Managing Contradictory Goals: A Longitudinal Study of a Social Enterprise

Meaning Meeting

April 23, 2009

Wendy K. SmithUniversity of Delaware

Marya L. BesharovCornell University

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

Contradictory goals involve Inconsistency Ambiguity Conflict Complexity

Psychological forces encourage Consistency (Festinger 1957) Clarity (Kahneman & Tversky 1979) Conflict avoidance (Deutsch 1973) Simplicity (Miller 1993)

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

2001-2003 2004-2006 2007-2009

Differentiation Integration

Three methodological strategies• Domains of action• Issues raised• Decision patterns

Establish the Social Mission

Solidify the Business Plan

Seek Support for Both

Methodological Strategy 1: Domains of Action

Tensions manifest in multiple domains

HR practices

Growth strategy

Governance

External partnerships

Domain: HR Practices

2001-2003 2004-2006 2007-2009

Establish the Social Mission

Solidify the Business Plan

Seek Support for Both

Key Tradeoffs

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

2001-2003 2004-2006 2007-2009

Establish the Social Mission

Solidify the Business Plan

Seek Support for Both

Key Tradeoffs

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

2001-2003 2004-2006 2007-2009

Establish the Social Mission

Solidify the Business Plan

Seek Support for Both

Key Tradeoffs

Board of Governors No BoardRely on friends, family

Create Board Expand BoardCreate local advisory groups

Mix of social/financial

All US based members

Mix of social/financial

Add local (Asia) members

(social vs. financial background)

(local vs. NA based)

Domain: External Partnerships

2001-2003 2004-2006 2007-2009

Establish the Social Mission

Solidify the Business Plan

Seek Support for Both

Key Tradeoffs

Funding(donors vs. investors,earned revenues)

Mostly donors Earned revenues cover operations

Cultivate socially oriented investors

Strategic Partners(NGO vs. for-profit)

Primarily NGOs Establish for-profit partnerships

Establish social enterprise partnerships

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

2001 2004 2006 2009

Establish the Social Mission

Solidify the Business Plan

Seek Support for Both

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

Issues Decisions1. Board Expansion

Financial vs. social backgroundLocal (Asia) vs. NA members

1. TRADE-OFFS Add social background – social Add local member – social

2. Operator Hiring Disadvantaged vs. Productive

2. SYNERGYTrain disadvantaged and hire most skilled

3. Management CompensationConsume mission vs. pay competitive salaryFund salary w/ revenues vs. donations

3. TRADE-OFFSPay competitive salaries – financialPay management through revenues – financial

4. Management CapacityLocal vs. NA management

4. TRADE-OFFSTransfer more responsibility to Asia – social

Managing Contradictions Over Time

Integration

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

2001-2003 2004-2006 2007-2009

Differentiation

Establish the Social Mission

Solidify the Business Plan

Seek Support for Both

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?

Thank you!