If an organization is a living system, is it appropriate for anyone to own it? Would it be more appropriate to see it as something we bring into the world and steward, like a child? How might that work, legally and financially?
These questions came up recently as I was writing a chapter on living organizations. More practically, they also came up as my partners in a new venture and I struggled to find a legal structure that fits with the living systems views at the heart of our work.
What followed was an exploration into emerging forms of ownership – what Marjorie Kelly calls “generative ownership models” in her new book Owning Our Future: The Emerging Ownership Revolution. In the book, she documents the experience and remarkable success of organizations around the world that are structured in new ways. These new models, she says, are focused on “creating the conditions for life,” in contrast to the dominant “extractive” forms of ownership.
The need for a revolution in ownership stems from four problems (as I see it):
· Structure: As in architecture, organizational ownership structure has a strong influence over behavior. This is why – aside from rare exceptions - we see consistent, sub-optimal patterns of behavior in each of the major types of legal structure.
The structural message of for-profits is: the organization is an “it;” it exists for itself.
The structural message of non-profits is: the organization is an "it"; it exists for others.
And the structural message of co-ops is: the organization is "us"; it exists for us.
As a result, for-profits are stereotypically predatory and inhuman... non-profits are assumed to be slow and chronically underfunded... and co-ops are too often sleepy and internally focused. We can work differently in each of these structures, but it takes extraordinary effort to work against the nature of the design. The question, then, is: are there alternative structures that more naturally and consistently lead to the behavior and outcomes we want – and that integrate the positive structural messages of each of the existing models?
· Growth: Employee-owned companies may seem like the obvious solution, inviting broad stewardship and including employees in ownership of the organization. B-corporations are another promising model, incorporating social mission directly into their charter. But in both of these cases, as with all equity-based models, there is still the problem of constant pressure to grow. Increasing share value is the great promise of stock ownership, after all. And that requires continuous growth. The demand is multiplied in employee stock ownership models, which must not only increase share value but also endlessly generate excess cash to buy out the shares of any departing employees. The reality is that humanity cannot continue to grow its every enterprise incessantly; as it stands, we have already exceeded the carrying capacity of the planet. Certainly, growth is a natural urge of all living systems, including human organizations. But what new ownership structures might we imagine that would include the concept of “enough”?
· Ethics: There is also a moral question to consider. An organization usually consists of multiple people with immeasurable passions, ideas and contributions. It consists of patterns of relationship, context in community and unique history. How can some few people own that? More to the point, how can they sell it? Isn't it in some way like selling people as slaves?
· Stewardship: I also wonder if, paradoxically, ownership gets in the way of the kind of wise stewardship that’s needed in organizations and society. If I looked at my children as my property, it would fundamentally change my approach to parenting. Instead of ownership, I have responsibility. I'm serving them and I'm also serving society - my goal is to raise good citizens. When I think of owning an organization, it’s easy to lose sight of the broader responsibility part. It becomes even murkier when there are absentee owners whose interests are primarily financial. What structures would more powerfully reinforce a sense of responsibility to serve individuals, the organization, society and the biosphere?
In Owning Our Future, Kelly shows that new structures are indeed emerging around the world – structures that lead naturally to high engagement among customers, employees and community; that support responsiveness and agility; that honor the life within the organization; and that encourage responsible levels of growth. In the inspiring examples she describes, ownership is either broadly distributed among employees - and often other stakeholders, too - or it is held by a foundation or in a trust. In every case, broad stewardship is baked into the organization’s DNA. Notably, each is also successful according to traditional financial measures.
The UK’s John Lewis Partnership, for example, is 100% owned by employees. Individual shares are not owned and cannot be sold; instead, overall ownership is held in trust on behalf of all current employees. Profits are shared as a percentage of salary. With US$13.5 billion annual gross revenues, 81,000 permanent staff and a powerful culture of participation and engagement, the company is hailed as a testament to the power of such new models.
If we follow the trajectory – from ownership by a few, to ownership by many, to ownership held in trust – can we look ahead to imagine that a living company will come to be considered part of the Commons... something we bring into the world, like a child, for our benefit, for its own benefit and for the benefit of all life on the planet? This is not a call for the dull impotence of communism – in the examples Kelly provides, profit-sharing and decision-making privileges remain with those involved according to formulas they design. And the market results are at least as dynamic and powerful as traditionally capitalist approaches. But what if the legal entity came to be something held in trust on behalf of the individuals involved and the community? Indeed, “held in trust” seems an appropriate phrase considering the shift that’s needed, in business in particular.
Ultimately, what unites all the organizations Kelly describes – and every example of a for-profit, non-profit or co-op that breaks the structural mold – is a deep-seated intention to serve life. It’s also the ability to hold the paradoxes this involves. Living systems involve collaboration and community, but also predatory behavior and competition. Individual organisms serve their own needs, even as they serve the needs of their ecosystem. It takes wisdom to integrate all of these seemingly conflicting goals within an organization. The revolution Kelly describes is, most of all, a search for organizational forms that support such wise perspectives and actions.
In the next post, I’ll explore what all this might mean for my own new venture.
Until then, I’d love to hear your thoughts, experiences and reactions.
[My thanks and acknowledgement to fellow Next Edgers for contributing to these thoughts in a recent Facebook discussion; in particular, Bernd Nurnberger, David Braden, David Eggleton, Jordan Greenhall, Mark Frazier, John Kellden, Seb Paquet, Troy Camplin, Jim Rutt, Irma Wilson and Dibyendu De.]