Essays on Management: Organisational mission and purpose

Organisations need to define their core mission and purpose and only then can they define what products or services they can provide and what competencies they need to develop to do so.

To define an organisation’s purpose requires answers to two basic questions. The first is “in whose interests are we acting?” For a business this may be customers and for a university it might be students. The second question is how to add value to those whose interests are served.
This in turn allows an organisation to define its objectives and how to achieve them. A failure to answer these questions and to tightly define objectives means an organisation will lack direction, focus and effectiveness. This does not mean an organisation cannot have multiple customers or objectives, however they should never be conflicting or be so disparate as to have no affinity. Fisher and Paykel split its whiteware and its medical electronics businesses when it realised how disparate its markets were. Medical electronics is a highly specialised and regulated market with technically demanding purchasers in hospitals around the world. It is akin to a producer rather than consumer good market. Whiteware is a mass consumer goods market that is price-driven element, has modest value for weight, is as much metal and mechanical as it is electronic engineering and has quite low R&D intensity. Splitting out the two businesses clarified both the market focus and the innovation management needed to support it.

Defining an organisation’s core purpose is easy; translating that core purpose into operational practice is harder. A hospital is there to look after the patients and schools are there to educate children, however it is easy to lose sight of this.

Many organisational disasters occur when organisations look inward, and lose sight of their core mission. This occurs because they lose touch with their external customers, they fail to retain past learning, or they surrender to new bubbles or herding behaviours.
Boeing got into financial trouble because it shifted its core purpose from making great aircraft to trying to improve its financial returns. The Development Finance Corporation (DFC) was established for an economic development purpose, in effect an industry policy intervention. It was intended to deal with market failure such as lack of early stage, development capital, including for businesses seeking to develop export markets. Such businesses were still below international scale even if they dominated New Zealand market niches, and they struggled to bear the cost and have the patience and financial staying power to learn about and overcome barriers in international markets and successfully compete in them. DFC failed catastrophically when it moved into commercial banking.

The difficulties the ACC faced in 2012 resulted from confusion over its core mission. Was it a risk shifting insurance agency, a rehabilitation agency, or something in between? Zealandia began as the Karori Wildlife Sanctuary, a volunteer-driven environmental protection initiative without a business structure or commercial mind-set. Key inputs included people donating time or money. It then morphed into a tourist-influenced venture with significant public investment and a corporate structure creating a demand for gold-plate to replace the widows’ motes. In doing so it crowded out the volunteers’ intrinsic motivations. Not surprisingly it rapidly got into financial difficulties and faces ongoing risk of loss of community support.

AgResearch CRI lost its way in the late 1990s when it decided to move from its core pastoral farming focus to become a life sciences company. This was a time of tipsy euphoria about a weightless “new economy” of dotcoms and biotechnology start-ups. It led to some shifts in funding in the New Zealand science system to what was akin to venture capital funding for businesses. AgResearch was developing a vision of becoming a San Diego-based or listed life sciences company. Inevitably this vision collapsed and AgResearch under new leadership returned to its core mission. However by this time it had lost some core competencies in areas such as forage plant breeding and this loss takes time to recover from.

Non-profit organisations are challenging because they have no paying customers nor profit metrics to measure their performance. However they still need to define their core business, their constitution, structure and management. Iwi organisations may be whakapapa-based, however they still need professional governance and management structures and processes.

To stay focused and coherent an organisation must understand and adhere to its core mission as it relates to external stakeholders. Organisations need continuous renewal of their competencies and ability to respond to how the external environment is changing. They also need sometimes to change their core mission. This is challenging because it means understanding what external changes are fundamental and what are blips, to see what are secular rather than cyclical trends, to be immune from the latest bubble or social craze, and to be able to work out what parts of existing mission and capabilities should endure and what should be discarded.

An organisation’s purpose is codified in its constitution or empowering statute. This defines what it can and cannot do legally and constitutionally. In any organisation there must be purpose, mission and movement forward and not just compliance with a formal constitution. The translation of this into operational practice is challenging. This requires mission being translated into learning and into the application of that learning into practice. Therefore, to deliver on their purpose, organisations should be designed to facilitate information flows and learning. Organisations that are information-organised and managed can rapidly cut out many management layers and accelerate speed of response to change and to new opportunities, and this feeds back to ongoing evolution of why an organisation exists and how its focus may need to change.

The need for focused purpose therefore interacts with communication and learning and how this drives organisational design and structure. While there are good arguments to structurally separate funding from provision, the split between policy and funding popular in last century’s public sector management reforms failed for two reasons. Firstly, it impeded communication so policy people were too divorced from operational reality and operational people were not able to engage with and influence policy. Secondly, people identify in groups and struggle to see beyond organisational boundaries to the wider purposes they should be working for.

Is it meaningful to think in terms of a country’s mission or purpose? Countries group individuals united by geography, shared legal frameworks and ethnic, social and cultural affinities. However differences within a country can be as great or greater than those between them. Ethnicities, cultural, religious and other identities overlap in myriad ways and traverse geography and citizenship affiliations.

Countries as well as organisations may seek to define their core mission through their constitutions. In the absence of a US-style supreme constitution, different organisational purposes collectively help make up part of a country’s constitution and are therefore fundamental to how societies function. Special interest groups, iwi and other Maori organisations and sports clubs must all define in their constitutions what their organisations exist to do and what they are accountable for. In 1985 the NZRFU was challenged in court on whether an All Black tour to South Africa was in rugby’s interests. The legal injunction served when a non-governmental organisation seemed about to violate its own constitution, that is its own purpose and reason for existing, helped end New Zealand’s sporting contacts with the South African apartheid regime.

The Treaty of Waitangi may have questionable status in New Zealand’s “constitution”, or rather in the myriad laws, regulations, organisational purpose statements and articles of association and common law principles that make up a collective constitution made up of hundreds of thousands of parts. The Treaty is our founding document as a British colony, and the 1986 Constitution Act marked the point where our sovereignty had been progressively shifted from the Crown to our elected Parliament. Since then, Parliament has been sovereign.

However, the constitutions and associated laws, regulations and common law principles around our iwi and other collective Maori entities and natural resource rights, together with illusive “Treaty principle” references, do mean Maori interests are thoroughly woven into our constitutional fabric. New Zealand’s “multiplicity of constitutions” therefore expresses organisationally how history’s hand, our ancestors and we ourselves have chosen to organise ourselves to do collectively things we cannot do individually. The fact that we are one of the world’s most successful societies and economies suggests soundness in our many organisations and their constitutions reflecting their many reasons for being.

About Peter Winsley

I’ve worked in policy and economics-related fields in New Zealand for many years. With qualifications and publications in economics, management and literature, I take a multidisciplinary perspective to how people’s lives can be enhanced. I love nature, literature, music, tramping, boating and my family.
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