Reimagining the point of organisations

Pornography is hard to define but we know it when we see it. The purpose of the firm is similarly hard to define, yet we know what it is not. It’s not just about making profits, unless you’re a particularly hard-bitten Friedmanite or Rayndian. From Goldman Sachs through the Chairman of the Fed, the FT and the Business Roundtable, the purpose of business seems to be swinging back to its pre-1980s vibe. What used to be CSR is now ESG, but it’s hard to know what it means to ‘add value to society’, or other variations on the theme. And in the space where regulators, business leaders and accountants squabble, the status quo continues, companies make money with little regard to the environmental or social agenda that is increasingly in crisis.

Humanocracy, a new book by Gary Hamel and Michele Zanini, has the potential to offer a fresh take on what has come to be a rather narrow debate between the clarity of profits and the feel-good nature of societal value. Rather than suggest that the point of the firm is measured in some external impact on society, it focuses on its employees. The book offers humanocracy as an antidote to large company bureaucracy, but its message can apply as aptly to all companies: focus on maximizing contribution, not compliance.

We need a new organizational paradigm—one in which human beings are no longer viewed as “resources” or “capital.” We must also reframe the problem — the goal is to maximize contribution, not compliance.

Much of the books recommendations are designed to help large corporates move away from rigid processes and internal politicking, and embrace a more agile, startup-type mindset and approach. The modern corporate form is anything but market based, it’s an evolution from Frederick Taylor’s scientific method, which aimed to people to be as predictable as machines, and assumed front-line workers needed to be strictly controlled.