Politically radical social workers didn’t expect to be working in a bank any more than white-collar bankers expected to be holding meetings in a crowded public market. The microfinance loan officer is a unique sort of professional, and when commercial microfinance began, there weren’t any of them. New types of hybrid organizations always have to make up institutional culture from scratch. “When you don’t have a ready-to-wear model for how to function and you’re trying to combine these divergent logics, two key issues are ‘Who should you hire?’ and ‘How do you socialize them?’ to make money without losing track of the social mission,” says Julie Battilana, assistant professor of business administration at Harvard Business School.
Two of the first social development NGOs to transition into commercial microfinance organizations in the early 1990s—both in La Paz, Bolivia—handled the tension in different ways, and with differing success. At Banco Solidario (BancoSol), a visionary leader named Francisco “Pancho” Otero hired seasoned social workers and anthropologists, bankers and lawyers. He created a strong institutional culture around shared development goals that inspired deep commitment from employees. “His big mistake was thinking that would be enough,” says Silvia Dorado-Banacloche, a professor of entrepreneurial management and law at the University of Rhode Island who conducted extensive interviews during BancoSol’s transition period. Otero believed that “by becoming a commercial bank the only thing that changes is the back office.” But BancoSol’s identity soon began to split. Social workers accused bankers of hindering development activities with their nitpicky rules and procedures; bankers considered social workers “dangerous idealists.” The schism paralyzed the bank, which recovered only after it replaced most of the development-oriented staff.
Caja de Ahorro y Prestamo Los Andes saw what was happening at BancoSol and took a different approach. The bank hired recent college graduates and molded them into employees who could pursue development and banking objectives. The extensive training slowed the bank’s growth, but Los Andes maintained a commitment to its hybrid mission and even tackled the notoriously difficult agricultural market.
BancoSol eventually adopted some of Los Andes’ hiring and socialization practices. “I think if you were one of the social worker diehards, you might say the bankers won; but I think the bankers would say we’re very different bankers,” says Michael Chu, former chair of BancoSol. The conflict between profit and social impact “is a tension that can be resolved,” he says.
How? “Any organization that is doing well by doing good will be served by trying to develop their own people,” says Dorado- Banacloche. “It is very important to translate lofty visions into measurable goals.”
Julie Battilana and Silvia Dorado- Banacloche, “Building Sustainable Hybrid Organizations: The Case of Commercial Microfinance Organizations,” Academy of Management Journal, February 2010.