What does it take to lead an organization that balances profit and purpose without losing its way? Anne-Claire Pache, Professor in Social Innovation, holder of the ESSEC Chair in Social Innovation, and Associate Dean for Strategy and Sustainability at ESSEC Business School,sits down for a thought-provoking conversation on the challenges, myths, and opportunities of hybrid organizations. From the delicate balance of profit and purpose to the governance pitfalls that can derail even the most well-intentioned efforts, her insights uncover the nuances of leading organisations with dual missions – and how to turn tensions into triumphs. From an interview with Prof. Adrian Zicari.

The Tightrope of Hybridity: Managing dual mandate of profit and purpose by Anne Claire Pache and Adrian Zicari. Edited by Anshuman Sisodia. Related research: Battilana, J., Pache, A., & Lemmel Hay, C. (2024). Strengthening boards to navigate the intersection of profit and purpose. Stanford Social Innovation Review. Pache, A., Battilana, J., & Spencer, C. (2024). An integrative model of hybrid governance: The role of boards in helping sustain organizational hybridity. Academy of Management Journal, 67(2), 437-467.

AZ: Today we can discuss two recent research papers of yours. I’d like to begin with the more recent one, in the Stanford Social Innovation Review, where you start with a very interesting story – the OpenAI board controversy – and the tension between profit and purpose. Nowadays, we have many hybrid organisations: in insurance, in banks, and in Spain, you have Grupo Mondragón. How do you see this tension between profit and purpose? What causes it, and what can one do about it?

Anne-Claire Pache: I would like to begin by saying that hybrid organisations have been around for a very long time. Hybridity is not a matter of essence, but a matter of degree. This means that, to some extent, all organisations incorporate a multiplicity of objectives that – depending on how central and strategic these multiple objectives are – may lead organisations to experience the challenges of hybridity.

In my research, I’ve been focusing on those organisations that incorporate hybridity at the heart of their strategy and operations. But first, I’d like to emphasise that this notion of hybridity is important and interesting to take into account in almost all types of organisations.

Now, when we talk about the multiplicity of objectives in organisations – especially companies – there is an idea that they are not only meant to achieve financial objectives but also other types, including social and environmental ones. And there’s been a kind of myth that has persisted. It says, “Oh, in fact, financial and social or societal goals can be perfectly aligned, and we should look for these opportunities where more social performance leads to more financial performance, and vice versa.”

That’s the shared value model (Porter and Kramer, 2011), suggesting that yes, you can perfectly align these goals and everything will be fine. Now, there are definitely instances where we see this alignment – and when it happens, great. But the truth is, in many cases, there’s actually a misalignment between social or societal and financial goals. Leaders in most organisations have to navigate these social-financial trade-offs. They have to manage them, and sometimes, they’re faced with tough decisions about which objectives to prioritise – whether to put financial goals first or focus instead on social and environmental responsibilities.

What we’ve been exploring in this research, which we’ve conducted with Julie Battilana and Channing Spencer, is really looking at what happens in these situations – specifically, the role of boards of directors in managing these tensions. We’re examining what kind of board configurations best support the achievement of these dual objectives in the most effective way.

The OpenAI Case: A Cautionary Tale

AZ: Anne-Claire, could you tell us more about the OpenAI case and how it relates to the opening of your paper? Specifically, how does that story illustrate the challenges organisations face when trying to balance societal and financial goals?

Anne-Claire Pache: In this Stanford Social Innovation Review paper, we use OpenAI as an example to illustrate the tensions that do arise when combining societal and financial goals. OpenAI was founded with a bold, hybrid purpose – to develop AI that serves humanity on the one hand, and on the other, as ChatGPT was developed and took off, to incorporate a business model that maximised profitability for its tools and models.

We had, in the board of directors of OpenAI at the very beginning, a combination of directors who were supporters or champions of OpenAI’s societal goal, and we also had representatives or champions of the financial dimension.

But then, something happened – and it’s public – that led to complete chaos in OpenAI’s governance. As ChatGPT took off and its impact grew, the board members who were more aligned with OpenAI’s societal purpose started to feel uneasy. They saw the organisation shifting too much towards financial priorities and said, “Wait, we’re becoming too focused on the money. We’re losing sight of our mission.”

That tension reached a breaking point when these board members made the dramatic decision to fire Sam Altman, the founder. To them, he was pushing OpenAI too far in the direction of financial success at the expense of its original purpose.

Then, the coalition of people supporting the financial objective of the organisation, including employees, retaliated, ultimately leading to the dismissal of the members of the board who were representing the social coalition. The financial coalition then took over, reinstating Sam Altman as CEO and bringing him back into his role on the board of directors.

This is just an illustration of the fact that these people hadn’t read our research [laughs]. The research wasn’t published yet when that happened, and I doubt they’ve followed it since…

It’s a great illustration of the fact that if you want to lead an organisation with multiple objectives, you can’t just – like OpenAI did – have a board that represents these two sides of the organisation. That’s the first necessary step, but that’s not enough. You also have to ensure the board itself is stable, meaning you have to make sure both sides – both the societal and financial aspects – are firmly represented in the governance structure. You need to somehow write down and secure the presence of these two sides. It’s crucial to ensure that one side doesn’t get overtaken by the other. That’s one of the key takeaways.

AZ: That makes a lot of sense. So, you’re saying that the structure of the board needs to be stable and deliberately balanced, with protections in place to keep either side from dominating?

Anne-Claire Pache: Exactly. Not only do you need to ensure that one side doesn’t get overtaken by the other, but you also need to think about how you structure the board to prevent big shifts in its composition that could tip the balance. You don’t want one of the two coalitions – the societal or the financial – disappearing entirely. That’s where the structure comes in.

But structure alone isn’t enough. You also need processes that allow for open, fruitful conversations. These processes should recognise and respect the differences between the two sides and, most importantly, help manage the trade-offs that inevitably arise when you’re balancing these competing objectives.

In a way, this can happen in a fruitful and productive manner, avoiding the kind of destructive and unproductive conflicts we’ve seen – like at OpenAI, where the founder was fired first, followed by members of the board. The key question is: how do you create a culture where two sides with very different views, cultures, and biases – especially in terms of which objectives they prioritise – can coexist? You need to establish processes that ensure all voices are heard and respected. It’s about raising awareness about the different perspectives of the board members, openly valuing both, and channelling the emotions that naturally arise in conversations where disagreements surface into positive energy, rather than letting them spiral into negativity and conflict.

AZ: In your paper, you’ve shared some great advice about relationships within the board – what you call the relational process – as well as relationships outside the board, which you refer to as bridging with top management. This seems crucial to preventing disconnects between the two. Could you maybe give an example of these two processes working well in practice?

Anne-Claire Pache: Yes, absolutely. This is a very important point, and the OpenAI case illustrates it well. At one point, there was a coalition of organisational leaders – led by Sam Altman – where senior leaders at OpenAI mobilised against members of the board. This highlighted a clear gap and fault line between those advocating for the social mission of OpenAI and those focused on the financial mission. Interestingly, some of these proponents were part of the senior leadership itself.

This underscores the need not only for alignment within the board but also for significant effort to ensure understanding and alignment between the board and the senior leadership of the organisation. One way to achieve this is by regularly inviting members of the senior leadership to speak to the board, fostering mutual knowledge and understanding. Additionally, decisions made by the board should be communicated clearly – often by the CEO or president – to the senior leadership. This helps avoid situations where estrangement, misunderstanding, or a lack of recognition arises between the board and senior leadership.

Any activities that promote better knowledge-sharing, more interaction, and clearer explanations of decisions are crucial. It’s also about making the cultures and worldviews of senior leadership visible to the board, and vice versa. This process of enculturation – ensuring that the values and perspectives of different groups are understood – is vital to preventing the emergence of these fault lines within the organisation.

Oscillations vs. Simultaneous Balance: What Works Best?

AZ: Let’s imagine we’re in a macroeconomic crisis – something we’ve seen several times before. In this kind of crisis, I’ve noticed, at least anecdotally, two different approaches. One is to say, “Look, right now, in this moment of crisis, we need to focus on cash flow and save the sinking boat. We’ll think about purpose next year.” The other approach is to say, “No, no – precisely in this moment, we need to stick to our purpose, because if we stay true to it now, people will believe in us.” What’s your take on this debate?

Anne-Claire Pache: What we’ve seen in hybrid organisations – and I think you’re providing a great example here – is a tendency at times to address these goals, purpose versus profit, in sequential terms. This means focusing on one dimension for a few years, often due to internal or external crises, and then shifting focus to the other dimension later. These oscillations, which we’ve observed in some hybrid organisations, usually arise as a result of these tensions.

From our data, we’ve found that while oscillations can be a way to manage hybridity – alternating between focusing on one dimension and then the other over time – some companies manage to balance both simultaneously. They don’t necessarily need to alternate. Specifically, they achieve this by incorporating governance structures and processes that allow them to manage these trade-offs on a regular, even daily, basis. Instead of saying, “Okay, let’s go all-in on profit for a few years, then all-in on purpose for a few years,” they find ways to integrate both.

Yes, oscillations do work – at least in the organisations we’ve observed – but we believe they’re not ideal. Dropping one objective for a period of time and then switching to another isn’t necessarily the best approach. The ideal model would be to sustain both objectives over time, simultaneously.

We’ve found that this kind of balance is possible, but only under the condition that a hybrid governance model is not just implemented but actively practised on a daily basis. It requires a culture where board members, despite their diverse perspectives, develop the ability to consistently incorporate both dimensions – purpose and profit – into their decision-making. They need to manage the trade-offs that almost always come with pursuing multiple goals but do so at the board level in a way that avoids the strong oscillations we’ve observed in many organisations.

Embrace Hybridity as an Opportunity

AZ: Anne-Claire, would you like to share a particular message with the readers of our magazine?

Anne-Claire Pache: Absolutely. I’d like to encourage everyone to see hybridity as an amazing opportunity. The idea of embracing multiple goals – taking a combination of financial, social, and environmental objectives seriously – is crucial for all organisations today. However, it requires specific structures and practices to ensure these models succeed. I really urge readers to explore the potential of placing these multiple goals at the centre of their strategy, but also to take seriously the need to manage them carefully and thoughtfully.

There’s another piece of research I’ve conducted with Julie Battilana, Metin Sengul, and Marissa Kimsey where we highlight four key dimensions that organisations must consider when they seriously commit to pursuing multiple goals. These dimensions are critical for ensuring that hybrid organisations can thrive without losing sight of their dual missions. That could be another conversation.

AZ: Okay, we’ll keep the suspense for the next conversation. Thanks a lot!
Anne-Claire Pache: Thank you so much, it was nice speaking with you.

Useful links:

• Link up with Prof. Anne-Claire Pache on LinkedIn
• Read a related article: Companies Must Commit to Profound Transformations 
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