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Most of the economic activity of the modern society and economy is done by some 'organization'. Rather little is done by individuals on their own. There are many different structures for organizations. One big segmentations is:
- Public Sector
- Government
- Para-Statal Organizations
- Private Sector
- Profit maximizing enterprise
- Cooperatives / Mutual organizations
- Not for profit organizations and NGOs
- Religious organizations
- Social business
The profit maximizing enterprise. The profit maximizing enterprise ... the engine of the modern economy has a dynamic that seeks the maximum of profit and the maximum of stockholder value. Though a good organization would work to have great stockholder value that is sustained over time ... the way capital markets work, it behooves the management and decision makers to focus on short term value even if this consumes long term value.
While the score-keeping was rigorous and relatively simple fifty years ago ... modern corporate score-keeping is now the subject of all sort of rigging ... no relative of rigorous. The law and rules have allowed all sorts of practices that have helped make it possible to have reportable profits on top of enterprise activities that have been catastrophic.
Bluntly put ... a lot of this has been fraud, even though it has been “legal”.
The not for profit charity or NGO. The not for profit or NGO (Non Governmental Organization) has a very different dynamic. Job one is the survival of the organization, and for this a constant flow of funding to support the activities is crucial. There are a lot of activities that are done to support this priority ... including the production of monitoring and evaluation reports that satisfy the funding organizations, the donors.
The organization must do some of what the donor expects them to do ... enough to be able to show the donors that the activities being funded are taking place. Nobody is, however, looking at cost efficiency and assessing whether or not the spending is resulting in a high or low level of activity. Nor is anybody looking at the results and assessing cost effectiveness in a rigorous manner.
While the mission of the private charity or NGO may well be laudable ... this does not automatically translate into a well run organization that is both cost efficient and cost effective. These metrics are usually missing.
The social business. The social business has a different dynamic. The operations of the business may be highly profitable ... but the resulting fund flows are used to expand the operations to serve more of the market rather than to reward stockholders and maximize stockholder value. The business model helps to make best use of technology and resources to get the maximum of productivity. The social dimension aims to provide the most of value to the community by scaling up the operations as effectively as possible and as fast as possible. The sustainable business means that the enterprise is sustained not by donors, but by the market.
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