Structural Debt in Holacracy: When Structure Lags Behind Reality

Structural debt is the organizational equivalent of technical debt. In software development, technical debt arises when code quality is sacrificed for speed. In Holacracy, structural debt emerges when governance doesn’t keep pace with the reality of work.

At SI Labs, we’ve learned that structural debt is inevitable – but also that it must be actively managed. This is one of the common anti-patterns we address in our Holacracy practice. This article explains how.

What Is Structural Debt?

Structural debt arises when formal structure (roles, domains, accountabilities) no longer matches actual work.

The Concept

In an ideal world, governance exactly mirrors reality:

• Every accountability is actually fulfilled
• Every role has the right scope
• Everyone knows who’s responsible for what

In reality, structure drifts away from work:

• New work emerges but no role for it
• Old accountabilities are no longer needed but still stand
• People do things outside their roles

This discrepancy is structural debt.

Why “Debt”?

Like financial debt, structural debt has “interest”:

• The longer it exists, the larger it grows
• It slows decisions
• It creates conflicts and confusion
• It must eventually be “paid back” (through governance work)

Research Insight: Organizations that don’t regularly adapt their structures to reality experience a productivity loss of 15-25%. Main reason: People spend time finding workarounds for dysfunctional structures. [1]

Recognizing Symptoms

Structural debt has characteristic warning signs.

Early Symptoms

Informal agreements instead of governance

People bypass formal structure because it doesn’t fit. “We just do it that way, even if it’s not in the roles.”

Orphaned accountabilities

Nobody does what structure says should be done – but nobody complains either.

Unclear responsibilities

“I thought Role X does that?” – “No, they haven’t done that for months.”

Advanced Symptoms

Governance avoidance

People no longer bring tensions because “it doesn’t help” or “it’s too complicated.”

Political decision paths

Instead of using governance, decisions are made informally or pushed through by personalities.

New employees are confused

Newcomers can’t read from structure how work actually functions.

Acute Symptoms

Structural blockages

Work can’t get done because structure prevents it and nobody changes it.

Massive role overlaps

Multiple roles do the same work without coordination.

Leadership vacuum

Certain areas have no clear responsibility – and nobody feels responsible to change that.

Causes: How Structural Debt Emerges

Structural debt has typical emergence patterns.

Cause 1: Governance Is Seen as Annoying

What happens: People don’t bring tensions because governance meetings seem “too long” or “too bureaucratic.”

Consequence: Structure drifts from reality.

Solution: Make governance more efficient. Encourage tensions. Make the value of governance tangible.

Cause 2: Rapid Growth

What happens: The organization grows faster than structure is adapted.

Consequence: Roles are overloaded or too vague. New work areas have no home.

Solution: Plan structural reviews during growth spurts.

Cause 3: Changes Aren’t Formalized

What happens: Work changes organically but nobody adapts governance.

Consequence: Structure describes a state from months or years ago.

Solution: Regular “reality checks”: Does our structure still fit?

Cause 4: Fear of Conflicts

What happens: Governance changes could be uncomfortable – so they’re avoided.

Consequence: Structural problems remain unresolved.

Solution: Normalize conflicts as part of the process. Governance is the place for structural conflicts.

The Structure Audit

A systematic method to identify structural debt.

The Process

Phase 1: Inventory (30-60 minutes per circle)

• List all roles and accountabilities
• For each accountability ask: Is this actually being done?
• For each role ask: Does the scope match reality?

Phase 2: Gap Analysis (30-60 minutes)

• What gets done that isn’t in any role?
• What coordination happens informally that should be formalized?
• Where are ambiguities?

Phase 3: Prioritization (15-30 minutes)

• Which gaps cause the biggest problems?
• What can be quickly fixed?
• What needs larger structural changes?

Phase 4: Governance Pipeline

The identified gaps become proposals for upcoming governance meetings.

Frequency

Organization Type	Recommended Audit Frequency
Fast-growing	Quarterly
Stable	Semi-annually
After major changes	Immediately

Refactoring Strategies

How to pay down structural debt.

Strategy 1: Incremental Refactoring

Approach: Make small improvements at every governance.

Advantages: Low barrier, continuous progress.

Disadvantages: Can be too slow for large debt.

When to use: For ongoing structural hygiene.

Strategy 2: Dedicated Refactoring Sessions

Approach: Special governance meetings only for structure cleanup.

Advantages: Focus, efficient for larger changes.

Disadvantages: Needs explicit time.

When to use: With significant structural debt.

Strategy 3: Circle Reset

Approach: Rethink the circle “from zero.”

Advantages: Radical fresh start, no legacy.

Disadvantages: Effort-intensive, can be destabilizing.

When to use: With massive debt, after reorganizations.

Continuous Structure Hygiene

Better than paying off debt: Avoiding debt.

Practices

Encourage tensions

Every tension not brought is potential structural debt. “If something’s not right, bring it to governance.”

Maintain governance rhythm

Regular governance meetings prevent debt from accumulating.

Formalize new work immediately

When new work emerges, directly create a role or accountability for it.

Actively delete old structures

Remove roles and accountabilities no longer needed, don’t ignore them.

The Rule of Thumb

A healthy governance should regularly produce structural changes. If nothing changes for weeks, debt is probably accumulating.

Structural Debt at SI Labs

As part of our Holacracy practice, we manage structural debt closely together with role evolution. Our experiences:

What We’ve Learned

Debt is normal. No organization has perfect structure. The goal isn’t perfection but manageable debt.

Proactive is better than reactive. Doing a structure audit before problems become acute saves time.

Pain is a signal. When people use workarounds, that’s a signal for structural debt.

Typical Challenges

• The temptation to ignore debt (“It still works”)
• Fear of refactoring effort
• Underestimating the damage that debt causes

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Research Methodology

This article is based on the concept of technical debt (software engineering), research on organizational adaptability, and over ten years of experience with structural governance at SI Labs.

Source selection:

• Literature on technical debt
• Studies on organizational agility
• Holacracy practice

Limitations: The concept “structural debt” is an analogy, not exact science. The “interest” is hard to quantify.

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Disclosure

SI Labs GmbH has practiced Holacracy for over ten years. We have experienced and actively managed structural debt.

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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] 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]