Types of Organizations

This may be a topic I’ve covered before – I vaguely remember it but can’t find the post – but I have had several conversations lately about the differences between business, charity, and government organizations.   And when I find myself having redundant conversation, it’s fodder for the notebook.

Organizations

An organization is created to achieve a benefit for someone, but only if there is a need for the participation/contributions of more than one person.  Where one person is capable of doing something, he does it himself. 

It is also generally true that an organization is created when there is an ongoing need.   There are some ad-hoc organizations that disband as soon as their purpose is achieved, but these are by their nature temporary.   Most organizations are ongoing concerns that serve ongoing needs.

Business/Commercial 

The most familiar kind of organization is a business, which has the following critical characteristics

• The benefit is enjoyed by someone other than those who contribute to its creation
• Those who wish to enjoy the benefit are willing to compensate those whose contributions are required to furnish it
• Those who furnish the benefit wish to be compensated for their contributions

Social 

A social organization forms when people seek to organize for their own benefit. 

• The benefit is enjoyed by some or all members of the group
• Those who furnish the benefit are compensated by their enjoyment of the benefit

Charity

Charities (nonprofit organizations) have the following characteristics:

• The benefit is enjoyed by someone other than those who contribute to its creation
• Those who wish to enjoy the benefit are unwilling or unable to pay the cost of furnishing it
• Someone else is willing to pay for the beneficiaries to receive the benefit 

Government

Government programs are created when there is demand for a benefit but no-one is willing to pay for it voluntarily.  That is:

• The benefit is enjoyed by someone other than those who contribute to its creation
• Those who wish to enjoy the benefit are unwilling or unable to pay the cost of furnishing it
• No-one else is willing to pay for the beneficiaries to receive the benefit 

Dysfunctional

And as I was reviewing and whittling down the criteria for the four main kinds, it occurred to me that there do exist dysfunctional organizations

• The benefit is not enjoyed by anyone
• Those who receive secondary benefits (employment) seek to perpetuate the organization in spite of its lack of a primary benefit

What’s the Point?

This meditation is admittedly outside my usual milieu, but I find the topic comes up fairly often in discussions of new products and programs.  So the value in this consideration is winnowing down a large number of ideas to a smaller number that are worth pursuing: if people could benefit from something but aren’t willing to pay for it, then it’s not a fruitful pursuit for a commercial organization (but might be a good idea for a nonprofit if you can find donors, or a government program if you cannot, or a social organization of the people are able and willing to organize and provide for their own needs).