What Can DAOs Learn from Holacracy? (Part I)

By Demetria R. Giles

DAOs have ushered in a new way of being for people who have been left disenchanted or simply left out by traditional organizational structures.  An exciting new frontier for folks, particularly for creators and crypto believers, who are looking to work in ways that uphold personal agency, autonomy and decentralization.

This groundbreaking model of organization and governance does not come without its challenges.  Of course not all DAOs are the same, but frequently new members point out the lack of efficiency, poor organization and information imbalance. The common thread of most complaints is the initial disorientation due to the absence of boundaries. Luckily for DAOs, this is fixable.

Insert holacracy.  Holla-what? Holacracy is defined as a new social technology for governing and operating an organization via a set of core rules and roles that are distinctly different from those of traditionally governed LLCs, nonprofits or corporations.  Coined by Brian J. Robertson, author of “Holacracy: The New Management System for a Rapidly Changing World”, this method of organizing provides extraordinary evolutionary design power behind the collective mission of a distributed community.

Okay, so the DAO has a roadmap, but does it have a Constitution though? The Constitution is a key element of holacracy that every DAO should consider.  This is essentially the playbook or the rules of the game for a DAO.  It lays out the redistribution of authority without a management hierarchy. It’s a major factor in shaping the mindset of members before, during and after the DAO onboarding or “wayfinding” process because there are big picture roles to be filled.

Real empowerment requires boundaries and clear expectations via common law or governance.  If DAOs are serious about decentralization then its founding team must take seriously the formation of an empowerment process. Here’s how:

  1. Encode roles with authority by clearly stating the purpose, domain and accountabilities of a specific role. Clear boundaries allow everyone to lead.
  2. Establish that members can take on as few or as many roles as they feel they are capable of maintaining.
  3. Communicate when and how members can make proposals for new roles & policies in governance meetings that follow a set protocol for organizational changes.
  4. Clearly state when and how members can make requests for new projects in tactical meetings for daily operations.
  5. Normalize the presence of tension in collaborative environments, and give all members the authority to address tension.

What happens when a DAO (or any organizing body of people) does not have a Constitution? Without it, instead of using energy to work towards the purpose of the DAO, members will:

  • Spend more time trying to figure out the limits on their own.
  • Find or create a leader which causes a single point of potential failure.
  • Engage in ineffective self-organizing which leads to poor long-term participation.

In simple terms, the Constitution shows its members the evolving nature of a DAO’s structure and their dynamic role within it. It sets the tone for rapid iteration, incessant curiosity and continuous learning.

As a DAO founder, establishing one is important because it signals a few things for all DAO members:

  1. Anything is allowed that works toward the DAO’s purpose unless it is explicitly forbidden in the Constitution.
  2. Members are trusted; the DAO has their back when they step fully into their roles, identify necessary actions and execute decision-making power.
  3. Any initial centralized power of DAO founders is ceded to the will of the Constitution, and no DAO member is above it.

This moves the needle from delegated authority to truly distributed authority. To carry out your role as a DAO member, you can make any decision or take any action as long as there is no rule against it in the DAO’s Constitution. It’s a framework that frees members to collaborate with others on projects, bounties and tasks in a way that fulfills their own personal purpose within the larger purpose of the organization but without asking for permission.

To be clear, DAOs do not have to use the Holacracy Constitution as is.  In the spirit of innovation, it can be fully adopted, partially adopted with amendments or a completely different version of a Constitution can be created to best suit the mission of a particular community.  The point is to get one, and use it.

DAOs do not need to throw the baby out with the bathwater so to speak.  Decentralization is great but we do not have to compromise on structure and alignment.  We can get rid of management hierarchies without plunging ourselves into mayheim.  Holacracy’s Constitution, which is intended to be an open source document, allows us to replace the idea of a “boss” with an emergent order as opposed to anarchy. This is the missing meta framework of DAO onboarding that will cement member’s understanding of their autonomy to lead, create and problem-solve in alignment with a mission that’s bigger than anyone person can achieve.

About the Writer

Demetria R. Giles is a leadership and education consultant based in Las Vegas, NV.  She is the former director of 9th Bridge School - an education initiative of the Downtown Project. She became interested in holacracy after touring Zappos.com back in July 2017.

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