Strategic Management of Social Purpose Businesses: Navigating the Intersection of Mission and Market

Purpose: Organizations involved in employment and training are increasingly central to social work practice, particularly in the wake of welfare reform. Fostered over the last two decades of privatization and government retrenchment, nonprofit organizations utilizing in-house businesses to provide jobs training for disadvantaged populations have proliferated in the workforce development arena (Adams & Perlmutter, 1991; Massarsky & Beinhacker, 2002; Salamon, 2002). The rapid expansion of hybrid organizations raise questions regarding the compatibility of social mission and commercial goals (Perlmutter & Adams, 1990; Young & Salamon, 2002; Weisbrod, 2004; Cooney, 2006), particularly when clients are simultaneously receiving services and contributing to business production. Using neo-institutional theory (Meyer & Rowan, 1977; DiMaggio & Powell, 1983) to frame these social businesses as needing to develop structures that accommodate different internal operating technologies, a tightly coupled business technology to stay competitive and a loosely coupled social service technology that allows for individualized responses to a wide range of client needs (Cooney, 2006), this study builds on existing research to examine a range of SPBs and the strategies they employ to deal with internal tensions in operating technologies and to foster long term growth and sustainability.

Methods: Structured interviews were conducted with the senior administrators of 15 SPB organizations participating in the Yale/Goldman Sachs National Business Plan Competition for Nonprofit Organizations. The interviews included closed and open ended items covering: sources and stability of financial revenues, competition, market share, scale, organizational structure, business and service technologies, goal relationships, and economic risk. All interviews were recorded and transcribed. Using a multiple case study analysis approach (Yin, 1994), the data underwent three stages of analysis, moving from descriptions to themes to assertions (Stake, 1995; Creswell, 1998). First, 2-3 page holistic descriptions of each case were developed. Then, through open coding and focused coding techniques (Charmaz, 2006), themes that emerged across cases were identified. Finally, assertions developed through the cross-case comparison of these themes were advanced.

Results: The analyses produced descriptive information about the strategies employed by these organizations for managing resources and structuring business and social service functions into integrated practice models. Resource management strategies include: (1) diversification, (2) commercialization, (3) attachment to dedicated funding streams, and (4) cross-subsidization. Organizational variation ranged from models where the businesses are operated with a loose relationship to other programs, to models where working in the businesses is the primary programmatic element around which all the other services are organized. Issues shared across SPB organizations include: need for capital, expanded skill requirements for managers, and crises of sustainability emanating from shifts in both the public and market sectors.

Implications: This study provides a foundation for understanding social work practice in organizations strategically utilizing business for social ends. The paper concludes with policy recommendations for rethinking the relationship between local government and SPBs as one possible way to address identified challenges and to support the vital mission of these organizations as they focus on workforce development for the most disenfranchised members of society at a time when the safety net is receding.