The whitepaper outlines the system of Domains, which seem to be the same as your 'circles' as you describe them. You can read a TL;DR here, which also has a link to the full whitepaper: https://colony.readme.io/v1.0/docs/off-whitepaper
I think there may well be 'off grid' (or in Colony's case 'off-chain') challenges to running an organization exclusively with Colony.
> We know from digital sociology that these reputational systems create their own hierarchies and imbalances in the system and I am wondering if Colony can prevent these in any way.
One thing that comes to mind as a response is Colony's reputation system mechanics: Reputation decays over time. So, to help disincentivise a 'reputation aristocracy' within an organization, reputations scores will halve over the course of about 3 months, which means no-one can just rest on their laurels and hold influence in a colony without regularly contributing to that colony's goals.
As others have commented, the other main distinction would be that a colony can put bounties up in native tokens, which confers influence in some types of voting (other types can be exclusively reputation-weighted), as well as dividends from the colony's revenue. Each colony can tweak their token's total supply, issuance rate and initial distribution to achieve the desired incentive model for what they need/desire.