Managing Contradictory Goals: A Longitudinal Study of a Social Enterprise Wendy K. Smith University of Delaware Marya L. Besharov Cornell University Meaning Meeting April 23, 2009
Issues for Feedback • Is our emerging model interesting? • What theoretical gaps can our model address? • What additional data can we collect?
Agenda Digital Divide Data: A social enterprise Opportunity to study managing contradictory goals Emerging model of managing contradictory goals over time Potential contributions and next steps
Digital Divide Data: A Social Enterprise DDD Vision and Mission “Digital Divide Data's vision is to create better futures for disadvantaged people in the developing world.” "Digital Divide Data's mission is to provide growth opportunities for our staff and high quality services to our customers through sustainable technology-related enterprises."
Digital Divide Data: A Social Enterprise (cont.) SOCIAL: 402 employees, 214 ‘graduates’, >10x average salary FINANCIAL: $1.5 M in revenues, 30% operating margin
Social Enterprises: A Growing Phenomenon • Social enterprise – an organization that tries to achieve a social mission through a profit-generating business operation • AKA: hybrid, fourth sector, not just for profit, sustainable business, green business, impact business • Social enterprises are growing in number • B-Corp: 190 members; $1B in revenues; 42,000 users • Business Alliance for Local Economies: 20,000 members • Investors Circle: $130M invested in ‘impact’ businesses • Social Venture Network: 500 members • Business for Social Responsibility: 250 members
Social Enterprises: Multiple Contradictory Goals • Social mission and financial performance • Both goals are strategically critical to the success of the social enterprise • Contradictions across the social enterprise • Selection and socialization (Battilana & Dorado 2009) • Motivation and incentives (Besharov 2008) • Identity (Foreman & Whetten 2002) • Growth strategy (Leonard, Epstein, & Smith 2007) • Funding sources (Chertok, Hamaoui, & Jamison 2008)
Managing Contradictory Goals • Contradictory goals pervasive in organizations • Social vs. financial • Explore vs. exploit • Learning vs. performance • Effectively managing contradictory goals is critical to organizational performance (Cameron & Levine 2006; Eisenhardt & Westcott 1988; Gitell 2004; Murnighan & Conlon 1991; Osono, Shimizu, & Takeuchi 2008; Smith & Tushman 2005; Sundaramurthy & Lewis 2003)
Managing Contradictory Goals: Challenges • Psychological forces encourage • Consistency (Festinger 1957) • Clarity (Kahneman & Tversky 1979) • Conflict avoidance (Deutsch 1973) • Simplicity (Miller 1993) Contradictory goals involve • Inconsistency • Ambiguity • Conflict • Complexity
Managing Contradictory Goals: Prior Research and Open Questions Prior research has explored strategies for managing contradictory goals involving: Org. structures (O’Reilly & Tushman 2008; Smith & Tushman 2005) Cognition/framing (Gilbert 2006; Jarzabkowski & Sillince 2007) Identity (Fiol, Pratt, & O’Connor 2009; Pratt & Foreman 2000) Issue crafting (Sonenshein 2006) Culture (Gibson & Birkenshaw 2004) Change (Seo, Putnam, & Bartunek 2004) Other? Open questions: How do strategies emerge and evolve over time? How do different domains relate to one another?
Research Question • How does a social enterprise simultaneously manage social and financial goals? • How manage contradictory goals over time? • How manage contradictory goals across multiple domains?
Methods • Longitudinal case study • Digital Divide Data • Inductive, building theory from case study data (Edmondson & McManus 2007; Eisenhardt 1989; Siggelkow 2007) • Initial data collected • 13 interviews • CEO (3), NA management (2), Asia management (2), Board Chair (1), Operators (4), External consultant (1) • Archival data • Board agendas and minutes, articles, annual reports, org charts • Additional data to be collected • Interviews and observation • Asia and North America
Initial Analysis • Individually examine interviews and board packets • Where are the tensions between social and financial? • How do these tensions change over time? • How are senior leaders managing these tensions? • What strategic issues are being raised? • What decisions are senior leaders making? • Create tables/lists • Interesting tensions over time • How senior leaders managed these tensions • Explore patterns • Compare analyses with one another
Preliminary Model of Managing Contradictions Over Time Differentiation Integration Establish the Social Mission Solidify the Business Plan Seek Support for Both 2001-2003 2004-2006 2007-2009 • Three methodological strategies • Domains of action • Issues raised • Decision patterns
Methodological Strategy 1: Domains of Action • Tensions manifest in multiple domains • HR practices • Growth strategy • Governance • External partnerships
Domain: HR Practices Establish the Social Mission Solidify the Business Plan Seek Support for Both Key Tradeoffs 2001-2003 2004-2006 2007-2009 Operator Hiring (disadvantaged vs. skilled) Disadvantaged quotas Performance criteria Pre-operator training Management Capacity (local (Asia) vs. NA) Expats shadow locals Hire local quality mgmt Local management training Compensation (‘consume the mission’ vs. competitive salary) NA mgmt volunteers Expand & fundraise for NA mgmt Revenues fund NA mgmt
Domain: Growth Strategy Establish the Social Mission Solidify the Business Plan Seek Support for Both Key Tradeoffs 2001-2003 2004-2006 2007-2009 New Products (low skill vs. high margin) Low skill work High margin work Trainable high margin work New Offices (underserved vs. productive) Open two new offices to expand mission Seek profitability in current offices Plan future profitable growth to expand social mission
Domain: Governance Establish the Social Mission Solidify the Business Plan Seek Support for Both Key Tradeoffs 2001-2003 2004-2006 2007-2009 Board of Governors No Board Rely on friends, family Create Board Expand Board Create local advisory groups (social vs. financial background) Mix of social/financial Mix of social/financial (local vs. NA based) All US based members Add local (Asia) members
Domain: External Partnerships Establish the Social Mission Solidify the Business Plan Seek Support for Both Key Tradeoffs 2001-2003 2004-2006 2007-2009 Funding (donors vs. investors, earned revenues) Mostly donors Earned revenues cover operations Cultivate socially oriented investors Primarily NGOs Establish for-profit partnerships Establish social enterprise partnerships Strategic Partners (NGO vs. for-profit) Cultivate relationship with for-profit ‘mentor’ Partner with for-profit ‘mentor’ For-profit mentor adopts socially responsible practices
Methodological Strategy 2: Issues Raised • Focus on strategic issues raised as a measure of attention allocation (Dutton & Dukerich 1991) • Categorize issues • Financial: P&L, operations, sales, management responsibility • Social: Fundraising, social metrics, social mission • Both: HR, governance, growth, accounting, budget • Identify pattern of issue attention allocation over time
Issue Attention Allocation Establish the Social Mission Solidify the Business Plan Seek Support for Both 2001 2004 2009 2006
Methodological Strategy 3: Decision Patterns • What type of decisions are made in each time period? • Synergies • Incorporate and address both goals • Reduces conflict, promotes creativity (Rothenberg 1979; Eisenhardt & Westcott 1989; Osono 2008) • Trade-offs • Privilege either social or financial • Hard to make inconsistent trade-offs (Louis & Sutton 1991)
Decision Patterns: March 2005 Decisions • Board Expansion • Financial vs. social background • Local (Asia) vs. NA members • TRADE-OFFS • Add social background – social • Add local member – social • Operator Hiring • Disadvantaged vs. Productive • SYNERGY • Train disadvantaged and hire most skilled • Management Compensation • Consume mission vs. pay competitive salary • Fund salary w/ revenues vs. donations • TRADE-OFFS • Pay competitive salaries – financial • Pay management through revenues – financial • Management Capacity • Local vs. NA management • TRADE-OFFS • Transfer more responsibility to Asia – social Issues
Managing Contradictions Over Time Differentiation Integration Establish the Social Mission Solidify the Business Plan Seek Support for Both 2001-2003 2004-2006 2007-2009 • Potential Contributions • Approach to managing contradictory goals evolves over time • Pattern evident across multiple domains • Differentiation precedes integration • Integration involves both synergies and trade-offs • Outstanding Questions • What explains transitions from one phase to another? • Are some domains leading or lagging? • Does differentiation enable integration? • What explains differences between synergy and trade-off decisions?
A Concluding Thought Differentiate in order to integrate - a meta-theme? • Pattern evident across organizational phenomena/theories: • Diversity – Ely & Thomas 2001 • Innovation – Gilbert 2006; Smith 2005; Andriopoulos & Lewis Forthcoming • Identity – Besharov 2008; Fiol, Pratt, & O’Connor 2009 • Mindfulness – Weick, Sutcliffe, & Obstfeld 1999; Langer 1989 • Others?