If it feels like your social enterprise has bitten off more than it can chew, you’re not alone. Social enterprises have multiple and often conflicting demands – demands that make it difficult to act and can create ethical dilemmas for leaders.
So, how do social entrepreneurs deal with these demands?
Social entrepreneurs – anyone who works in a social enterprise – can learn from research by Wendy K. Smith (University of Delaware), Michael Gonin (University of Zurich and University of Lausanne), and Marya L. Besharov (Cornell University). Their article, “Managing Social-Business Tensions: A Review and Research Agenda for Social Enterprise,” outlines how to effectively address inherent tensions between profit and purpose.
What to Do When Profit and Purpose Conflict…
Successful social entrepreneurs don’t necessarily see tensions as trade-offs. Instead of working with an “either/or” mentality, they lead with a “both/and” mentality. They create strategies to embrace tension rather than resolve it. And, they typically do so in four areas:
Reflect both profit and purpose in your success measures.
Social enterprises must address both short-term and long-term goals simultaneously. Shareholders may demand quantitative or financial reports, while NGO partners may zero in on the social enterprise’s mission and long-term impact. Smart social entrepreneurs know the risks of focusing on only one: only focusing on expanding the mission can lead to financial demise, while only focusing on increasing financial returns can mean losing sight of the mission.
Effective social entrepreneurs reflect their mission, vision, and the variety of stakeholders in their goals. They recognize the need for multiple measures of success, rather than just one. At Textbooks for Change, a social venture making educational materials affordable and accessible to students, success is measured in many ways. It’s not solely about sales growth: the number of books donated, the number of microloans provided, and the amount by which the organization reduces its environmental footprint each year all matter too.
Strengthen corporate culture by hiring employees that can mitigate bias and navigate conflict.
There are four types of employee that social enterprises can hire:
- Social mission focused
- Business focused
- Pluralist (focus on both)
- Generalist (focus on neither)
A study by Battilana and Dorado favours generalists – employees without a bias for business or social mission. Hire generalists, then socialize them to support an integrated mission. This approach mitigates the potential for conflicting values and tensions between staff, increases team cohesiveness, and improves overall financial performance.
But often it's hard to hire employees who don’t have bias. The challenge is getting people to move from a state of detrimental conflict to using their differences in a constructive way.
So, what to do?
Another study by Besharov points to pluralists – people focused on both the social mission and financial demands. Such employees can help social enterprises effectively navigate conflicts that surface between employees with opposing commitments. Hiring a few pluralists can ultimately help strengthen your corporate culture.
Build capacity with access to training and opportunities for promotion.
Social enterprises must enable impact generation with efficient use of resources. Limited funds are not an excuse to forego employees’ professional development; there are creative ways to develop and empower employees. Digital Divide Data, a work integration social enterprise, found that one solution was providing employees with access to loans rather than grants to support their professional development.
Textbooks for Change employees complete a social impact metrics training course by Simetrica to increase understanding of how the organization can better measure its success. Metrics learned in the course can later be used during performance evaluations and promotion decisions.
Create an integrated identity by knowing when to separate and when to connect.
Social enterprises operate in a grey area. They’re not traditional businesses and they’re not traditional not-for-profits. And, this means they have critics on both sides of this spectrum. Traditional businesses may have doubts about work quality meeting ‘business standards,’ while traditional not-for-profits may worry about exploitation. Within a social enterprise, donors may demand impact sustainability and reporting; shareholders may demand financial returns; and, employees may demand clarity on which need is top priority.
To avoid getting bogged down by old business paradigms, successful social entrepreneurs manage multiple identities. They are in tune with the ways stakeholders relate to their business. They understand there are times when they'll have to emphasize social mission and other times they'll have to emphasize financial objectives – and they know when to do which.
They also connect multiple identities together in an overarching vision – a higher purpose linking social mission with financial demands, while motivating employees to work together for the greater good.
Know When to Emphasize What
For Digital Divide Data, their higher purpose is to stop the cycle of poverty. They keep this vision in mind when hiring workers with limited skills and trying to be efficient and productive in their work.
Researchers Lähdesmäki and Suutari provide additional insights on how to manage company-community relations. A social enterprise’s communications team can also help leaders manage identities, make communication decisions, and build relationships with different stakeholder groups.
Leveraging Tension, Redefining Success
Social enterprises earn over 500 billion dollars in the US and represent 4% of GDP in the US (Naveen et al.). For continued growth, social enterprises will need to integrate their mission into key business decisions and processes.
Make no mistake: conflicting demands will always exist. Tensions between goals, growth, and identity have faced traditional businesses, and they’re even more complex in social enterprises. The key to succeed in the tensions? Do not simply manage social-business tradeoffs, leverage them. Adopt a both/and approach that redefines success on your terms.
Battilana, J., & Dorado, S. 2010. Building sustainable hybrid organizations: The case of commercial microfinance organizations. Academy of Management Journal, 53(6): 1419-1440.
Besharov, M. L. 2014. The relational ecology of identification: How organizational identification emerges when individuals hold divergent values. Academy of Management Journal, 57(5): 1485-1512.
Naveen, M., Swarup, R., Nicholson, J. and Khan, S, 2015. “Scaling Up: Catalyzing the Social Enterprise.” A.T. Kearney Inc: 2.
Smith, W., Gonin, M., and Besharov, M, 2013. “Managing Social-Business Tensions: A Review and Research Agenda for Social Enterprise .” Business Ethic Quarterly. 23.3: 407-442.
Smith, W. K., Lewis, M. W., & Tushman, M. 2016. Both/and leadership. Harvard Business Review.