Integrating For- and Non-Profit
Humans have a wonderful tendency to make distinctions where
underlying reality has no such boundaries. Some of these
distinctions prove useful for a time and become unquestioned
givens – new definitions or categories that we believe are
reflective of a fixed reality, rather than temporary
constructs of human meaning-making. Eventually though, all
distinctions outlive their usefulness – and when that
happens, evolution’s challenge is to draw new boundaries to
collapse and integrate what we previously thought of as
fixed opposites. One such distinction I see as no longer
useful is the divide between for-profit and non-profit
organizations.
We’re used to thinking of for-profit companies as existing
to generate profits for shareholders, while non-profits
exist to serve some social good. Our governmental and legal
structures are all setup within this mindset. There are a
few progressive movements today trying to add a third
category of “for-benefit” companies, which exist for both
purposes, yet that requires a more granular definition of
what “social benefit” means – what to include and exclude.
And that’s when things get messy, at least if we pay
attention. When we follow this definition exercise to its
logical conclusion, I think it reveals the limits of the
entire distinction.
As I see it, the vast majority of organizations today are
already doing the work of the world. Virtually every one of
them is already playing a role in unfolding evolution,
advancing society, providing something the world needs –
that’s already in their nature. Cotton was once limited to
the garments of kings, and now it’s providing more sanitary
clothing in the poorest African countries – and I doubt the
for-profit cotton farmers and loom-makers that contributed
to this evolution really had a conscious focus on this level
of greater good. They just did the work reality called them
to do – and that was of benefit.
So, aside from fringe cases (the Enron’s of the world), how
can we possibly make a reasonable distinction around which
organizations are “doing social good” and which are “just
generating profits”? What organization isn’t doing the work
of the world in some way, to some degree? And what
organization can afford to ignore profit – that is, an
overall economic indicator of whether it’s building more
value than it is consuming in the world? But instead of
trying to define yet-another artificial category of the
“for-benefit” company, perhaps we’d be better served by
collapsing them all back into a single entity type that
integrates all of these distinctions, and frees each
organization to contribute to our shared journey to the best
of its capacity.
Holacracy enables this collapse and integration with its
shift to a transpersonal model of
organization. Whether or not there are investors
involved, its organizing system aligns all activities around
realizing the organization’s broader evolutionary purpose.
This can be legally-encoded in an organization’s bylaws or
similar governing documents, which will also shift the board
from entirely shareholder representatives to a
multi-stakeholder board that stewards the organization
towards its purpose. Its structure also honors the need to
optimize profits (in balance with other considerations). If
investors are involved these profits provide them a needed
return, and if no investors are involved then all profits
can be reinvested in better pursuing the purpose. The old
for-vs.-non-profit distinction now becomes a relatively
minor one – instead of a major difference in both the
fundamental intent and control of the organization, it’s
simply a question of whether the organization has taken on
an investment obligation to better pursue its purpose.
With this shift in place, it is no longer relevant to talk
about the “owners” of the organization, any more than it is
relevant to discuss who owns you or me – we certainly do
have economic responsibilities to the individuals and
organizations that help fund our journey, but we are not
owned by them, laboring simply to bolster their profits.
And nor would it make sense for us to be – history has
shown that relying on slave labor isn’t as economically
advantageous as a free workforce. Holacracy offers this
liberation to organizations doing the work of the world.
Its self-organizing structures and integrative
decision-making effectively frees an organization to govern
itself, to find its own unique purpose and follow its higher
calling. And, I believe, to generate better economic
returns for those who provide needed resources along the
way.
Looking at the bigger societal picture, what might it look
like to legally integrate this distinction between
“for-profits” and “non-profits”, while capturing the wisdom
of each? I think it looks like requiring corporations and
other entities with limited liability protection
(“personhood” status) to use a purpose-driven legal power
structure, like Holacracy, in lieu of the current control
paradigm as a condition of receiving personhood treatment.
And what then would happen to the many societal systems
designed to rebalance the externalities and injustices
created by organizations pursuing profits at the expense of
other important considerations? Environmental laws, labor
laws, unions – all have their roots in compensating for the
limits of the current paradigm, and a good percentage of
lawsuits today are specifically to counteract for its
unwanted side-effects. Once we legally orient around
organizations as purpose-driven entities doing the work of
the world, what old systems are no longer necessary… and
what new ones might emerge? I’d sure like to find out…
