Terminations and compensation changes at Holacracy One
Ever since I read Brian Robertson’s book five years ago, one of my deepest qualms with Holacracy has been the gap it created around People practices such as performance management, compensation changes, and terminations.
Five years ago, I wrote:
Dealing with “human spaces” problems such as hiring/firing, compensation, growth, etc. is not part of the Holacracy “operating systems” but mere “add-ons/apps” that each business should figure out on its own, once they adopt Holacracy. Yet at the same time, it’s been acknowledged that Holacracy is at odds with traditional “human spaces” solutions, and the friction between the two is a key cause for some companies attempting to adopt Holacracy but failing to successfully do so.
To use the “Holacracy as an Operating System” metaphor which Robertson introduced in his book: he created a new OS that’s incompatible with the existing apps (manager-led people practices) and launched it without an ecosystem of compatible apps. Only radical early adopters would switch to a new OS without an ecosystem of compatible apps already in place, which sadly, not only slowed down Holacracy’s adoption but also made it the target of very valid critique.
Since then, I’ve learned to look at Holacracy less as a monolithic dogma and more as a source of inspiration for several potent building blocks for designing more human organizations. Top of which are the “OS Kernel”, the Holacracy Constitution, a compelling alternative to CEO/founder dictatorship for governing organizational power; and variations of the Integrative Decision Making process for more effective decision-making.
While those are important pieces of the larger puzzle, it is still missing the key pieces of people practices and will not be complete without them.
Robertson has softened up over the years too. When I heard him speak last year, he had a growing appreciation for the human aspect of the organization and for the need to cultivate not just “role” but also “sole”.
In a series of blog posts published earlier this summer, he outlined how his Holacracy-run company, Holacracy One, handles two of the most challenging people practices in any organization — terminations and compensation changes:
The processes are also covered in detail in the company’s governance system, GlassFrog.
Termination process (Partnership Review)
- Partner — the person whose affiliation with the organization is being reviewed.
- Partnership Assessor — responsible for assessing Partners for continued partnership during scheduled Partnership Reviews.
- New Partners automatically go through a Partnership Review after three, six, and twelve months of tenure. Any Partner can request a Partnership Review for another Partner.
- All Partnership Assessors must participate in the review or waive their right to attend. They can also invite additional Partners to attend, as long as no other Partnership Assessor objects.
- After sharing the context for the review (the reason it was called) participants vote (advocate for / neutral / against) on the following prompt: “knowing what I know now, if this partner weren’t already in the partnership, I would invite the reviewed partner into the partnership again now with their current relationship terms”. If the vote is not unanimous the Partnership Assessors explain their votes, discuss the matter and vote again.
- To remain in the company, a Partner must have more “advocate” than “against” votes and at least one “advocate” vote.
- If the decision led to a negative outcome, the Partner is notified and has three days to decide whether they want to accept the outcome or discuss it with the Partnership Assessors. If they opt for the latter, they have two weeks to have those discussions and decide whether to request a do-over.
- The outcome of a do-over Partnership Review is immediate and final. A negative outcome kicks-off the Partner offboarding process.
Compensation change process (Compensation Review)
- Partner — the person requesting the compensation change.
- Compensation Architect — responsible for designing, implementing, and evolving the organization’s overall systems and related processes for determining Partner compensation. As well as defining and publishing the organization’s possible compensation tiers, along with general criteria to guide others in assessing placements within it.
- Compensation Guardians– responsible for assessing proposals for compensation placements against other existing placements, and against the general guidance published by the Compensation Architect.
- Impact write up: The Partner submits a write-up of (a) the skills and other capacities with which they contribute most of their value to the organization, and (b) any constraints or weaknesses that limit the value those skills and capacities would otherwise be able to add. Part (a) can be written by someone else (after obtaining the Partner’s permission), but part (b) must be written by the Partner. All Compensation Guardians with relevant focus must confirm that the write-up is materially complete and accurate.
- New compensation level proposal: The Partner submits a proposal for a new compensation level, using one of the allowed levels defined by the Compensation Architect. The proposal outlines arguments for and against the change, and an assertion that the author thinks that granting the new level is the right decision for the organization all things considered. The proposal can also be authored and submitted on behalf of a different Partner.
- Compensation Review: The proposer schedules a “Compensation Review” meeting with all relevant Compensation Guardians. Compensation Guardians can waive their right to attend, as well as invite additional Partners to attend, as long as no other Compensation Guardian objects. The Compensation Review follows the same structure as the Partnership Review (above) with a modified prompt: “If this person didn’t already work here, would you advocate for hiring them again at their proposed new compensation level?”. To be approved, a proposal needs more people advocating for it than against it, and at least one positive advocate.