Most people will recognise that the primary purpose of a commercial organisation is to make a profit. Some commercial ventures such as charities may not seek to make a profit in the most traditional sense, but still, the funds through which they do their work are generated by the same means as those organisations that are seeking profit.
Profit is a contentious thing in the world today, largely because of the disparity between large multinational corporations and the little guy. I think it’s worth spending some time exploring this argument.
A description of profit taken from Reinventing Organisations is this, “profit is like air; we need air to live, but we don’t live to breathe.” My own personal definition of profit is this: profit is not merely the mark of a robber baron, but an acknowledgement by the end consumer of the value added by each person prior to the consumer’s purchase.
I would suggest the issue most people have with profiteering organisations today is that faceless multinational corporations, non-describe shareholders and the pursuit of profit maximisation do not show any appreciation for the human endeavour behind that profit. Whose value am I acknowledging when I purchase a product off Amazon? Whose value is a homeowner acknowledging when they pay off interest on their mortgage? It’s not that there isn’t value to be rewarded, just that there’s no obvious person to reward. Profit has become disconnected from its purpose, in this regard.
Or consider it another way. If profit is like air, what does profit maximisation make you think? To me, I conjure a picture of many smartly dressed people desperately clawing at clouds until there is only one left, and the others have suffocated. Then I ask the question; can one person breathe more than another?
Profit as air is the business perspective, whilst not living to breathe is the social perspective. Profit as recognition of value is the economic – or at least political economy – perspective. All three of these perspectives are important but none should be considered in isolation. This will be a theme of this presentation.
Of the ideas Reinventing Organisations tackles, competition is one of the subtler. What’s interesting to me is the idea of competition within an organisation. When I read the book, I drew a picture, and wrote some annotations. This is basically what I drew.
Firstly, I said there’s a limited quantity of stuff. This assumption is obvious. In a competitive environment, only one person can win a race. Next I said if our organisation’s aim is to build as many towers as possible, out of the limited stuff we have – stuff is a technical term by the way – then competition works. But if our organisation’s aim is to build the highest tower, then competition drains resources, and in fact co-operating is better.
But if you think about this model, there is a glaring flaw in it – namely, if we want to build the most towers, isn’t it still better if we co-operate? Together, we can plan the most efficient pattern of construction, the best way to split resources and so on. Together we can make big decisions that in isolation we can’t even start to ponder.
Ultimately, it’s what we strive to do that should influence how we do it. And there’s almost no organisation on the planet – except maybe some banks (don’t get me started) – that actively work against their own self-interests. Of course, it’s important to understand what an organisation’s ‘self-interest’ is, because I think that’s an innately vindictive term.
My proposition is this: a company’s ‘self-interest’ is essentially its ‘purpose’, and succeeding in fulfilling its purpose requires profitability, for profit is air, and co-operation, for what we strive to do should inform how we do it.
My go to way of thinking about these things is via a constructed model. I think of these three things, purpose, profit and co-operation (I couldn’t think of a third ‘P’ word) as being cyclical. But this model still feels reductionist and removed from the real organisations discussed in Reinventing Organisations. My solution is to use profit and competition.
Specifically, I want to think about what organisations in the book do for their employees. This idea is touched on in The Puritan Gift by Hopper; the idea that managers should know what their employees want to achieve to allow them to better manage the employee. In Reinventing Organisations, we are asked to go beyond understanding and to actively encourage our staff to pursue their goals, with company interests not directly in mind.
When an employee does this, whether they are encouraged to or not, I call it self-profiteering. Primarily we work to earn money. When we change the way we work, without a change in our compensation structure, we are earning something else. This is self-profit, and it can be destructive. In fact, I’d suggest in some industries – banking, cough cough – this is why we see so much intra-company competition. Your standard company’s battle over departmental budgets is another prime example, often with department heads jostling for efficiency savings, and the benefits that come with that…
This competition, as shown prior, degrades the company’s purpose, and ultimately its profit. So why is it a good idea to encourage it? Because when an organisation takes an employee and treats them merely as a cog in a system they become atomised, and disconnected from the purpose of the organisation. This is the result of oppressing staff ambitions. When we engage in our staff in their future ambitions, their additional skills and, to an extent, just as people, we can bring people from all different areas of the organisation to the table – perhaps metaphorically – so they not only know what they’re doing and how they contribute, but importantly why they do it. How is their role helping the company, and how is the company helping them?
This is how profit becomes a way of acknowledging the value added by all people involved. It might not be an explicit social contract, nor a negotiated financial agreement, but it’s a meaningful, human reward.
Not only does adding in the idea of encouraged self-profit make the model feel so much more human, it also allows us to look at organisational hierarchies not as vast pyramids but as close, human networks. We can pick any individual and trace how they inform the company’s purpose, how they help others, and they contribute to profit and importantly what they get out of the whole arrangement.
I want to conclude with asking a question that I think is important: where next? The ideas I’ve spoken about have, in my opinion, sounded obvious on one level and very utopian, pie-in-the-sky on another. I refer you to Reinventing Organisations for answers to both these points: firstly, much of the book is obvious, and the perversion comes when we ask how the technocracy of modern large business has emerged, and secondly, the book demonstrates organisations that have these ideas already exist, and can be successful. If my ideas are pie-in-the-sky, well, that’ll make for a weird view.
The reason I ask where next is because two of the organisations referred in the book are Buurtzorg, a Dutch healthcare provider, and ESBZ, a German school. Not only are these both examples of sectors of extreme public relevance embracing these ideas (and so I would suggest worthy of inquiry for public benefit, even if no result is found), but they are sectors that we, as a country, are struggling to operate at this present time, and in the future.
Please do not for a moment think that I am proposing a resolution to the crisis in the NHS by distributing copies of Reinventing Organisations to every senior manager in the NHS; but the success of Buurtzorg in the Netherlands should not be underestimated. Equally, ESBZ seeks to encourage their students to become independent thinkers, to be creative and to engage in the outside world. In a future of increasing automation, increasing online presence and increasing mental health challenges amongst younger people, it is perhaps wise to ask why this school works so well, and what benefits can it provide for tomorrow’s, if not today’s children?
I don’t have the answer to these questions, but a good presentation should leave the listener questioning something. I question how the ideas in Reinventing Organisations can be applied to the world of finance to make a more stable and more suitable banking system. You will have your own interests. But let the book inspire questions. It’s not a manual. If the key to business success could be written down, business schools would be libraries. It’s an idea, one that places people – us – at the heart of it.