A Paradoxical Leadership Model for Social Entrepreneurs Challenges, Leadership Skills, And Pedagogical Tools for Managing Social and Commercial Demands

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  • > Academy o/ Managemeni Learning & Educafion, 2012, Vol. II, No. 3, 463-478. http://dx.doi.org/10.5465/amle.2011.0021

    A Paradoxical LeadershipModel for Social Entrepreneurs:Challenges, Leadership Skills,

    and Pedagogical Tools forManaging Social andCommercial Demands

    WENDY K. SMITHUniversity of Delaware

    MARYA L. BESHAROVCornell University

    ANKE K. WESSELSCornell University

    MICHAEL CHERTOKDigital Divide Data

    Social enterprises offer the promise of financially sustainable organizations that can respondto the world's most pressing problems. Yet for social enterprises to succeed their leaders musteffectively manage conflicting demands that arise from dual commitments to improvingsocial welfare and achieving commercial viability. While existing research highlights distinctskills for enabling social missions or for achieving business outcomes, we draw on paradoxresearch to buiid theory about the challenges and associated skills for effectively managingthe tensions emerging from the juxtaposition of social mission and business outcomes. Wethen use two exemplary settings for educating social entrepreneurs, one in the classroom andone in the field, to illustrate pedagogical tools for teaching these skills. Integrating thesechallenges, skills, and pedagogical tools, we propose a paradoxical leadership model forsocial entrepreneurs.

    The quality of human life on the planet has neverbeen better and never been worse. Forces for glo-balization, innovation, and competition are open-ing new technological and economic frontiers

    We appreciate the reflections and insights from the operators,managers, and board members of Digital Divide Data and thestudents in the Social Entrepreneurs, Innovators, and ProblemSolvers course. We are also grateful to Associate Editor NelsonPhillips and three anonymous reviewers. The development of thismanuscript was supported in part by funds from the Center forInternational Studies at the University of Delaware, the Center forIntegrative Leadership at the University of Minnesota, and theInstitute for the Social Sciences at Cornell University.

    while simultaneously exacerbating human rightsviolations, financial injustice, and environmentaldevastation. Social enterprises have grown in re-sponse, using innovative ways to address societalills that frequently rely on commercial venturesand earned income (Dees, 2001; Tracey, Phillips, &Jarvis, 2011). These organizations have the poten-tial to harness the creativity, efficiency, and via-bility of commercial means in service of socialends such as improving human and environmentalwelfare.

    Social entrepreneurs play a key role in realizingthis potential. Increasingly, research has explored

    463Copyright of the Academy of Management, all rights reserved. Contents may not be copied, emailed, posted to a listserv, or otherwise transmitted without the copyright holde:express written permission. Users may print, download, or email articles for individual use only.

  • 464 Academy o Management Learning & Education September

    the characteristics of effective social entrepreneurs,specifically highlighting their differences from tradi-tional entrepreneurs (i.e., Tracey & Phillips, 2007).Dees (2001) categorized social entrepreneurs as"one species in the genus of entrepreneurs" (2), akey distinction being their commitment to socialchange. Indeed, scholars depict social entrepre-neurs as heroic individuals (see Seelos & Mair,2005), who possess the business savvy and deter-mination of entrepreneurs, in addition to a relent-less passion for their social mission (Bomstein,2004; Thompson, 2002). The key message of thisresearch is that managing a social mission re-quires a unique set of skills beyond those neededto achieve an organization's commercial goals.

    However, the social and commercial sides of asocial enterprise are not isolated from one another.Rather, they are inherently interrelated and oftenconflicting. Attending to both the social and finan-cial might benefit the organizational overall, yetthese different pursuits are often associated withcompeting identities, value systems, and norms(Battilana & Dorado, 2010; Tracey et al., 2011). Man-aging the tensions that arise is a critical skill forsocial entrepreneurs (Dacin, Dacin, & Matear,2010). Doing so requires more than just skills inarticulating and measuring a social mission orentrepreneurship skills in effectively driving com-mercial operations, each of which has been thefocus of past research. It also requires skills forembracing conflicting social and economic de-mands. Yet, aside from a few notable exceptions(i.e., Tracey & Phillips, 2007), social enterprise re-search offers little insight into the skills that en-able social entrepreneurs to attend to these com-peting demands.

    We address this gap by developing theoryabout how leaders of social enterprises can cul-tivate skills for managing competing social andfinancial demands. Specifically, we addressthree questions. First, what are the leadershipchallenges posed by attending to the competingdemands of social enterprises? Second, whatskills do leaders need to effectively respond tothese challenges? And third, what pedagogicaltools can we use to help social entrepreneursdevelop these skills?

    We address our first two questions by drawingon a growing body of research on paradox theory(i.e., Lewis, 2000; Smith & Lewis, 2011). Paradoxtheory offers insight into the nature and manage-ment of competing demands in organizations.Based on this theoretical approach, we argue thatthe inherently competing demands that arisewhen organizations pursue social missionsthrough commercial means create two chal-

    lenges for social enterprises. First, social enter-prises risk losing their dual focus and becomingeither purely social mission-oriented or purelycommercial. Second, social enterprises risk be-coming mired in intractable conflict betweenmembers representing the social and commer-cial sides of the organization, respectively. Lead-ers of social enterprises therefore face twin chal-lenges: They must maintain commitments to boththeir social mission and their business plan, andthey must effectively manage internal conflictbetween these two sides of the organization.Three interrelated leadership skills enable man-agers to attend to these challenges: accepting,differentiating, and integrating competing de-mands. Accepting involves viewing both socialand financial demands as simultaneously possi-ble. Differentiating entails recognizing theunique contributions of each demand. Finally,integrating focuses on bringing social and finan-cial demands together such that conflict betweenthem becomes productive rather than intracta-ble. By linking paradox theory with social entre-preneurship, our contribution in this section is toexplicate specific challenges associated withmanaging competing social and commercial de-mands and link those challenges to critical lead-ership skills.

    We address our third research question by usingtwo exemplary models of teaching social entrepre-neurshipone in the classroom and one in thefield-to illuminate specific pedagogical tools fordeveloping these leadership skills. Social Entre-preneurs, Innovators, and Problem Solvers (SEIPS),an undergraduate course at Cornell, was recog-nized by Ashoka in 2010 as one of 10 exemplaryuniversity syllabi around the world for teachingsocial entrepreneurship. Digital Divide Data(DDD), a 10-year-old social enterprise in south-eastAsia, won awards and grants from the Skoll andRockefeller Foundations reflecting, in part, theirsuccess in teaching social entrepreneurship skillsto new generations of leaders. By drawing on ex-amples of teaching social entrepreneurs in theclassroom and field, our contribution in this sec-tion is to illustrate theory in action, demonstratingpedagogical tools that can help leaders developspecific skills in these two distinct settings. Takentogether, the challenges, leadership skills, and ex-amples of pedagogical tools we discuss here offera model of paradoxical leadership for social entre-preneurs that highlights the difficulties of the in-herently conflicting nature of their endeavor aswell as the opportunities for effectively managingtheir competing demands.

  • 2012 Smith, esharov, WesseJs, and Chertok 465

    SOCIAL ENTERPRISES:PARADOXICAL CHALLENGES AND CRITICALLEADERSHIP SKILLS

    Social enterprises seek to affect positive changeand create social value through entrepreneurialinnovation (Dees, 2001). Broadly, this definition in-cludes organizations that focus almost exclusivelyon a social mission, such as not-for-profits, govern-mental agencies, and foundations (Dees, 2007). Yetsocial enterprises frequently adopt commercialmeans to achieve the social ends they pursue (Da-cin et al., 2010; Dacin, Dacin, & Tracey, 2011). Wefocus here on this type of social enterprise becausesuch organizations face a unique set of challenges.In particular, even as social entrepreneurs adoptcommercial endeavors in service of a broader so-cial mission, they experience operational conflictsbetween social and financial demands. Beyond theskills needed to manage either a social mission ora commercial venture, leaders of these social en-terprises also need skills for managing the ten-sions and conflicts between these competingdemands.

    Paradox theory offers insight into the challengesassociated with managing the conflicting de-mands of a social enterprise and the skills bywhich such challenges can be addressed. Paradoxrefers to "contradictory, yet integrated elementsthat exist simultaneously and persist over time"(Smith & Lewis, 2011: 382). Organizational studiesof paradox explore how leaders respond to contra-dictory elements, or underlying tensions, in orga-nizations (Poole & Van de Ven, 1989). When tensionsfrom competing demands become salient, theyelicit strong, often defensive, reactions among or-ganizational leaders that can lead to potentiallydetrimental responses (Lewis, 2000). As an alterna-tive response, leaders can embrace inconsisten-cies and seek to support contradictory elementssimultaneously. Doing so can result in creative,beneficial alternatives (Cameron & Quinn, 1988;Poole & Van de Ven, 1989; Smith & Lewis, 2011).

    In social enterprises, pursuing social missionsthrough commercial means gives rise to paradox-ical tensions between competing social and finan-cial demands (for a discussion of competing de-mands in social enterprises see Tracey et al., 2011).Commercial viability is based on economic values,whereas social missions are grounded in societalvalues. While pursuing commercial viability en-courages efficiency, pursuing social missions im-plies a focus on effectiveness in addressing socialproblems (Epstein, 2008). While pursuing commer-cial viability involves attending to a more narrowset of shareholders, pursuing social missions ex-

    pands the focus to a broader group of stakeholders(Brickson, 2007; Donaldson & Preston, 1995).

    Competing demands can evoke defensive reac-tions among organizational leaders, who oftenseek to avoid rather than confront tensions (Lewis,2000). First, the contradictions and inconsistenciesthat arise in the face of social and financial de-mands create anxiety in social entrepreneurs, be-cause they complicate our linear logic, confuse ourrationality, and threaten our egos (Vince & Brous-sine, 1996). Such anxiety often results in a feelingof being stuck (Smith & Berg, 1987). In response,individuals seek strategies for consistency to re-gain clarity and control (Cialdini, Trost, & New-som, 1995), including splitting, polarizing, andchoosing between opposing forces (Lewis, 2000).Yet choosing one option can lead to extreme be-haviors to advocate for that choice. Escalatingcommitments continually reinforce a chosen op-tion and ensure its preservation (Staw, 1976), ulti-mately resulting in the dominance of one side ofcompeting demands over the other. For social en-terprises, this means losing their joint social andcommercial focus, as leaders repeatedly choose toprioritize either the organization's social missionor its commercial viability. Thus, although theyinitially pursue both, social enterprises can beginto look more like traditional for-profit entrepre-neurships on the one hand or traditional not-for-profit organizations on the other. For example, asthe microfinance field grew, some organizationseventually held initial public offerings and em-phasized their financial performance, much to thecriticism of people such as Mohammed Yunus,Grameen Bank founder and Nobel Laureate, whosuggested that these organizations lost their socialpurpose (Yunus, 2011). Tracey and colleagues'(2011) study of Aspire, a U.K.-based social enter-prise, illustrates the opposite problem. Financialproblems led Aspire to increasingly focus on itssocial goals and lose sight of its commercial via-bility, which ultimately contributed to the organi-zation's demise. This tendency to overemphasizeeither social mission or commercial viability to thedetriment of the other creates a challenge for so-cial entrepreneurs, who must maintain commit-ments to both.

    Second, competing social and commercial de-mands can lead social entrepreneurs to becomemired in intractable conflict, particularly whenthese demands are associated with distinct sub-groups within the organization. Group commit-ments can emerge with limited initial collectiveengagement, and group membership serves to in-tensify continued commitment (Tajfel, 1970). As aresult, polarization can occur even when there are

  • 466 Academy of Management Learning & Education September

    few tensions between groups. Moreover, Fiol, Pratt,and O'Connor (2009) argue that when threatened,group members not only support their own per-spectives, but they also define who they are byrecognizing how they are not like opposing groups.This process exacerbates the distinctions betweencompeting groups. In the extreme, such polariza-tion can lead to intractable conflicts characterizedby entrenched competition and mistrust betweengroups over a long period of time. For example,Battilana and Dorado (2010) describe ongoing con-flict in a Bolivian microfinance organization be-tween loan officers who sought to promote the or-ganization's financial success and those whosought to promote its development and social wel-fare objectives. The inability to address this ten-sion resulted in declining organizational perfor-mance. Because the tensions between social andcommercial demands can become so pervasiveand detrimental, they create a second challengefor social entrepreneurs, who must overcome in-tractable conflicts.

    While these twin challenges of managing socialenterprisessustaining dual commitments andovercoming intractable conflictmay seem insur-mountable, research suggests not only that orga-nizational leaders are capable of sustaining com-peting demands, but also that the juxtaposition ofsuch tensions can be a source of organizationalsuccess (Cameron, 1986). The integration of oppos-ing forces can encourage novel, creat...

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