What organisations have in common

Iguanas and crabs

One of the basic premises of the Escondido Framework is that underlying model is applicable to a wide variety of organisations. This reflects my own experience working in a variety of different contexts: private sector companies; public sector organisations; an organisation representing the interests of a membership; charities; sports clubs and associations. It is also an unavoidable consequence of the logic behind the framework: that organisations exist because they are able to create value more effectively through a collection of embedded and integrated processes and long term relationships and non-market processes than by a sequence of discrete independent market transaction; and that in doing this they exist in a virtual space bounded by a number of interfaces with external parties.

Organisations vary in the type and character of the external market interfaces with which they interact and which provide their boundaries, but this not take away from what they have in common. Sources of funding – for both operational capital and for income – vary. Classical firms have shareholders and lenders for their capital, and customers providing income. Membership organisations have membership subscriptions. Public bodies may depend on grants from other public bodies or government which in turn rely on the decision of a treasury function and ultimately on popular consent. Charities relies on donations and grants. Organisations of different types may also have secondary income sources that are the primary income sources of another organisational type: the public body or charity with trading operations and customer; the membership organisation that is supported by public or charitable grants; commercial firms that receive grants (including tax breaks that have the effect of grants) from public agencies for capital or to improve the profit and loss account (either supplementing income or reducing the cost base).

The model applies equally to the subsidiary organisation within multi-tier structures. The subsidiary firm within a multi-business corporation will have a different relationship with its supplier of capital to the one that its parent company may have with its shareholders, but the subsidiary’s management will (whether consciously or not) shape its bids for capital against criteria set by the parent in terms of risk and return; and the approach taken to shaping budgets and trade-offs considered in seeking to meet corporate targets are analogous, if not directly similar to those of the parent company’s management in positioning the company against the requirements of shareholders. A similar argument applies to lower level public bodies that have one or more tiers of organisational structure between themselves and the responsible government body.

The tendency of organisations, and certainly of the people working within them, to adopt a purpose that includes the survival of the organisation is common to all. It is not universal in any of the organisational forms: firms may be established for specific project or to deliver a specific outcome. Indeed, one of the earliest forms of commercial enterprise was the maritime merchant venture of the early modern period with shares parcelled out in 64ths. And government backed projects may be time limited, with a defined purpose and winding up arrangements: take the delivery of an Olympic Games for example. But in most cases, the organisation takes on a life of its own and, more critically, the management team measures its success against the sustainability of the organisation. Furthermore, in the absence of adequate governance all forms of organisation are at risk of being captured by the management or leadership who, at the very least, can be conflicted by their own interests and their judgement compromised.

One consequence of the commonality between organisations of different forms is that valuable lessons can be transferred, albeit with sensitivity to the context.  What can be learnt from organisations with apparently different corporate form or purpose about managing the external market interfaces (negotiation, marketing, communication), about improving the internal operations including making the most of the “dark matter” inside the organisation, about strategy and about governance.

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