Your Company is a Fiction, Your People are the Facts

Most business professionals will tell you that the core business disciplines are: accounting, finance, marketing, management, and technology (in no particular order). In the next tier you might find organizational effectiveness, strategic partnerships, social media, innovation, human resources, among others, and there is often robust debate around which concepts should be included in this second tier. I would strongly argue, however, that organizational effectiveness should always be included among the core disciplines. To explain my rationale, I need to provide some history.

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The most famous company in history might be the Dutch East India Company. It is largely recognized as the first company to issue stock to its owners (Wall Street sends its regards), and it was the first multi-national corporation in the world. It was chartered in 1602 and it was granted a monopoly by the Dutch Dutch East India Company government on the spice trade. Since this was the heyday of mercantilism, the Dutch East India Company was granted quasi-governmental rights, which made it an extremely powerful organization that had the ability to wage war, imprison convicts, mint its own coins, and establish colonies. Eventually, the Dutch East India Company went bankrupt, and its possessions were distributed in 1799. Yet so powerful was this organization, that its land holdings along the Indonesian archipelago became what is known today as the Republic of Indonesia.1

Dutch East India Company Trade MapDue to its conquests, it’s tempting to think of the Dutch East India Company as a living entity in and of itself. In reality, however,
the Dutch East India Company was a mere legal fiction. A legal fiction is an actual legal term where courts assume a fact in order to answer certain questions or solve analytical problems. For example, since a corporation begins its life as a piece of paper, can it really be said that a corporation is capable of entering into contracts, or does it have the ability to sue or be sued? Can a corporation ever engage in criminal activities if it doesn’t physically exist as a person?

The easiest solution to this theoretical conundrum was to create the legal fiction of “corporate personhood,” which is the concept that we treat a corporation as if it were a real person for purposes of analyzing its legal rights. Chief Justice Marshall of the United States Supreme court said, “The great object of an incorporation is to bestow the character and properties of individuality on a collective and changing body of men.”2 Today, the legal fiction of corporate personhood is the most widely used and probably the most significant legal fiction ever created.3 Even within the last decade, the United States Supreme Court has extended this legal fiction to find that corporations have first amendment rights, which includes the right to spend money supporting political campaigns.4 It should be noted that corporate personhood has been extended to other business entities, such as limited liability companies, limited partnerships, etc. Thus, it’s safe to say that every company in existence is a fiction.

On the other hand, what is fact is that a corporation is an association of like-minded people who have come together to advance a business purpose. And while there are laws and well-defined rules that govern the relationships among these people, nonetheless, the corporation’s true essence is tDecisionWisehat it is really just a group of people. It can be said that companies are made of, and driven by, people. While today it is tempting to think of Apple (the modern-day version of the Dutch East India Company) or IBM as cosmic forces independent of their people, they are not. They too are fictions. Apple is great not because it simply exists and has evolved to become such. Apple is a great because of its talented and innovative people.

Accordingly, you might start to see why I argue that organizational effectiveness should be included as a core business discipline.
If you want to improve your bottom line, you need to measure it. That’s accounting. If you want to produce widgets, you have to manage and oversee the manufacturing process. That’s management. And, if you want to improve your company’s overall success, then you have to improve its people, since that’s the real stuff from which companies are made. This is what we call organizational effectiveness. At DecisionWise we focus on assessments, trainings, and other materials that improve people within organizations. We do so because we strongly believe that if you treat your people as the core fact underlying your company’s success, you will soon see very real and positive results.
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[1]See Wikipedia (en.wikipedia.org): Dutch East India Company.
[2]Providence Bank v. Billings, 29 U.S. 514 (1830).
[3] 1 U.S.C. Section 1 (United States Code); “In determining the meaning of any Act of Congress, unless the context indicates otherwise – the words “person” and “whoever” include corporations, companies, associations, firms, partnership [and so on] ….
[4]Citizens United v. Federal Election Commission, 558 U.S. 310 (2010); The United States Supreme Court ruled that the First Amendment to the United States Constitution prohibits the government from restricting political expenditures by a nonprofit corporation.