For-Purpose Enterprises are the organizations of the future. Their structure goes beyond employment and aligns the people structure and the legal structure of an organization with the heart of it: doing meaningful work based on the Holacracy operating system.
Combining the Organization (the work structure), its Association (the people structure), and the Company (the legal structure), Thomas Thomison created the Self-Organizing Enterprise with encode.org. In a first iteration of the concept they already changed the name to For-Purpose Enterprise to better reflect the pivotal role that purpose plays in this construction.
In this article Thomas Thomison explains how the Association and Company can be established in a way that creates the possibility for Purpose Agents to work in multiple For-Purpose Enterprises.
It’s all about the work of the Organization
“So the Organization and the purpose are the most important. That’s where I started with Holacracy ten years ago. It was to upgrade organizations. Figure out how to make them self organizing, replace managerial hierarchy and to replace the fundamental structure of organizations’ work. I have been doing that for ten years now. But we’ve been seeing some loopholes. We left behind the people system and the legal system.
In the current world of work we’re being held personally, people can get trumped, we have employees that are slaves or servants to employers and we have labor laws. All kinds of authority out of our control. So what we want to do, as encode.org is doing, is to upgrade these two systems to get it more aligned with the Organization system.
Although in the model the three containers seem to be equally important, the Organization is the heart of this model. The legal structure and the people structure are supporting the Organizational structure. Also, for an Organization to express work, what does it need?
- Skill and talent (people resources)
- Assets (capital resources)
While they are secondary in one regard but also necessary because without them the Organization can’t pursue its purpose.”
“Just like for the Organization we have a ruleset for the people structure. A ruleset upon which we’re going to interact with each other as a collection of Purpose Agents.
It contains some core behavior norms and some Association specific norms. And it contains a tension processing agreement. You can see the Association Agreement as the rules of the road for the people.
Another Agreement here is the founding member agreement. This one is necessary if the organization starts from scratch. It’s an alternative pathway for founders to come together, dealing with the problems right from the start with owners, founders, ego, legal structures and ownership. It’s used to structure the launch of the for-purpose organization and deal with startup issues.”
“In order to be interconnected, everybody has to play by the same set of rules. So that no matter where you show up in the world working with whatever legal entity, you can pursue purpose.
There may be different legal underpinnings, for Dutch law for example, but the same capital structures, membership units, and the same basic principal agreements apply.
It’s what we call the Dynamic Capital Structure. It’s suitable for all For-Purpose Enterprises. The capital structure is defined by membership units, or classes of stock if you will. In a For-Purpose Enterprise, we have classified 4 units:
- Long-term capital interest (C)
- Profit interest (P)
- Deferred Interest (D)
- Dynamic Allocation Interests (A)
This allows for dynamic equity. The units are found in the Property Agreement and they’re used to manage the capital needs of the Company. Every For-Purpose Enterprise has these four units defined. So we’re creating a global business language for legal structure.”
For-Purpose: you start with Holacracy, this is beyond
“We can do all this only after you’ve been practicing a distributed authority system like Holacracy. So only when we make the key distinction that an organization is not the same as a group of like-minded and passionate people. And we eliminate the need for managerial hierarchy and we no longer hold power personally. It shifts our perspective and gives us new perspectives to take, to address old problems differently.
It’s after a decade of practice that I now feel comfortable reintegrating these other two systems from a different perspective.”
Learn more about encode.org here
Thomas Thomison working with Dutch lawyers on the legal structure for Energized.org.