Management Issues in Stakeholder Managed Businesses and Co-operatives Focusing on Sundance Renewables

Borzaga and Solari Working with a very broad definition of social enterprise: ‘essentially a (private) organization devoted to achieving some social good’ Social enterprises largely in contradistinction to the public sector in providing public services, but with particular ‘positive externalities’, i.e. knock-on benefits such as ‘an enriched service, such as more hours of care or a different interpersonal approach’ Acknowledge the ambiguity of the term ‘social good’ Concerns about the efficiency and effectiveness of social enterprises Multi-stakeholder nature of social enterprises makes them face particular problems in balancing interests

Challenges? Legislative and regulatory environment Quality of product and employee skills Management expertise and support Financing Networks and co-operation Governance structures

People challenges ‘Different management styles are requierd to maintain a competitive advantage based on workers’ commitment and involvement’ ‘The value-driven employee of a social enterprise wants it to manifest a consistent set of values, norms and organisational practices A new governance and organisational form is needed...’

Characteristics of new governance form? Greater autonomy Participatory decision-making Respect for people and their expectations Balance between efficiency and social mission Closer attention to customers and society Ownership—economic and psychological Emotional and technical leadership Fulfilment of array of personal needs and desires

HRM in social enterprises SEs are usually labour-intensive Importance of ‘intrinsic rewards’ Psychological contract between employees and organisations is different in nature Balance between extrinsic incentives (pay, flexibility of work hours) with intrinsic (participation, autonomy, moral values) Distributive justice: balance between effort and incentives Flatter hierarchy

How does this apply to Sundance?

What are multi-stakeholder processes? Term grew out of the Rio Earth Summit in 1992 Intrinsically linked to sustainability Kofi Annan (2000): need for ‘more active cooperative management’ ‘Stakeholders are those who have an interest in a particular decision, either as individuals or representatives of a group’

Key values and ideologies of MSPs Sustainable development Good governance Democracy Participation Equity and justice Unity in diversity Leadership

Governance at Suma Separate the board from the executive: the Management Committee, as the elected (non-executive) directors, have authority over the Function Area Coordinators, who are the executive managers (effectively the executive directors) But there is a dynamic dialogue between the two; neither can operate without the other Ongoing relationship between the MC and the general meeting of member shareholders so that, in contrast to the single AGM of most companies, Suma has six GMs a year MC can only operate with impunity for a maximum period of three months at most, Executive managers at Suma are answerable at least on a weekly basis to MC.

Consequences Separation between the democratic governance of the cooperative and the executive management of the business Authority of members is clearly defined and it is only operational when they sit together as GM Otherwise they relate to the business as employees subject to the executive management culture they have chosen democratically In collectives member employees refuse instructions from colleagues giving rise to a ‘stop – go – stop’ style of management Most collectives suffer from the problems of most small partnerships of equals – the tyranny of the individual veto.

Network governance Response to lack of accountability and inefficiency in private sector and unresponsiveness and bureaucracy in public sector Size of global businesses and power of CEOs reduces accountability Importance of human scale Public disillusion with business

Rational for network governance Network organisations introduce internal interdependence to provide a rational basis for developing trust, cooperation and greater operating efficiency They also introduce internal competition for job satisfaction and other self-interests Unlike command and control hierarchies, network organisations allow individuals to utilise their contrary nature to be competitive/cooperative, suspicious/trusting, self-interested/altruistic and so on These are nature's way of introducing the checks and balance required for efficiently sustaining the self-regulation of social creatures

Advantages... Self-interest of executives harnessed to further the public good by introducing contestability for senior positions Internal competition for control provides a much better informed, sensitive and efficient mechanism to improve the operations of a business than competition for control through the stock market. A compelling basis for replacing corporatisation, privatisation or public-private partnerships as a means for increasing economy, efficiency, and effectiveness of social enterprises.