Strengthening Boards to Navigate the Intersection of Profit and Purpose

The board of a hybrid organization acts as a guardrail for the organization’s strategic attention. (Illustration by iStock/Nuthawut Somsuk)

On March 8, 2024, Sam Altman made a triumphant return to the board of OpenAI, the tech start-up whose ChatGPT program has revolutionized generative artificial intelligence. This happened just a few months after the board’s decision to remove Altman from his position as CEO in November 2023 triggered an employee revolt and governance crisis, causing nearly the entire board to resign. Altman returned as CEO soon after, but OpenAI has remained under public scrutiny amidst investigations and lawsuits.

Months of twists and turns in OpenAI’s leadership sparked curiosity about the tech start-up’s governance structure. Originally founded as a nonprofit, OpenAI launched a for-profit subsidiary in 2019. The nonprofit board, which governs the entire organization, is responsible for sustaining OpenAI’s mission of “ensuring that artificial general intelligence … benefits all of humanity” while the organization simultaneously pursues the commercial opportunities of developing cutting-edge generative AI products.

OpenAI is not the only organization that has experimented with alternative ways of organizing. For decades, companies across industries have diverged from the dominant profit-maximizing corporate model and combined it with organizing models from the social sector to create “hybrid” organizations. Some, like OpenAI, have done so through nonprofit ownership of for-profit subsidiaries. In a similar vein, in 2022, Patagonia, Inc. announced that it was transferring all voting stock to a trust and all nonvoting stock to a nonprofit organization. Before making this change, Patagonia had already elected to become a Benefit Corporation, as have many other companies such as Allbirds, Warby Parker, and OpenAI competitor Anthropic. In doing so, these companies have committed to higher standards of purpose, accountability, and transparency. These various models of hybrid organizing are meant to enable companies to pursue not only commercial objectives but also social and environmental ones.

Many organizations around the world have successfully adopted a hybrid model and many continue to do so. Yet, some critics have questioned whether it is realistic for organizations like OpenAI to achieve social and environmental goals alongside commercial ones.

We have spent the past 20 years studying hybrid organizations—organizations that simultaneously pursue social and commercial goals. So, let us set the record straight: Hybrid organizing has proven to be a powerful model for organizations to progress beyond the narrow corporate model of profit maximization and work for the benefit of humanity. In light of OpenAI’s governance crisis, rather than dismiss hybrid organizing, we should look to organizations that successfully navigate the challenge of balancing mission and profit as models for effective hybrid board governance.

How Boards Can Govern Social and Commercial Interests

Our recent research revealed that boards have a critical role to play in enabling hybrids to sustain the pursuit of their multiple goals. We have identified two key characteristics of effective hybrid boards: 1) Their members collectively represent both the social and commercial sides of the organization and 2) At least one board leader works to strengthen connections between board members, the hybrid mission, and the organization’s leadership team.

As the governing body in a hybrid organization, the board must ensure that strategic decisions further both social and commercial goals. In other words, the board acts as a “guardrail” for the organization’s strategic attention. But the board itself can suffer from mission drift if board members prioritize one type of goal. For example, since financial stability is essential to an organization’s survival, board members might devote more time and resources to increasing revenue than to achieving the organization’s social mission. To avoid this risk, boards must include members who have experience achieving social goals (for example, they may have worked primarily in nonprofit or public service contexts) and members who have experience achieving commercial goals (they may have worked primarily in a corporate context or have business training). Together, these board members with diverse experiences help to draw the board’s attention to the organization’s multiple goals as the board makes strategic decisions.

The challenge facing hybrid boards, though, is that diverse board members have different and sometimes competing cultures and priorities. These tensions can lead to conflict, as OpenAI’s governance crisis illustrates. Our study of hybrid organizations across sectors has revealed that boards often split into conflicting social and commercial factions when board members feel at odds with each other and don’t share the same values. This division can derail not only the board’s effectiveness, but the organization’s ability to pursue its goals at all.

Fortunately, our research suggests that effective governance processes can prevent the fracture of diverse boards into opposing factions. In particular, we have found that board leaders play a key role in navigating these tensions.

First, board leaders must foster a sense of collective responsibility for achieving social and commercial goals. Board leaders can make the importance of the mission tangible to board members by reviewing social and commercial performance at every board meeting and bringing members on field visits to see the organization’s impact firsthand.

Consider the example of IDEES, a French work integration social enterprise in the temp work industry that operates with an organizational structure like that of OpenAI. IDEES’ board chair Pierre Choux frequently met with individual board members in between board meetings, not only to discuss urgent matters but also to share updates on the organization’s social and commercial performance. Creating mutual trust and interpersonal connections is also key to overcoming tensions or misunderstandings between board members. Choux helped bridge the divide between diverse board members by playing a “go-between” role among members who were aligned with different goals, translating one group’s views to the other and advocating for each group’s perspective. Regular group dinners after board meetings also allowed board members to build relationships outside of the formal board room. By helping board members connect with each other and with the organization’s goals, board leaders can productively deal with tensions and prevent conflict.

Second, leaders of hybrid boards should maintain open communication channels between the board and the organization’s senior leadership. To help keep the board and senior management aligned, successful board leaders incorporate the perspectives of senior management to inform the board’s strategic decisions and work with senior management to ensure those decisions are understood and carried out. At IDEES, Choux systematically invited senior management to present strategic projects during board meetings and met regularly with the executive team to discuss minutes from board meetings. At Adecco Insertion, another temp work social enterprise, board members and senior leaders regularly attended special events together to celebrate the organization’s successes, thereby fostering emotional connections and trust between the two groups. This ongoing, two-way flow of communication supports mutual understanding between the board and the rest of the organization and helps engage all organizational members in the pursuit of the hybrid mission.

The Promise of Hybrids

Navigating the tensions between social, environmental, and commercial goals is a challenge that corporate leaders face across sectors and industries. In an era when consumers and policy makers alike are calling for increased accountability for companies’ social and environmental impact, hybrid organizations offer a promising alternative to the status quo by putting people and the planet back at the center of our economic system while remaining profitable.

Effective board governance, strengthened by the guidelines we have outlined, is critical for companies to sustain the pursuit of these multiple objectives. Far from looking at hybrid ways of organizing as exceptions that exist only in a niche, it is time that we use them as sources of inspiration and possible models to transform corporations. It is a necessity if we are to avoid the catastrophic consequences for humanity of confusing the greedy pursuit of profit with progress when it comes to the future of AI and any other sector of our economy. The French writer, Rabelais, warned us long ago: “Science without conscience is the ruin of the soul.” Markets alone do not have conscience, but we human beings do. It is up to us to decide how to get organized to ensure that new technologies, products, and services enhance everyone’s lives for the better while preserving our planet.

Read more stories by Julie Battilana, Anne-Claire Pache & Chloe Lemmel-Hay.