I was so blown away by the Holacracy Facilitator Training, it was one of the most moving experiences I have been through. I could see myself and the other participants learning and improving every hour throughout the entire 5 day workshop. I highly recommend the Holacracy Facilitator Training to deepen your understanding of Holacracy.
Integrating For- and Non-Profit
August 6, 2010 - 6:43pm
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…
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Comments
Aug 9 2010 - 10:09amBrian Robertson writes:
Hi Josh - Appreciate the clarification; that was actually intended to be part of the implied central message of the post: a suggestion that the financial/legal split between the two is no longer grounded in a distinction that serves, and thus there's utility in removing it. If all entities become legally purpose-driven, and taking on investment is viewed as a minor distinction - no different than you or I taking out a bank loan to accelerate our journey in life - then I don't think a major tax divide along those lines is all that meaningful.
But this also opens up new questions about how we calculate taxes on entities; does it still make sense to tax based on profits retained by the company or paid to investors each year, as the current tax code does? Maybe. Or is there a new structure that becomes more useful/meaningful under this new framework? I'm not sure, and the few thoughts I have are probably good fodder for a future blog post...
Regards,
- Brian
Aug 11 2010 - 4:27amAnna Marie Noble writes:
Hi Brian & Josh -
There is a new legal structure called a "B Corp" that two states have already adopted.
The organization that is spearheading this movement - http://www.bcorporation.net/ - is right down the road from your headquarters, Brian. Check them out!
Aug 14 2010 - 7:17pmTuril writes:
I agree that there is something not totally right about what we have now. And I agree that for-proft and non-profit can be merged into something better.
However, I suggest that the old fashioned idea of "profits" are actually the thing we need to get rid of. The goal of a truly valuable organization or business is actually to give MORE than it takes. When my organization generates more value for the world than it takes from the world, I'm doing something right. When I leave my organization, I hope to personally have LESS material wealth than when I started.
Certainly we want the people who contribute resources to any activity to be healthy (because that's what makes the world a better place to begin with), so everyone who contributes to the success of the work in any way should be taken good care of. We all need nutritious food, clean water, fresh air, warmth, and light, and the freedom to express our excess human byproducts in ways that make us happy. So helping all those involved get these needs should ideally be the priority of any business/organization/program above and beyond any other, secondary goals. And any extra material resources that an activity generates should be directed towards increasing the level and breadth of health for everyone.
This all means that traditional for-profit businesses might not DO much of anyting different, really, except for consciously reframing what they do, so that it's clear how their activities are increasing the level and breadth of health for the most people possible.
Aug 19 2010 - 12:29pmJessica writes:
This is very good as a way to work with and within corporate structures. It is a great answer to the question "how can I work best with the social structures that do exist now and will for the foreseeable future".
If this answer were applied to the question "are these the social structures that best serve our evolution as individuals and as societies", this answer would make it impossible to ask the right questions.
Every single social institution that I can think of "provides something the world needs". But some do more harm than good and some do more good than harm. Some are about as good as we are capable of right now and some are major impediments to our evolution. If we make "provides something the world needs" the sole criteria, then it becomes impossible to even ask the right questions.
In that realm of broader social evolution (in contrast to the realm of work within existing forms), the better question would be "what is the balance of the costs and benefits of these institutions, both the goods and services they create and the types of people we become working within them". And further, we could ask, "is this close enough to the best form for our individual and collective evolution or would some different form serve us better" and "under which conditions, is this the best form and under which conditions would something else be better".
For example, in considering cotton, we might consider that slavery in the South was fading after the US Revolution but was rejuvenated by slavery. We might consider the environmental impacts of using irrigation to grow a crop that requires so much water. We might consider the effects, both good and bad, on people's lives of working in 3rd world textile plants at extremely low wages. Thinking globally, we might examine the overall impact on African development of the availability of inexpensive textile imports.
But if we start from the criterion of "does this provide something the world needs", then it becomes impossible to even ask these questions or to find answers.
Again, there are two paths here for working for the world. Both are valid and helpful. I wish you well on your path.
Aug 19 2010 - 1:35pmBrian Robertson writes:
Hi Jessica,
I appreciate your two paths, though I don't think I'm walking down the one you're suggesting I am. When I say "provides something the world needs", I'm not talking about supply & demand and providing goods/services, or anything like that - although I appreciate that it may sound like I am. I'm trying to refer to something very different - what evolution needs to move forward (not the world, and not us), something that's "trying to emerge", something that serves creativity unfolding into reality; not just fulfilling human demand/desires. See my first blog post for more on this.
I also wouldn't suggest that this evolutionary purpose should be the sole criteria, just the driving focus or goal; Holacracy's power structure and board composition are also designed to ensure an organization honors key constraints of all the many contexts impacted by the organization, such as those you point out. You can find more about the board structure in various resources in our About Holacracy section.
Additionally, you pose a question about what best serves "our evolution as individuals and societies". I appreciate the power of that question, although it's not the one I'm trying to point towards. Holacracy attempts to free an organization to serve evolution - but evolution has been around a lot longer than us humans and our societies, and I suspect will be long after we humans are the leading edge of it. It's this broader evolutionary process that I'm interested in finding better ways to serve; of course while honoring the fact that humans are currently at the leading edge of it. And I believe we're more likely to serve humans better by making the focus not about them, but rather about serving that broader evolutionary process.
Thanks for posting,
- Brian
Aug 19 2010 - 2:07pmBrian Robertson writes:
Hi Turil,
I'd like to dig in to what you posted a bit further; specifically this part:
"I suggest that the old fashioned idea of "profits" are actually the thing we need to get rid of. The goal of a truly valuable organization or business is actually to give MORE than it takes. When my organization generates more value for the world than it takes from the world, I'm doing something right."
I'm not quite sure what you mean - profit is a measure of exactly what you wrote above: whether we've created more value than we've used in the process. What we do with the profit is another matter. One option is to re-invest it to serve a broader purpose and never send a dime to any investor, as many financially-healthy non-profit organizations do - they make a profit by creating more value than they consume, and then put that profit to use as a resource for furthering their purpose. Or we can distribute profits to the humans involved - either employees or investors.
Perhaps you mean we should get rid of distributing profits to investors? That seems to have a few assumptions behind it, including that these investors will use that resource to serve just themselves. Some certainly do, though others live modest lives and re-deploy that capital in ways that serve forces far beyond themselves. I think some in this group actually use these profits for social issues far better than the organization that generated the profit possibly could, in which case wouldn't we want that resource sent to those investors instead of retained by the company? Not to mention, if investors couldn't get profit distributions that would shut-down most investments, which would have devastating consequences on lives around the world.
Or do you mean we shouldn't allow individuals to spend profits in self-serving ways? That would require one hell of a definition of "self-serving", and bring up a whole lot of other questions!
For my part, I think the leverage point lies in shifting the power structure of organizations, such that investors no longer "own" and thus fully control the organization, but rather are in many ways "along for the ride" - welcome to contribute capital with expectation of return, but not free to dominate the organization and take any return they want from the entity. If ultimate control lies not in the investors but in a purpose-driven multi-stakeholder board, then we have a structure which can distribute a reasonable amount of profit to investors, to encourage much-needed investment, while also retaining a reasonable amount of profit to re-invest in better pursuing the broader purpose of the organization.
Regards,
- Brian
Aug 19 2010 - 2:36pmJessica writes:
Brian,
Thank you. Yes, I had misinterpreted what you meant to say.
I read the post you referenced.
"Instead of our desires driving the organization, it is driven by its own unique purpose in life – not just a purpose that’s “all about the people”, but one that is genuinely evolutionary, about helping creativity unfold for the sake of the future."
How do we know the unique purpose in life of an organization? Can an organization have a "bad" purpose?
For the sake of the future of what?
You are wanting to free the organization from our desires. Are there any other constraints that it might need to be freed from? Does the broader society create constraints to free the organization from? Can the organization's own form create constraints?
Aug 19 2010 - 4:23pmBrian Robertson writes:
Hi Jessica,
Here are my thoughts:
"How do we know the unique purpose in life of an organization?"
I think it's a process of listening to reality, getting our own desires and ambitions out of the way, and tuning in to "what wants to emerge". From experience I believe there's a clear and telling felt-sense that a group experiences when it gets to this state and senses such a purpose, though how to reliably shift a group to that state is still an open question for me (though I know there are a few methods out there that may help, such as the U Process). However it's done, with Holacracy it is the job of a multi-stakeholder board to find it - I wrote a little bit about this in my latest article.
"Can an organization have a "bad" purpose?"
Well, as your quotes around "bad" points to, what counts as "bad" is always a function of human meaning-making. Some consider universal civil rights "bad". So yes, there will always be people whose meaning-making labels any given evolutionary purpose as bad. However, if we've truly tapped into an evolutionary purpose, then it will at least be about moving forward in the direction of evolution, which is generally towards more differentiation and more integration, more complexity enfolded in more simplicity, more creativity embodied in the ordinary. And I think that goes beyond human meaning-making of "bad" or "good", and is a more powerful ground to stand on and act from (more inclusive, more embracing, more useful, etc.) - see my blog post The Limits of Company Values for more on this. In short, you might say an evolutionary purpose is never anything but profoundly positive, at least from an evolutionary perspective, though individual humans can and will make meaning otherwise and limit themselves and others in the process.
"For the sake of the future of what?"
Just the future, with no "of what" attached - or, you might say, about evolution's future, about a future that includes more creativity manifest, more complexity integrated, etc., per the above comments about an evolutionary direction.
"You are wanting to free the organization from our desires. Are there any other constraints that it might need to be freed from? Does the broader society create constraints to free the organization from? Can the organization's own form create constraints?"
Yes, yes, and yes, at least so I think. In particular, I think the organization's own form is one of the largest constraints with our present-day organizational structures and power systems. Much of my work with Holacracy is about enacting a major shift in the organization's form to better enable an organization to sense and respond to its evolutionary purpose, using the full capacity of all the wonderful humans engaged within it.
Hope that sheds some light on my thinking, and thanks so much for sparking all of this so I could get it written down and captured here!
- Brian
Aug 20 2010 - 2:35amJessica writes:
"Can an organization have a "bad" purpose?"
Well, as your quotes around "bad" points to, what counts as "bad" is always a function of human meaning-making. Some consider universal civil rights "bad". So yes, there will always be people whose meaning-making labels any given evolutionary purpose as bad.
Let me rephrase the question. Can an organization have a purpose that is counter-evolutionary? If so, how do we tell the difference.
Aug 20 2010 - 10:12amEvan Leonard writes:
This statement of Brian's captures the vital necessary shift for me:
"I believe we're more likely to serve humans better by making the focus not about them, but rather about serving that broader evolutionary process."
The organizations we're living with today are predominantly the product of the achievement driven industrial revolution. Progress was measured by outputs, speed, and scale.
Ever since the 60s we've been reacting to this paradigm, and instead defining ourselves by our relationships and self-identities. We've realized that life isn't "what we make, its who we are".
However, the sad reality is that this liberated self-identity has failed to generate successful practices for organization. For all of the wonderful benefits of self actualization, it has limited us in our ability to work together. As Brian points out, many of the structures from this phase have actually been reactionary band-aids made to counter act forces from previous achievement based phase.
From my perspective, this is where Holacracy comes in. While at the same time honoring achievement and output, and self-identity and relationships, Holacracy challenges us to look beyond -- "to sense" what could be. The practice of Holacracy asks each of us if we are willing to serve something larger than ourselves. And the early findings suggest that when we do, we also find that we feel more self-aware and successful that ever before.
Evan
Aug 20 2010 - 2:37pmBrian Robertson writes:
Hi Jessica,
"Can an organization have a purpose that is counter-evolutionary? If so, how do we tell the difference."
By definition, no; I'm using "purpose" to mean an "evolutionary purpose", which is by definition evolutionary and not counter-evolutionary, or it's not really an "evolutionary purpose". Though I think you're effectively asking if we can mistake human desires for an organization's evolutionary purpose; can we thus come up with something we call the purpose, but which is not actually the organization's evolutionary purpose? I think the answer to that is absolutely yes.
How do we tell the difference? A group might use a process that helps do so (see prior comment), or practices that reveal such a misunderstanding over time and effectively force us to face it (or try ever-harder to self-delude) - Holacracy's distributed governance processes have this effect I think. I also think it is a sense that individuals can develop, and their perceptions about it can be tested out with the perceptions of others - again from my prior comment, there is a distinct experiential "feel" to it I believe. If you're interested in more, there was a topic on this within our Holacracy Community of Practice, and a recorded call where this was discussed in more depth.
On a related note, another question might be: Can an organization actually not have any evolutionary purpose? If that's the case, I think it's usually because we actually don't have an "organization" by the definition I use, just a group of people organized around one or more individuals' egos. Though perhaps we could also have that case when there is a true organizational entity present, but one whose time has come to die (or maybe which already has, even if its shell remains) - in which case perhaps it's time to hospice it to a graceful death and free the energy its using for other purposes.
Hope that helps. And Evan, thanks for adding your comments - what you wrote really resonates with me as well.
Regards,
- Brian
Aug 26 2010 - 3:17pmBay writes:
Brian
I was so excited when I saw this headline because for more years than I care to remember I have been arguing the case that the accounting boundaries are totally misplaced. The assumption is that the drive for efficiency is dominated by the 'for-profit' organisations is incomprehensible simply because their is a greater onus on the other sectors to be more efficient because it is other people's money they are spending - either through people's hard-earned taxes or through people's generosity. This creates a far greater moral obligation to be efficient.
Unfortunately, while I can see this, and I have no difficulty with the concept of an evolutionary organisation, I simply am not smart enough to see how this will hang together in the long haul. There always has to be some sort of 'ownership' - and while I have developed a perfectly viable model for balancing investor and employee interests and rewarding contribution accordingly, I still cannot see how you can eliminate the "what's in it for me" aspect of human nature for the stakeholders' interests to all be harmoniously met let alone accommodate the shift to the evolutionary model you envisgae. One only has to look at the North Sea fishing industry and the deforestation of the Amazon to realise that the decks are stacked heavily against us - perhaps insuperably so.
Am I missing something?
Aug 26 2010 - 4:38pmBrian Robertson writes:
Hi Bay,
I hear that sentiment quite a lot; it's a tough challenge! Rather than try to eliminate the "what's in it for me" aspect of human nature, Holacracy's approach is rather to wrap it in an effective governance process that forces alignment around an evolutionary purpose - even when we humans try to co-opt it for our own ends. It shifts the ultimate locus of authority away from any of us driving the organization (and even away from all of us driving it), and places it instead in the output of a due-process, one which senses and responds to an underlying evolutionary "pull" from reality. Much like our modern democratic governmental processes shift the locus of authority away from any individual driving society, and place it instead in a due-process - though in the case of Holacracy, it's not a democratic process driven "for the people", but an evolutionary one driven "for furthering evolution unfolding".
So a question might then become: how can a process possibly do that? And that's not a question I can answer in this forum - though I can tell you I believe Holacracy and it's governance and decision-making processes enable just that, at least when facilitated well. It's a pretty profound shift and quite a nuanced process, moreso than just the mechanics of the process might indicate, and I believe it has to be experienced to be really felt and understood. For me, this shift is what's most cool and unique about Holacracy. But no need to take my word for it - if you're interested in experiencing how this happens, HolacracyOne hosts introductory workshops with hands-on simulations designed to offer a first-hand experience of this process in action.
Hope that helps, at least a little - wish I could convey more in writing (and I'll continue to try in future blog posts).
- Brian
Dec 2 2010 - 11:12amLisa writes:
I have just found this site, and I love it! This is the only blog I have read so far, but what a great discussion! I have so much to say, I don't even know where to start. Brian, I have been trying to get discussion going around this type of concept with many organisations, networks and forums over the past 10 years in my own circles, so I applaud organisations like yours (Holacracy) for breaking through the boundaries of existing governance and mindset and leading the way.
After having read the book "The Fourth Wave - Business in the 21st Century" a few years ago (written 17 years ago) it was interesting to look around and experience the world of business through a newfound filter. Refreshingly what I saw was that in the majority of cases businesses, both big and small, were pretty much already moving in a positive evolutionary direction, and that business as opposed to government were indeed taking the lead in serving the well-being of mankind.
I have always had a hard time trying to understand the vivid distinction that people (and governments) have set between not-for-profits and for-profit companies. And what I have come to see is that there is a clear attitude of "us and them" along with a notion that if you (or your organisation) sells something with a goal of making lot's of money for private shareholders then you are selfish, ruthless and generally BAD! But if you are a not-for-profit (big or small) and your goal is to raise lots of money for "social good" or welfare, then you are GOOD!
One of my biggest questions has been - who decides what is "social-good" and what isn't. Now maybe I am little naive, and I confess I do not have a University Degree, am not worldly travelled (in fact have never left my comfortable country of Australia), and do not have any real claim to fame, nor fortune, but I truly do feel deep in my soul that people (and organisations are just groups of people) on a whole, are GOOD! And they strive every day to be good. This is something I witness every day.
The simple fact is that inevitably all money raised for the NFP's, in one way, shape or form, comes from a private individual or company (either through direct donations or taxes), so this distinction between the two seems very contradictory since NFP's simply would not exist if it wasn't for profit making entities.
I was excited to have been able to attend the Social Enterprise World Forum in Melbourne in 2008 hoping to find some clarity around my own attitude and confusion on the topic, and while on the world stage I could see a real and exciting shift to a new way of thinking, when it come down to the majority of the individuals in the room (over 500 of them) I was left feeling disillusioned by the ingrained mindset that making money (even if you are a not for profit) is not a good thing!
Seriously, there are a lot of NFP organisations (in Australia anyway) with people working for them that truly believe that being a NFP means the organisation is not allowed to retain a profit and therefore have to spend all their income. And the crazy thing is, that this "welfare" mindset keeps them in a never ending cycle of dependency themselves, which in the end is not sustainable and inevitably of no "social-good" whatsoever.
I have spent many years working with NFP organisations in a financial recordkeeping, consulting and auditing role, and it is very frustrating to witness the poor process and, dare I say it, wastage of money that many of them encounter. Yet they remain in operation and continue to receive "funding" and "donations". On the other hand For-Profit organisations simply do not have this "luxury" (for want of a better word), for them it's make or break, and with a lot more pressure from the government and the public.
So Brian, I think what you are doing is a great thing, and I will definitely keep up to date with holacracy's progress and I look forward to researching more of the information you are sharing here on the site. I trust intuitively that the world is ultimately heading in a positive evolutionary direction, and it's finding movements like this that continues to confirm my belief. It is certainly an amazing time to be alive.
-Lisa
P.S. Sorry it was such a long post, I obviously had lot's to say, so thanks for the opportunity :)
Dec 2 2010 - 1:15pmBrian Robertson writes:
Thanks for posting Lisa, really glad you found us! Everything you wrote really resonates with me as well. We'd love to get an event going in Australia as soon as there's enough interest down there, so perhaps we'll have a chance to connect in-person if/when that materializes. In the meantime, let us know if there's anything HolacracyOne can do to help you on your journey!
- Brian
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Brian Robertson
Brian is an experienced entrepreneur, CEO, and organizational pioneer. His work with Holacracy™ has found international support within both the conventional business world and cutting-edge movements and thought-leaders.
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Though you make some good points, I think it misses that point that profit vs. non-profit is a financial stucture issue. In order to become a non-profit, you file with one entity, the IRS. Though your points are all valid, they do not address the diffeneces in fiscal contructs. I see the issue as a financial one, each can be run/goverened any which way (mostly).
Let me know if I missed something.