What is the For-Purpose Enterprise
The For-Purpose Enterprise is an innovative new approach to structuring your venture.
It is not designed for business as usual. It’s for organizations of the future.
This framework has 3 containers which are aligned on purpose.
The people in this structure are not employees, they’re Purpose Agents.
An unfinished journey towards self-organization
The journey towards self-organization started with Holacracy. A framework to organize work in a self-organizing way.
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. But organizations did experience some loopholes.
What Holacracy left behind is the people system and the legal system. That’s why encode.org created the For-Purpose Enterprise.
Thomas Thomison from encode.org about work:
“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, is to upgrade these two systems to get it more aligned with the Organization system.”
In the For-Purpose Enterprise you see three contexts: The Organization, The Association and The Company. Each context serves to express purpose in their own way. They are overlapping, co-arising contexts which makes the For-Purpose Enterprise a dynamic structure.
About ‘The Organization’
Holacracy is the name of the game in the Organization container with the Holacracy Constitution as its ruleset. In this container the work for purpose gets done within circles, roles and accountabilities.
Although in the model the three containers seem to be equally important, the Organization is the probably where most of the energy goes. 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, they are at the same time necessary, because without them the Organization can’t pursue its purpose.
About ‘The Company’
In order to work in an interconnected way, everybody has to play by a similar set of rules. This way, no matter where you show up in the world working with whatever legal entity, you can pursue purpose across various For-Purpose Enterprises.
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 in all For-Purpose Enterprises, across a growing number of jurisdictions.
It’s what we call the Dynamic Capital Structure, defined by membership units, or classes of stock if you will. In a For-Purpose Enterprise, we there are four types of units:
- Long-term capital interest (C)
- Profit interest (P)
- Deferred Interest (D)
- Dynamic Allocation Interests (A)
This allows for dynamic equity. The units are encoded in the Membership Agreement and they’re used to manage the capital needs of the Company. Every For-Purpose Enterprise has these four types of units defined. They can be used as new, more flexible financial vehicles between For-Purpose Enterprises. The For-Purpose Enterprise is creating a global business language, expressed in its legal structure.
About ‘The Association’
This you could say is ‘the people structure’. The Association holds the personal and interpersonal contexts.. The Association Agreement is a ruleset upon which we’re going to interact with each other as a collection of Purpose Agents that happen to resonate with and align around a specific purpose.
It contains some core behavior norms and some Association specific norms as well as 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, addressing the problems with founders, ego, legal structures and ownership right from the start. It is used to structure the launch of the For-Purpose Enterprise and deal with startup issues. It honors the individual contributions of the founders, outlines the initial purpose statement and paves the way for creating an Operating Agreement – all the while preventing personal power-holding from taking root in the Enterprise.
About being a ‘Purpose Agent’
Thomas Thomison “A Purpose Agent is something different than an employee. Even different than an enlightened employee working for an enlightened organization. When we have a For-Purpose Enterprise that is structured legally and organizationally for purpose, then that means our relationship to that thing changes and instead of being employees or subcontractors we actually become independent agents of purpose.“
A Purpose Agent becomes self-organized by choosing where to spend his or her time energy and talent towards purposes that he cares about. As an individual a Purpose Agent wants to be attracted by a purpose greater than himself and wants to help bring that purpose in the world.
The Purpose Agent is always part of the three containers, so via his or her financial shares, a long term legal relationship and also by being part of the Association, the collective of individual Purpose Agents are sharing the same purpose.
This framework makes it possible to be in more than just one For-Purpose Enterprise: it enables a network of interconnected purposes and enterprises.
We published two interviews with Thomas Thomison of encode.org about the For-Purpose Enterprise: