Organisation and Function: Reclaiming the Third Mandate in the Age of Grand Challenges

Calls for organizations to address grand societal challenges increasingly emphasise performance-oriented adaptation and organisational repurposing through new initiatives, metrics, and governance mechanisms. Yet this focus often neglects the more fundamental macro-structural role organisations play in society. Drawing on Niklas Luhmann’s social systems theory, this paper reclaims the long-neglected “third mandate” of organization theory by distinguishing between performance, understood as system–system relations, and function, understood as system–supersystem relations. We argue that organisations respond to external performance expectations without altering their societal function, which consists in reducing and reproducing the alternativity that makes decision-making possible. Developing a set of propositions, we show when organisations are likely to translate social mandates into decision premises, when decoupled or symbolic compliance is more likely, and why state-induced repurposing can generate a fiscal paradox that undermines the very distinctions, including those between for-profit and non-profit forms, on which public finance depends. This perspective helps explain why pressures associated with grand challenges so often produce superficial reform rather than substantive transformation. By clarifying the structural limits of organisational change, the paper offers a more realistic basis for theorising and governing organisational contributions to grand societal challenges.