This is something I’ve been thinking about for a while – I think modern organisations – especially corporate ones – have forgotten what they are really for.
History of organisations
Back when people started to organise into collaborative groups, aka tribes, the purpose was initially strength in numbers. Over time, individuals gravitated to the tasks they were best at; and the tribe came to rely on them to get that task done. Whatever someone had a penchant for doing, so long as the tribe found that activity useful in some way – including pure entertainment value – the tribe would adjust itself to allow ways for each person’s special talent (or Genius, in my lexicon) to be used as fully as possible.
As tribes became cultures, and then societies, and then economies, they became too large to operate as a homogeneous whole, and they split into smaller units, each with a need for certain tasks too be carried out, and opportunities for those with a penchant for those tasks to provide value by doing them.
The first real commercial organisations were the crafts guilds, providing a way for talented people to learn a trade and bring their value to the world. From these came small businesses, with a Master taking on Journeymen and Apprentices – still with the purpose of making it possible for the individuals to bring their genius and value to others.
Rise of the Company
Then, at a certain point in history, mechanisation meant that if someone made a large investment in machinery, it was possible to generate more value from the same number of workers. And that was when the focus shifted from collaboration aimed at helping the individual’s talent reach the customer, to organisation aimed at getting the most from the machines in which the owners had invested their capital. Getting a return on capital took over as the primary concern; capitalism had arrived.
For a long time, capitalism played a valuable role in fuelling human development, and made significant contributions to improving mankind’s lot. The returns expected by the owners of the capital seemed justified, given the contribution they were funding to a better life. People stopped dying of preventable disease (in the developed world at least), and life-spans grew longer.
Somewhere along the way, some bright spark had the idea of getting lots of people with money to each put in a bit of capital to buy machinery, build factories, develop new products, all in exchange for a share in the company – in the form of share certificates. So now, instead of one beneficial owner with a clear vision of what the business is there to do, there are multiple owners, who may or may not agree on its purpose.
Add to that the fact that these multiple owners then worked out that if you could get a nice return from a share in one business, you could probably do even better with shares in several. So each owner’s focus became less clear too – a recipe for confusion about what each business was supposed to be achieving.
Trading away purpose
And then another bright spark came up with the idea of an “exchange” where you could sell your shares, so now investors could easily get away from their involvement with the companies if they became irksome to them, or if things started going a bit pear-shaped. And yet another bright spark came up with the idea of putting your spare money (capital) into a “fund” that someone else would run, investing your money for you, in lots of different companies. And finally, a whole bunch of bright sparks came up with the idea of “derivative” investments, so they weren’t even investing in companies at all!
At every stage, ownership and control moved further away from any connection with what the business was actually for. Investors are no longer nobly contributing to something they want to see getting out into the world, they are just too far removed from what’s actually going on inside the companies. The only way they can know if their money is being used effectively is by the amount of profit they see getting paid out as dividends. The profit motive has now usurped the proper purpose of a business.
I believe if you go back to the origins of organisations, the proper purpose of any organisation, whether commercial, public sector or charitable, is to enable those who work in it to use their skills, talents and unique genius to make the world a better place for some group of other people – whether that’s by designing and building smart motor cars, by putting on amazing and amusing entertainment, or by providing the wherewithal to bring clean water to communities in the developing world.
And my question is: how can this true purpose retake the primacy that the profit motive usurped?