Much of business reporting can become habitual. You become familiar with a typical corporate structure, look for the entity’s financials, compare the company to its competitors and find a story.
Familiarity can aid work and hasten understanding, but can also trip up your ability to think freshly. The business model mentioned above is common, but not the only one out there. Non-traditional companies can employ different types of structures. Each structure offers insights into how businesses can work, which will help you formulate questions when analyzing a company or interviewing an executive.
For-profits that fuel charity
One of the underlying assumptions of business coverage is that for-profit companies are designed to maximize profits in order to increase the wealth of shareholders. Despite economist Milton Friedman’s argument to that effect, it isn’t necessarily true. Beyond some debates between law professors on one side or the other of the question, this all assumes that there are shareholders looking to see more value.
But there are for-profit companies designed to benefit charities. Newman’s Own, a company co-founded by the late actor Paul Newman, is a famous example of a business that exists to do just that. Because the profits are used for donations, there is less pressure from specific shareholders to perform or meet artificial expectations. Look for how a more traditional company might be making decisions to satisfy investors and what the business might look like if a more sustainable approach were used.
Hybrid companies, a model that began to receive public recognition in the early 2010s, are a combination of low-profit organizations and those that benefit society. They blur the lines between profitability and social purpose, with the ability to tap into capital markets but also accept money from foundations. The structure raises the issue of whether a company can combine profits with doing good. Although many companies mention corporate social responsibility, or CSR, hybrid companies help set a standard by which traditionally structured companies can be compared. Ask executives what metrics they use to measure and value CSR and how they set and monitor goals.
The dynamics of business management change in a worker cooperative, when employees own a significant portion of a company and must be part of decisions. One of the primary examples is the Mondragon Corporation in the Basque region of Spain. Founded in 1956, it’s one of the largest businesses in Spain and focuses on creating jobs and operating with democratic decision processes. There are thousands of cooperatives in the country.
This isn’t the only type of cooperative. For example, customer cooperatives challenge the assumption that a company sells to customers in order to benefit its owners. A common example is one of the many natural food coops found in the U.S.
Credit unions and mutual insurance companies are other examples of cooperative structures. So is an agricultural marketing cooperative such as Cabot Cheese, which is owned by 1,100 farming families in the Northeast. Cooperatives underline the need to think broadly about different stakeholders in an organization. Ask executives about customer, employee and vendor turnover. If there are loyalty and satisfaction surveys, what do the results tell you about ties between the company and the three groups of stakeholders?
The more you know about alternative business models, the more you understand different corporate priorities. That can help you question why the companies you cover do what they do.