Illustration by Adam McCauley
How can an organization sustain both a social mission and a for-profit venture? While some social enterprises are successful at melding these two imperatives, many fail, or tip too far to one side or the other.
In a new paper, Marya Besharov of Cornell University and Wendy Smith of the University of Delaware provide a 10-year case study of one such entity, Digital Divide Data, which combines a moneymaking business with a mission to help disadvantaged rural citizens of Cambodia and other impoverished countries gain skills and jobs in information technology. DDD, which continues to thrive nearly two decades after its founding in 2001, has managed to navigate the challenge of its disparate goals in two ways, which Besharov and Smith dub “guardrails” and a “paradoxical frame.”
Guardrails are structures or processes within the organization that allow leaders to bump safely against them as they work to integrate the group’s dual mission. Such structures go beyond corporate governance to include hiring leaders with the right backgrounds: “Are you hiring people with expertise in the kinds of social problems and social issues you’re trying to address?” Besharov asks.
The paradoxical frame is a mind-set that allows for pursuing two divergent goals at the same time. While many organizations would find this problematic for their strategic direction, a successful hybrid entity like DDD explicitly discusses how to achieve both social and business goals, seeing them as “interdependent and synergistic,” Besharov says. In some cases, the group’s leaders had to explain to their local managers how to pursue the dual mission, since there were no similar groups in Cambodia when DDD was founded.
“Competing demands don’t have to be an either-or,” Smith says. “They don’t have to be contradictory.”
The paper’s key insight is that hybrid organizations use the guardrails as a guide while analyzing strategy through the paradoxical frame. “The path to sustainability is developing systems and processes and continuing to adapt over time,” Besharov says.
The researchers studied DDD through a combination of on-site visits over several years and the analysis of a vast trove of archival papers and electronic materials relating to the organization. Access to such data and the ability to track the group over such a long time makes the paper unique, according to Besharov. “Had we studied them for two years, we would have come out with a different answer that would have only shown what worked over that period,” she says.
The question of how hybrid organizations thrive is a crucial one now that more companies, especially in the United States, are embracing social goals as central to their business. “There are many more of those organizations now: B corporations, entrepreneurs starting small ventures that eventually grow that are incorporated as nonprofits,” Besharov says. Other examples include social enterprises, community-interest companies, and cooperatives, Smith adds.
The question also commonly confuses those who launch social missions. “Often when I speak with social entrepreneurs, there’s this sense that as soon as they start introducing business lingo and talking about cost challenges, they lose any sense of idealism,” Smith says.
In addition to extrapolating into arts, education, health care, or other social services settings that involve social enterprises and hybrid organizations, the paper’s findings could also be relevant to more traditional businesses as they navigate through strategic challenges that involve choosing between, or incorporating, divergent goals. Despite how common these problems are becoming, many managers are still unclear about how to achieve dual mandates.
The paper breaks new ground in its understanding that successful organizations use guardrails to “embrace both sides, not trying to resolve the tension or get rid of it,” says Tyler Wry, an assistant professor of management at Wharton who studies hybrid organizations. “The unique value [in this paper] is the idea that when you’re trying to navigate between these dual missions, you want to have these processes, procedures, governance mechanisms put in place to make sure you don’t go too far in one direction or the other.”
Marya Besharov and Wendy Smith, “Bowing Before Dual Gods: How Structured Flexibility Sustains Organizational Hybridity,” Administrative Science Quarterly, 20, 2017, pp. 1-44.
Read more stories by Chana R. Schoenberger.