departments and circles look superficially similar. Both are organizational units with people in them. But the similarity is deceiving.

The Fundamental Differences

Department	Circle
Organized around a leader	Organized around a purpose
Jobs/positions for people	Roles for work
Fixed task areas	Evolvable structures
Department head decides	Governance decides
Vertically integrated	Horizontally networked

What Happens with 1:1 Translation

Old department: “Marketing department, led by Anna, with 5 employees: Ben (Social Media), Clara (Content), David (Events), Eva (PR), Frank (Design)”

Naive translation: “Marketing circle, Lead Link Anna, with roles: Ben as Social Media, Clara as Content…”

The problem: The structure was copied, not rethought. Anna is still “the boss,” just with a new title. The roles correspond to old job descriptions. Nothing has really changed.

Research Insight: Holacracy implementations often fail when old structures are simply renamed. The value of Holacracy lies in rethinking work, not relabeling. [1]

The Analysis: What Work Is Actually Being Done?

Before migration, real analysis is needed.

Step 1: Document Work

Not: “What’s in the job description?” But: “What are you actually doing this week?”

Method: Everyone documents for one week what work they actually do. No interpretation, just observation.

Step 2: Group Work

The documented work gets grouped:

• Which activities logically belong together?
• What dependencies exist?
• What are the natural clusters?

Important: Grouping follows the work, not the people. If Clara does content and plans events, those can be two different roles.

Step 3: Identify Purpose

For each group: What’s the goal of this work? Why does it exist?

• “Create content” → “Build brand awareness through valuable content”
• “Plan events” → “Create personal connections with potential customers”

These purposes can justify different circles – or together form one circle.

Functional vs. Product/Service Circles

A central decision in migration.

Functional Circles

Circles grouped by competence: Marketing, Sales, Engineering, Finance.

Advantages:

• Clear specialization
• Knowledge sharing within the function
• Career paths for specialists

Disadvantages:

• Silos between functions
• High coordination effort
• Customer doesn’t see organization as unity

Product/Service Circles

Circles grouped by value creation: Product A, Product B, Service X.

Advantages:

• End-to-end responsibility
• Faster decisions
• Customer perspective in focus

Disadvantages:

• Duplications (each product needs marketing)
• Specialist careers more difficult
• Knowledge transfer between products expensive

The Decision

Questions:

• What’s more important: Specialization or speed?
• How different are the products/services?
• How much coordination between functions is needed?

There’s no right answer – only the fitting one for the context.

The Migration Approach

A proven phased approach.

Phase 1: Pilot Circle (4-8 weeks)

Start with one area:

• Small enough to be manageable
• Big enough to have real learnings
• With people open to experiments

The pilot circle learns Holacracy, makes mistakes, corrects them. The knowledge flows into the broader rollout later.

Phase 2: Expansion (8-16 weeks)

After the pilot:

• Document learnings
• Identify next circles
• Roll out gradually

Not: Change everything at once. That overwhelms the organization.

Phase 3: Consolidation (ongoing)

The structure gets continuously adapted:

• What works gets kept
• What doesn’t work gets changed
• Structure follows work

Timeline

Organization Size	Typical Migration Period
10-30 people	3-6 months
30-100 people	6-12 months
100+ people	12-24 months

Dealing with Leaders

The previous department heads are often the most critical element.

The Problem

Department heads lose in Holacracy:

• Directive authority over employees
• Exclusive decision rights
• Status markers (big team, title)

What they gain:

• Lead Link role (if suitable)
• Other roles based on strengths
• Clearer responsibilities

Patterns We Observe

Pattern 1: The Successful Transition

The person understands that Lead Link isn’t a management role. They find their strengths in other roles. They become an enabling factor for the team.

Pattern 2: The Struggling Transition

The person tries to act as Lead Link like a manager. Conflicts arise. With coaching and time, adjustment often succeeds.

Pattern 3: The Failed Transition

The person cannot or will not let go. They leave the organization or become a blocker. Sometimes separation is better for everyone.

Recommendations

• Involve leaders early (don’t surprise them)
• Offer coaching
• Communicate expectations clearly
• Have patience, but don’t wait forever

Research Insight: Former managers need 6-12 months to shed old habits. Most succeed, but not all. Transparency about this challenge helps. [2]

Piloting Recommended

Why starting small is better than Big Bang.

The Risks of a Big Bang

• Everyone learns simultaneously (no internal knowledge)
• Mistakes have big impacts
• No room for experiments
• Overwhelm at all levels

The Advantages of Piloting

• Controlled learning
• Mistakes have limited impact
• Internal expertise develops
• Proof of value before broad rollout

Pilot Selection

Good pilot circles:

• Have a clear purpose
• Consist of motivated people
• Have moderate complexity
• Are visible but not critical

Bad pilot circles:

• Are already dysfunctional
• Have unwilling leaders
• Are too small (< 5 people) or too big (> 20)
• Are mission-critical without buffer

Common Migration Mistakes

From our experience:

Mistake 1: Copying Structure

What happens: Old departments become circles 1:1. Why it fails: Old logic remains. Solution: Think from the work, not from old structure.

Mistake 2: Too Much Structure Initially

What happens: Everything is pre-defined – every role, every policy. Why it fails: Structure doesn’t fit reality. Solution: Start minimal, develop through governance.

Mistake 3: Bypassing Leaders

What happens: Leaders face accomplished facts. Why it fails: Resistance, sabotage, conflicts. Solution: Involve early, enable real participation.

Mistake 4: Everything at Once

What happens: Entire organization switches simultaneously. Why it fails: Overwhelm, no time to learn. Solution: Pilot, roll out step by step.

Mistake 5: Only Changing Structure

What happens: New circles but old behaviors. Why it fails: Holacracy needs new ways of working. Solution: Training, coaching, patience.

From Departments to Circles at SI Labs

Our experiences:

What We’ve Learned

It takes time. Our migration took over a year, with many adjustments.

Some departments dissolved. The old “HR department” became roles in various circles.

New circles emerged. Things that belonged to no department before got their own circles.

Typical Challenges

• Letting go of old identities (“I’m no longer the Marketing chief”)
• Building trust in the new system
• Patience while structure finds itself

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Research Methodology

This article is based on research on organizational transformations, Holacracy literature, and our practical experience at SI Labs and consulting projects.

Source selection:

• Studies on Holacracy implementations
• Practitioner reports and case studies
• Own experience from 10+ years

Limitations: Migration depends heavily on context. What worked for us doesn’t work everywhere.

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Disclosure

SI Labs GmbH conducted its own migration to Holacracy and advises other organizations on similar endeavors.

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Sources

[1] 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]

[2] Velinov, Emil, et al. “Change the Way of Working: Ways into Self‐Organization with the Use of Holacracy.” Journal of Organizational Change Management 34, no. 5 (2021): 1063-1078. DOI: 10.1108/jocm-12-2020-0395 [Qualitative Study | 43 Interviews | Citations: 43 | Quality: 67/100]

[3] Kirtley, Jacqueline, and Siobhan O’Mahony. “The myth of the flat start‐up.” Strategic Management Journal 44, no. 7 (2023): 1669-1702. DOI: 10.1002/smj.3333 [Empirical Study | 81 Start-ups | Citations: 81 | Quality: 78/100]