Popularized in 2006 by the non-profit B Lab and their launch of B Corps, the idea that it is time for profit-based businesses to change their purpose has been around for quite awhile. Personally, I first began thinking about the implications of purpose on organization design back in the late 1990’s after coming across the following quote by futurist Willis Harman.

“Business has become, in the last half century, the most powerful institution on the planet. The dominant institution in any society needs to take responsibility for the whole – as the church did in the days of the Holy Roman Empire. But business has not had such a tradition.”

In the article, “Transformation of Business” an interview with Willis Harman, by Sarah van Gelder in Business On A Small Planet (IC#41) from 1995 (found HERE), he goes on to expand on this quote, explaining that a transformative process was underway and a new business model would emerge.

Well, at risk of dampening that optimism, it’s been almost 30 years now and I really wonder if these emerging businesses will finally take “responsibility for the whole” as Harman predicted. Actually I don’t wonder – since organization theory suggests what is emerging has a design-based flaw. Let me expand.

Two weeks ago, in my Introduction to Business course, I explained that businesses need to be aware of their various stakeholders – which are typically categorized as investors, employees, customers, suppliers, community, and in the last decade or so, the environment. People generally agree that these stakeholders are all impacted by a business – that’s not the problem. The design issue is that each can have fundamentally different needs or interests. Or put another way, if each of those stakeholders were to agree on a uniting purpose that articulated those needs or interests (for example, all employees agreed on their collective expectations – fair compensation, an opportunity to participate and be valued for their contribution) there would be five potentially different purposes.

Purpose, as I explain in the design section (HERE), is like a circle that encompasses and unites individuals. When everyone agrees fundamentally on a purpose a truly collaborative organization exists. And again, from a design perspective, an organization can be either collaboration-based (equal accountability and responsibility) or control-based (reliant on AUTHORITY).

As we teach in business school, for-profit organizations have one objective – to maximize shareholder wealth. These organizations epitomize unequal power and authority or control-based structures. And while B Corps pledge to meet, according to B Lab, “high standards of social and environmental performance, accountability, and transparency” it’s not, to B Lab’s own admission, enough. It can’t be.

To create the transformative organization that Willis Harman dreamed about in the 1990’s, organization design theory suggests we must overlap the five stakeholder purposes or circles. In 2001, I called this the ‘Sweet Spot’ – check out that post HERE.

Don’t get me wrong – the attempt to balance profits with purpose (like with B Corps) is a good start. It’s just not enough. And never will be – there is an org design ‘glass ceiling’.

But to end on an optimistic note, there is a solution. We must #ReThinkOrgs and create truly collaborative-based structures. This site is dedicated to that vision. And hopefully, a rallying point for those who share it.

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