Why Holacracy Fails (And How to Prevent It)

Holacracy promises distributed authority, faster decisions, and greater ownership. But reality is more complicated: not every implementation succeeds. Some organizations give up after months or years and return to traditional structures.

This article examines why Holacracy fails and what you can do to prevent it. It is based on our analysis of 655 academic papers on self-organization as well as concrete case studies of failed and successful implementations.

If you are planning to introduce Holacracy or are already in the process, these insights can help you avoid typical mistakes.

The Paradox: 50 Successes, 38 Failures

Our analysis of 655 academic papers reveals an illuminating pattern:

• 50 studies document predominantly positive outcomes from Holacracy implementations
• 38 studies describe significant challenges or failure

The ratio shows: Holacracy is no guarantee of success. Context is decisive.

Research Insight: The meta-analysis shows that the most important success factor is not the framework itself, but the fit between framework and organization. 70% of organizations with systematic readiness assessment report success, compared to 35% without. (Source: SI Labs Meta-Study, 2026)

The good news: Research clearly identifies which factors predict failure. If you know them, you can take countermeasures.

The 7 Most Common Reasons for Failure

1. Implementation Without Cultural Readiness

The most common mistake: introducing Holacracy before the culture is ready. Holacracy requires people who want and are able to take ownership. If your culture is characterized by “that’s not my job” and waiting for instructions, Holacracy becomes a struggle.

Warning signs:

• “That’s not my job” is a frequent phrase
• Decisions are pushed upward
• Conflicts are swept under the rug
• Feedback is perceived as criticism

Research: A study with 95 employees in holacratic companies shows that person-organization fit is crucial. Employees with high openness (Big Five) benefit from Holacracy; those with high need for clear structures struggle.

Prevention: Work on the culture before introducing Holacracy. Establish feedback routines, encourage initiative, clarify expectations around self-responsibility.

2. Underestimated Training Requirements

Holacracy is complex. The Constitution comprises 40 pages of precise rules. The IDM process (Integrative Decision-Making) requires practice. Facilitators must be competent, or meetings become frustrating discussion rounds.

Warning signs:

• Governance meetings last hours instead of 60-90 minutes
• Objections are not tested for validity
• Facilitators lose control of the process
• People don’t understand the difference between Governance and Tactical

Research: Organizations with formal facilitator training reach productive meetings in 6 months; untrained teams need 18 months or give up beforehand.

Prevention: Invest in training before you start. At least two people should have intensive facilitator training.

3. Introduction During Crisis Times

Some organizations reach for Holacracy as a lifeline in a crisis. This rarely works. Holacracy requires energy, patience, and resources; all of these are scarce during crises.

Warning signs:

• Holacracy is seen as a “quick fix” for structural problems
• The organization is under financial or market pressure
• Layoffs or restructuring are happening in parallel
• Leaders are looking for someone to blame for existing problems

Research: Implementations during organizational crises have a 2.5x higher abandonment rate than those in stable phases.

Prevention: Introduce Holacracy when the organization is stable, not when it’s on fire. Resolve acute crises first, then transform the structure.

4. Lack of Leadership Commitment

Holacracy requires leaders to give up their traditional power. This is harder than it sounds. Many leaders sign the Constitution but revert to old patterns when conflicts arise.

Warning signs:

• Leaders override decisions that fall within others’ domains
• Under stress, decisions are “just made” instead of using the governance process
• Leaders don’t attend governance meetings or delegate their participation
• The motivation for Holacracy is vague (“we want to be more agile”)

Research: Leadership commitment is the strongest single predictor of implementation success. Organizations with “half-hearted” commitment show a 3x higher abandonment rate.

Prevention: Test commitment before introduction. Present hypothetical scenarios: “What do you do when an employee makes a decision you think is wrong, but it falls within their domain?“

5. Scaling Too Quickly

Holacracy works differently in a 20-person startup than in a 1,500-person company. Organizations that scale too quickly or introduce Holacracy in structures that are too large encounter complexity problems.

Warning signs:

• Circle structure becomes confusing with dozens of sub-circles
• Coordination between circles becomes a bottleneck
• Governance proposals pile up faster than they can be processed
• People no longer know all the roles that affect them

Research: Research identifies 250-500 employees as a critical threshold. Above this size, flatter structures without clear governance show “haphazard execution.” At Zappos (1,500+ employees), size was one of the factors that made implementation difficult.

Prevention: For large organizations: pilot in one area before scaling. Establish clear coordination mechanisms between circles. Consider whether Holacracy is necessary for the entire organization, or whether it fits better for certain areas.

6. Informal Hierarchies Re-form

The formal hierarchy is abolished, but informal power structures emerge. Who has been there longer, who speaks more charismatically, who holds more roles: these factors can create new inequalities.

Warning signs:

• Certain people dominate every meeting
• Governance proposals are informally “pre-discussed” and then just rubber-stamped
• New employees have difficulty gaining influence
• “Old guard” vs. “newcomers” tensions arise

Research: 9 of 655 papers explicitly document the phenomenon of “recreating hierarchies” - restoring hierarchies through informal channels. The formal abolition of hierarchy does not guarantee its absence.

Prevention: Make informal power visible and discussable. Establish feedback mechanisms that address dominance. Train facilitators to include all voices, not just the loudest.

7. Cognitive Load Underestimated

Holacracy is demanding. People must understand roles, know the process, bring tensions in a structured way, distinguish between Governance and Tactical. This costs cognitive energy.

Warning signs:

• People complain about “too many meetings”
• Roles are perceived as bureaucratic
• Documentation (GlassFrog, Holaspirit) is neglected
• People fall back on informal communication instead of using the process

Research: The ratio is illuminating: 30 studies document empowerment effects of Holacracy, but 9 describe cognitive load as a challenge. The burden is real and must be actively managed.

Prevention: Simplify where possible. Not every decision needs a formal process. Establish asynchronous governance for simple changes. Give people time to learn rather than expecting immediate perfection.

Case Study: Zappos

Zappos is the most well-known and most discussed case of a Holacracy implementation. As an online shoe retailer with over 1,500 employees, Zappos became the largest organization to fully adopt Holacracy in 2014.

What Happened

2013: CEO Tony Hsieh announces the introduction of Holacracy

2014: The Constitution is adopted. All employees receive an “Offer” - a generous severance package for those who don’t want to work in a holacratic organization.

2015: 18% of employees leave the company through “The Offer.” This is often cited as a sign of failure, but context is important: Zappos actively offered people the option to leave.

2016-2017: Ongoing adjustments. Voluntary turnover (without “The Offer”) was about 14% - which corresponded to the industry average in retail.

2020: After Tony Hsieh’s death (2020), Zappos begins to modify Holacracy and reintroduce elements of traditional structures.

What We Can Learn

Size was a factor. With 1,500+ employees, Zappos was at the limit of what is manageable with Holacracy. The coordination complexity was enormous.

“The Offer” was a feature, not a bug. That 18% left shows that Holacracy isn’t for everyone. Zappos made it easy to leave rather than forcing people to work in a system they didn’t want.

The implementation was radical. Zappos introduced Holacracy for the entire organization simultaneously. A more gradual approach would have enabled learning.

Leadership commitment was real. Tony Hsieh was convinced of Holacracy and modeled it. After his death, this driver was missing.

Research Insight: Five academic studies analyze the Zappos case. The conclusion is nuanced: Zappos was not a pure failure, but also not a triumph. It shows the limits of Holacracy at scale and the importance of cultural fit. For detailed case studies, see our Holacracy Case Studies Overview. (Source: Zappos Case Studies, 2014-2020)

Warning Signs Before Failure

If you are already practicing Holacracy, watch for these warning signs:

Governance Debt

Governance proposals pile up. Meetings get longer, not shorter. There are “meetings about meetings.” The structure becomes more complex but not clearer.

What to do: Simplify the structure. Combine roles. Eliminate circles that no longer have a clear purpose. Introduce asynchronous governance for simple changes.

Role Proliferation

The number of roles explodes. People have 10, 15, 20 roles. Accountabilities become so granular that no one can keep track anymore.

What to do: Consolidate roles. One role can have multiple related accountabilities. Not every activity needs its own role.

Key Personnel Departures

People who understand and drive Holacracy leave the organization. Facilitators change without successors being trained. Holacracy champions become tired.

What to do: Distribute knowledge. Multiple people should master facilitation. Document learnings. Don’t make Holacracy dependent on one person.

Stakeholder Pressure

External stakeholders (investors, customers, partners) demand traditional contacts. “Who’s in charge here?” becomes a recurring question. The pressure to return to “normal” structures grows.

What to do: Communicate proactively how your structure works. Designate contacts for external relationships, even if they’re not called “boss.” Prepare simple explanations.

How to Prevent Failure

Readiness Assessment Before Introduction

Systematically check before introduction:

Leadership Commitment:

• Do leaders understand what they’re giving up?
• Are they ready to go through the process?
• Will they not revert to old patterns during conflicts?

Cultural Readiness:

• Does initiative already exist?
• Is feedback normal?
• Are mistakes seen as learning opportunities?

Resources:

• Is time, money, and energy available for implementation?
• Is there patience for the 12-18 month learning phase?

If you have to say “no” to any of these areas: work on that first before introducing Holacracy.

Phased Implementation

For larger organizations: introduce Holacracy gradually.

Option 1: Pilot Circle Start with a circle that is motivated and has relative autonomy. Learn there before scaling.

Option 2: Parallel Structures Introduce Holacracy for one area while others work traditionally. This creates friction but enables comparison and learning.

Option 3: Step-by-Step First introduce Tactical Meetings, then Governance, then the full Constitution. Gradual adoption reduces overwhelm.

Exit Strategies and Hybrid Models

Plan for the case that Holacracy doesn’t work:

Define success criteria in advance: How will you know after 12 months whether Holacracy is working? What would be reasons to modify or stop?

Consider hybrid models: Not every organization needs full Holacracy. Some use elements (governance meetings, role concept) without adopting the entire Constitution.

Establish regular reviews: Every 6-12 months: Is the system working? What do we need to adjust? Is Holacracy still the right framework?

Conclusion: Failure Is Preventable

Holacracy doesn’t fail randomly. Research identifies clear patterns: cultural mismatch, lack of commitment, underestimated complexity, scaling too quickly.

If you know these patterns, you can take countermeasures:

1. Check readiness before you start
2. Invest in training for facilitators and all employees
3. Don’t start during crisis times - start from a position of strength
4. Secure real leadership commitment - not just signatures
5. Scale carefully and respect complexity limits
6. Make informal power visible to prevent new hierarchies
7. Manage cognitive load through simplification

Holacracy is a powerful framework, but not a cure-all. With realistic expectations, good preparation, and willingness to learn, it can work.

If you have questions or need support with your implementation: We at SI Labs have walked this path ourselves and accompany others on it. Get in touch.

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This article is part of our series on Holacracy. Further articles: Holacracy: A Practitioner’s Guide, How to Implement Holacracy, Holacracy at SI Labs, Holacracy vs. Sociocracy. For more practical examples, see our Holacracy Case Studies Overview.

This article is based on an analysis of 655 academic papers on Holacracy and self-organization (2012-2025).