Performance Reviews in Holacracy: Without Managers, Who Evaluates?

The annual performance review by a manager is obsolete in Holacracy. But that doesn’t mean feedback and development disappear—they just need to be organized differently. The central question: Who evaluates performance when no one is a supervisor?

Research on feedback cultures in self-managed organizations shows: Professional feedback is a decisive success factor for New Work—regardless of the organizational model [1]. The challenge lies not in the “whether” but in the “how.”

The Problem with Traditional Performance Reviews

Why They Don’t Work in Holacracy

Traditional performance reviews are based on assumptions that Holacracy removes:

Traditional Assumption	Holacracy Reality
Manager knows the work best	Colleagues know the work better
Hierarchical evaluation cascade	No fixed hierarchies
Annual review as ritual	Continuous role adaptation
Evaluation leads to promotion	No traditional career ladder

Research Insight: A study on Holacracy and person-organization fit shows that the fit between employee and organization is the strongest predictor of job satisfaction—not external evaluation [2]. This suggests that feedback systems should focus on development and fit, not hierarchical assessment.

The Evaluation Illusion

A common mistake: Manager evaluations are perceived as objective but rarely are:

Known Biases:

• Recency bias (recent events dominate)
• Halo effect (overall impression colors individual ratings)
• Similarity bias (similar people rated higher)
• Attribution error (success = ability, failure = circumstances)

Peer-based systems have different biases—but not necessarily more.

Alternative Feedback Models

1. Continuous Peer Feedback

Instead of annual reviews: regular feedback in the work flow.

How it works:

• Feedback after projects or milestones
• Focus on concrete situations
• Both positive (“more of this”) and constructive (“do differently”)
• Directly between participants, no detour through managers

Advantages:

• Timely and relevant
• Less memory bias
• Promotes learning culture
• Consistent with Holacracy principles

Challenges:

• Needs psychological safety
• Must be learned
• Can dilute without structure

Research Insight: Studies on autonomy and engagement show that job crafting—actively shaping one’s own work—correlates with higher engagement in self-managed organizations [3]. Feedback should therefore not only evaluate past performance but support future role design.

2. Role-Based Feedback

Feedback is oriented toward the role, not the person.

How it works:

• Each role has clear accountabilities
• Feedback refers to role fulfillment
• Separation: “You as a person” vs. “You in this role”
• Governance meetings as feedback channel for structural tensions

Advantages:

• More objective through role definition
• Less personal, more factual
• Direct connection to expectations
• Uses existing Holacracy structures

Challenges:

• Not all performance is role-bound
• Human development goes beyond roles
• Can seem technocratic

3. 360-Degree Feedback

Systematic feedback from all work relationships.

How it works:

• Feedback from circle members
• Feedback from other circles (interfaces)
• Optional: Customers/external stakeholders
• Aggregation into development themes

Advantages:

• Comprehensive picture
• Multiple perspectives reduce bias
• Uncovers blind spots
• More democratic than manager evaluation

Challenges:

• Organizationally demanding
• Can lead to “average” feedback
• Anonymity vs. openness tension

4. Self-Assessment with Calibration

Employees assess themselves, peers calibrate.

How it works:

• Self-assessment along defined criteria
• Peer group gives feedback on self-assessment
• Discussion on significant deviations
• Joint development goals

Advantages:

• Promotes self-reflection
• Relieves peers of “evaluation” pressure
• Development-oriented
• Personal responsibility

Challenges:

• Dunning-Kruger effect (incompetent overestimate themselves)
• Imposter syndrome (competent underestimate themselves)
• Needs honest feedback culture

The Connection to Compensation

A critical point: Should feedback influence compensation?

Option A: Decoupling

• Feedback serves only development
• Compensation follows other criteria (competency level, market)
• Less fear of feedback
• But: Can lead to “inconsequential” feedback

Option B: Loose Coupling

• Feedback is one input for compensation decisions
• Not the only factor
• Transparent connection
• But: Can burden giving feedback

Option C: Direct Coupling (Peer Compensation)

• Peers decide on salary adjustments based on feedback
• Completely democratic
• But: High conflict potential, difficult to scale

Research Insight: Perception of authenticity in organizational changes is the strongest predictor of employee retention [4]. If the feedback system is perceived as fair—regardless of the specific model—this significantly reduces turnover intentions.

Implementation: Step by Step

Phase 1: Cultural Foundation (Months 1-6)

Before changing the system, build the culture:

1. Feedback training: How to give constructive feedback?
2. Psychological safety: Mistakes are learning opportunities
3. Practice formats: Retrospectives, peer coaching dyads
4. Model behavior: Leaders/founders go first

Phase 2: Build Structure (Months 6-12)

Establish the new system parallel to the old:

1. Choose format: Which model fits your culture?
2. Define frequency: Quarterly, after projects, continuously?
3. Provide tools: Simple methods, not complex software
4. Pilot: Start with one circle, learn, scale

Phase 3: Integration (Months 12+)

Connect feedback with other systems:

1. Development plans: Feedback leads to learning goals
2. Role evolution: Feedback informs governance
3. Compensation: Clear, transparent connection (or conscious decoupling)

Case Study: Mercedes-Benz.io

Mercedes-Benz.io as a Holacracy greenfield shows a pragmatic approach [5]:

Implemented:

• Regular peer feedback in circles
• Role clarity as basis for expectations
• Continuous adaptation through governance

Insights:

• Culture work before system work
• Transparency creates trust
• Iterative adjustment instead of big bang

Common Mistakes

1. System Without Culture

The best feedback system fails without psychological safety. If people are afraid to be honest, any system produces only polish.

2. Starting Too Complex

360-degree feedback with 20 questions per quarter overwhelms. Start simple: “What should this person do more? Less? Keep doing?“

3. Coupling Compensation Too Early

As long as feedback culture isn’t mature, keep feedback and compensation separate. Premature coupling kills honesty.

4. Seeking Manager Replacement

The reflex “Who replaces the manager for evaluation?” is wrong. The question is: “How do we organize feedback so people grow?”

SI Labs Perspective

After years with peer-based feedback:

1. Simplicity wins: Complex systems get circumvented
2. Frequency beats depth: Short and often is better than long and rare
3. Separation helps: Keep development feedback and compensation input separate
4. Culture is everything: The best system fails without trust

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Sources

[1] Kotter, Julia. “Professionelles Feedback als entscheidender Erfolgsfaktor in New Work.” Organisationsberatung, Supervision, Coaching 30 (2023): 153-168. DOI: 10.1007/s11613-023-00818-2 [Practice-oriented analysis | Feedback methods | Citations: 6]

[2] Tröster, Darja, and Jörg Felfe. “Holacracy, a Modern Form of Organizational Governance: Predictors for Person-Organization-Fit and Job Satisfaction.” Frontiers in Psychology 13 (2023). DOI: 10.3389/fpsyg.2022.1021545 [Empirical study | Person-organization fit | Citations: 22]

[3] van Eersel, Job J., et al. “Autonomy and Engagement in Self-Managing Organizations: Exploring the Relations with Job Crafting, Error Orientation and Person-Environment Fit.” Frontiers in Psychology 14 (2023). DOI: 10.3389/fpsyg.2023.1198196 [Empirical study | Job crafting | Citations: 7]

[4] Afshar Jahanshahi, Asghar, et al. “Turnover and Recommendation Intentions in the Post-Implementation Period of Radical Decentralization.” Journal of Organizational Change Management (2022). DOI: 10.21818/001c.37162 [Empirical study | N=445 | Authenticity and retention]

[5] Velinov, Emil, Zoran Todorović, and Janez Damij. “How Mercedes-Benz Addresses Digital Transformation Using Holacracy.” Journal of Organizational Change Management 34, no. 5 (2021): 1125-1150. DOI: 10.1108/jocm-12-2020-0395 [Case study | Greenfield implementation | Citations: 23]

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Research Methodology

This article synthesizes insights from 5 academic studies on feedback, performance evaluation, and organizational design. The Kotter study [1] provides direct reference to feedback in New Work, while the Holacracy-specific studies [2,3,4] provide context for self-managed organizations.

Limitations: Direct comparative studies between traditional and peer-based performance review systems in Holacracy contexts are rare. Recommendations are partly based on transfer from related research fields.

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Disclosure

SI Labs practices peer-based feedback and has developed its own processes. Our recommendations are based on direct experience in our specific context and are not necessarily transferable.