Zappos employees in the online retailer's Las Vegas headquarters are part of a Holacracy. YouTube/Zappos Online retailer Zappos began a transition to "Holacracy" in 2013, deciding to ditch manager roles and job titles in favor of "self-management."

The alternative management system was created in 2007 by a software developer who says more than 300 companies worldwide have adopted it, including Twitter cofounder Ev Williams' company Medium and the cash automation company Arca.

Amazon-owned Zappos, which has more than 1,000 employees, is by far the largest company to try operating as a Holacracy.

But what exactly is it, and how does it work? Using the new book, "Holacracy: The New Management System for a Rapidly Changing World" by the system's creator, we break it down.

It's meant to be agile and adaptable

Holacracy is the brainchild of Brian Robertson, a former programmer and entrepreneur turned management guru.

As he was growing the software company he started in 2001, Robertson tells Business Insider, he realized the management-hierarchy system wasn't agile or adaptable. "It was crushing the ability in people to actually contribute and use their gifts," he says.

He studied as much self-management theory as he could, and developed his own approach, Holacracy, in 2007. He left his software company in 2010 to found HolacracyOne, a company that provides tools and coaching to companies that adopt its management principles.

The system derives its name from "holarchy," a term coined by the writer Arthur Koestler in his 1967 philosophical psychology book, "The Ghost in the Machine." It refers to a collection of holons, which simultaneously function as parts and wholes, like organs in a body.

Circles replace the pyramidal hierarchy

The term "self-management" can be misleading, Robertson says, since it suggests a sort of anarchy of individuals. Instead, he calls it "distributed authority." An organization operating as a Holacracy isn't perfectly flat, but it takes powers traditionally reserved for executives and managers and spreads them to all employees.

General components

Anchor circle: Typically comprises the board.

General company circle (GCC): Typically comprises the traditional executive leadership of the company. It is the only sub-circle in the anchor circle.

Sub-circle: Dedicated to particular functions of a company, like marketing and production. The circle a sub-circle exists in is known as its super-circle.

Roles: An element of a traditional job broken down into a task. A marketing circle, for example, can contain roles like social media, advertising, web marketing, and brand development. Every role comes with agreed-upon accountabilities.

If a role's responsibilities become too much for just one person to take care of, then it can expand into a new sub-circle with its own roles.

It's important to note that a role is not representative of a person — a single employee can have many roles, and roles are always subject to change.

HolacracyOne offers GlassFrog software that allows employees to monitor the layout of the entire organization. GlassFrog.com

Special roles

If a circle has a sub-circle, then they must be connected by the roles of Lead Link and Representative (Rep) Link. Both links attend the governance and operations meetings (described later) of both circles.

Lead link: Mandatory sub-circle role that is appointed by the super-circle. It is responsible for determining the circle's overall purpose, priorities, and strategies; assigning employees to roles, monitoring their performance, and reassigning roles for better fit; allocating the circle's resources; and defining the circle's metrics.

While they can assign work and determine strategy, they are intended to be stewards of the roles they're responsible for, not the people taking the roles. If disagreements arise among circle members, the ultimate resolution is left for the next scheduled operations meeting, but the lead link can make judgment calls regarding what is expected of each role's adopter.

"It is not the lead link's job to direct the team, or to take care of all the tensions felt by those in the circle," Robertson says. "As a lead link, you are not managing the people; you are representing the circle as a whole and its purpose within the broader environment of the organization."

Rep link: Mandatory sub-circle role that is elected by the members of its sub-circle. Whereas the lead link represents the purpose and direction of a sub-circle to its super-circle, the rep link is responsible for determining problems or frustrations the sub-circle has with the super-circle and resolving them. The rep link is also responsible for reporting the sub-circle's health to the super-circle.

Cross link: Optional role responsible for connecting its circle to either a parallel one or a circle that is far removed from it in purpose but still important to its mission. Robertson advises that only advanced holarchies use cross links, but says that a cross link (or links) between the anchor circle (the board) and the GCC (the company) can be quite useful.

Facilitator: Mandatory role for every circle, elected by members of its circle. Leads meetings.

Secretary: Mandatory role for every circle, elected by members of its circle. Keeps records of meetings.

There are structured meetings

Holacracy makes use of two highly structured meetings and one that is more open to interpretation. Robertson says the formality of the meetings is meant to streamline the decision-making process rather than add layers onto it. His intentions are to reduce the number of small daily interactions regarding decisions and eliminate time-sucking meetings with low yield.

Structured meetings are essential for adapting to change, addressing problems, and assigning work. HolacracyOne

Governance Meetings

Frequency: Typically monthly

Purpose: To refine a circle's operating structure (i.e. creating, amending, or removing roles, policies, or sub-circles; electing a facilitator, secretary, and rep link)

Process:

1. Check-in Round: "One at a time, each participant has space to call out distractions and orient to the meeting."

2. Administrative Concerns: "Quickly address any logistical matters, such as time allotted for the meeting and any planned breaks."

3. Agenda Building: "Participants add agenda items, using just one or two words per item. Each agenda represents one tension to process. Facilitator captures them in a list."

4. Process Each Item Using the Integrative Decision-Making Process: "Each agenda item is addressed, one at a time, using the Integrative Decision-Making Process," which is a system that allows the proposer to speak uninterrupted and others to weigh in, one at a time.

5. Closing Round: "Once the agenda is complete or the meeting is nearing its scheduled end, the facilitator gives each person space to share a closing reflection about the meeting."

Tactical Meetings

Frequency: Typically weekly

Purpose: To get each circle member on the same page and to address any problems hampering progress

Process:

1. Check-in Round: Each person has an uninterrupted chance to mention anything on their mind.

2. Checklist Review: Facilitator reads aloud a checklist for each of the roles, which the person in question responds to either with "check" or "no check."

3. Metrics Review: Each role responsible for a data report shares a brief on it.

4. Progress Updates: The facilitator reads aloud each project, asking, "Any updates?" The project lead either says "no updates" or gives a brief explanation.

5. Agenda Building: Each person has a chance to raise a tension, represented only by one or two words.

6. Triage Issues: Facilitator gives each person with a tension a chance to explain their issue and discuss it with other members. Facilitator determines what next steps need to be taken to resolve the issue as quickly as possible.

7. Closing Round: Each person has an uninterrupted chance to share a closing reflection about the meeting.

Strategy Meetings

Frequency: Typically every six months

Purpose: To review the circle's overall progress and develop long-term goals

Process:

There is no mandated structure, but Robertson says the meetings should last around four or more hours, and can fit into the following skeleton.

1. Check-in Round

2. Orientation

3. Retrospective

4. Strategy Generation

5. Unpack the Strategy

6. Closing Round

It's like an operating system

Holacracy inventor Brian Robertson. YouTube/HolacracyOne

Robertson says the best way to understand Holacracy is as an operating system, meaning that it doesn't come pre-loaded with all the software needed to run a business.

Holacracy provides, he explains, "a set of core rules for defining, evolving, and enacting your business processes over time," but it doesn't account for basics like "compensation and performance management systems, financial control/budgeting processes, and hiring and interviewing processes."

He likens these processes to "apps" for the Holacracy operating system, and wants Holacracy users to share their apps on HolacracyOne's website.

Zappos, for example, is still figuring out how compensation will work for the company. It is currently experimenting with HolacracyOne's Badge-based Comp App, which assigns skills, talents, and capacities to badges, which have monetary value.

It takes a long time to start working

The initial transition at any company is always "painful and uncomfortable," Robertson says, since people of all experience levels need to learn an entirely new way of doing their jobs.

Robertson's new book is a guide to understanding his management system. Amazon It's why every company, whether a new startup of a few people or established company of over 1,000 employees, is advised to bring in a certified Holacracy coach to teach the system.

Robertson says that while he hasn't collected data on it, he's found that it takes around three months for most employees to get the hang of Holacracy. It may take longer, or it may never happen at all.

For a company the size of Zappos, Robertson predicts that it will take at least a few years for it to move past the clumsy learning stage and into the desired streamlined, accelerated phase where Holacracy feels natural.

Robertson doesn't think Holacracy is for every company, but he thinks its distributed authority is an approach many more companies will be adopting in the near-future.

"I suspect we're going to see more and more companies moving this way, in the same way we've seen more companies moving to embrace agility," he says. "Look at companies in the '50s versus today. They're radically different. I think this is the direction it's going."

For more details, you can check out Robertson's book, "Holacracy," and read the official constitution every participating company adopts.