Introduction to the Organisation

Introduction to the Organisation

Hass McCook | 16 April 2014

In black-and-white terms, the Oxford Dictionary defines an organisation as “an organised group of people with a particular purpose, such as a business or government department.” This definition allows us to simplify organisations into three broad types with different purposes – For-profit organisations (FPO), Not-for-profit organisations (NPO), and Government organisations or agencies. Whilst the Comprehensive Case Framework is geared towards for-profit organisations, the same thought processes can be applied to other organisations if the core measure of organisational success is considered. Different organisation types, their purposes and their core measures of success are shown in the figure below.

 

Type Purpose Core Measure of Success / “Profitability”
For-profit To earn a profit by providing a product or service Increase of shareholder wealth through the generation and growth of profit
Not-for-Profit To further a cause Securing and growing revenue streams to meet the costs of furthering the cause
Government To administer a specific function of government (e.g. regulation, policing) Adequate administration of a public service within a budget and political mandate

 

The following sections will briefly delve into each broad organisation type, which will provide a useful segue into the profit motive and the nitty-gritty of diagramming.

 

For-Profit Organisations (FPO)

Simply put, a for-profit organisation (FPO) is an organisation whose central objective is to make profit. To put it more bluntly (and possibly crudely), FPOs exist to make their owners richer. Although this statement is quite black and white, it will be discussed in a more balanced fashion and in further detail during the discussion of the profit motive. FPOs can be publicly-traded, privately-owned, and in several jurisdictions, state-owned enterprises (also referred to as Crown Companies or Entities). Although each of these different types of FPOs differ vastly in their ownership structures, size, product and/or service – the buck stops with the owner of the organisation, and if the organisation isn’t profitable, the owner gets poorer. Some examples of different FPOs are as follows:

  • Privately Owned: Ranging from your local fish & chips shop all the way to Richard Branson’s Virgin Group, and IKEA
  • Publicly Traded: Any organisation that has publicly trading stock. These can be microcap companies with a market capitalisation of a few million dollars and shares worth pennies, to the Googles, Apples, and Exxon Mobils of the world, with market value of several hundred billion dollars, and stock price in the hundreds.
  • State-Owned: These are typical natural monopoly organisations, like infrastructure and utility supply. These organisations have a dual purpose of revenue generation and provision of an essential service.

 

Not-for-Profit Organisations

Not-for-profit organisations (NPO), as the name suggests, do not exist to make their owners richer, but to further a cause. Whilst cash flow is as important to an NPO as it is for an FPO, revenue is generated only to meet the cost of furthering the cause. Revenue can be earned through providing services and products to customers, as well as from donors, benefactors and grant-providers. Excess profit is not distributed to owners, but typically reinvested into the organisation to ensure sustained future viability. Similar to FPOs, NPOs vary significantly in their scope and size, with some examples of different types of NPOs below:

  • Charities: Oxfam, Red Cross
  • Activist Groups: Greenpeace, WikiLeaks
  • Educational: Khan Academy, Ted Talks
  • Community Groups: Boy & Girl Scouts, Religious Groups
  • Grant & Scholarship Issuers

 

Government Organisations & Agencies

Government Organisations and agencies exist to carry out a government function of some sort. Whipping out the trusty Ansoff’s product/market matrix, a government may be better defined as a diversified conglomerate organisation, like the Virgin Group, where all organisations in the conglomerate have very different aims and structures. Nonetheless, all of these different organisations provide a product or service for a budget, driven by a voter-approved mandate and are very rarely profit generative. Some examples of government organisations include:

  • The Defence and Police forces
  • Public transportation
  • Immigration services
  • Public Broadcast
  • Emergency Services

 

ansoff matrix

Figure 1 – Ansoff Product Matrix (Ansoff, 1957)

 

Now that that’s out of the way, we can move on to the main driver of the framework – the profit motive.

 

Bibliography

Ansoff, I., 1957. Strategies for Diversification. Harvard Business Review, 35(September – October 1957), pp. 113-124.

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