Introduction
The rise of innovative business practices has given rise to a convergence of societal and environmental challenges, leading to the emergence of novel business models that blend profit and purpose. These types of businesses and organizations are commonly known as social enterprises. The importance of dehybridization in the context of social enterprises lies in the transformation it brings about and its impact on the organizational structure, which promotes a more sustainable and profitable approach.
The process of dehybridization contributes in two significant ways. First, it involves a clear definition of a social enterprise’s mission by discarding conventional institutional practices and placing a greater emphasis on the transparency of its core cause. Secondly, it results in the creation of a distinctive operational model that sets a social enterprise apart from its competitors, making it more sophisticated and appealing to potential investors.
The article focuses on the dehybridization of social enterprises. This is of considerable significance because it highlights the critical role of dehybridization in the context of social enterprises and its implications for adopting sustainable strategies during times of crisis. It sheds light on an effective strategy for addressing crises and underscores the contextual importance of this transformation.
Prioritizing a stronger focus on their social mission, rather than conforming to a shareholder-centric approach during periods of crisis, has demonstrated its efficacy over the alternative approach. Dr. Magdalena Presa’s research findings, illustrated through examples such as Brexit and the Financial Crisis of 2008, indicate that Community Interest Companies that chose not to dissolve were more likely to undergo transformation via dehybridization. Moreover, these transformed enterprises witnessed a sustained growth in revenue after these crises, in contrast to those that didn’t undergo such a transformation.
Figure 1: Hybrid Spectrum of Social Enterprises.
An Introduction to Dehybridization
Dehybridization, in a broader context, relates to the process of transitioning from a mixed or hybrid environment towards a more specialized and focused direction. In the context of social enterprises, dehybridization signifies a method of organizational transformation that involves shedding the institutional norms, values, and conventions associated with the social enterprise sector. These sector-specific norms often evolve due to cultural, political, and industry-related influences. Dehybridization entails adopting an alternative and concentrated approach to the core mission of the social enterprise.
This structured transformation process effectively steers the social enterprise away from conventional institutional norms and established industry practices, allowing them to better fulfil their mission. Various forms of dehybridization may include a complete overhaul of the social enterprise, such as shifting from a profit-oriented model to a non-profit one, thereby placing a heightened focus on addressing the societal issue.
According to Dr. Magdalena Presa, in the context of social enterprises, dehybridization can lead to the organization becoming either a charitable entity, distancing itself from commercial principles, or a for-profit business that lessens its focus on charity. Another aspect of dehybridization is financial dehybridization, where social enterprises seek funding from impact investors who have accumulated their wealth through contributions to social causes. This approach adds uniqueness to the social enterprise’s business model by departing from traditional funding methods.
The Importance of Dehybridization
At specific junctures, dehybridization becomes essential. It’s important to acknowledge that operating in a hybrid model doesn’t always benefit social enterprises. In fact, it can have detrimental effects on both their organization and their relationship with stakeholders. This consideration involves both commercial and social connections with stakeholders and the mission of the social enterprise. Consequently, the significance of dehybridization lies in the resolution of these conflicts and the establishment of a more focused and streamlined business model approach.
Dr. Magdalena’s research supports this argument by demonstrating that the persistence of a hybrid business model is detrimental to both beneficiaries and financial investors, given the ongoing challenge of satisfying both sides. This is crucial because it brings clarity to the purpose of the social enterprise. By elucidating their mission and concentrating solely on it, they become more effective, leading to improved future outcomes.
Furthermore, Hybridization is imperative as it fosters greater resilience during times of crisis. This, in turn, safeguards social enterprises and ensures the continuity of their social mission.
Stages of Dehybridization
The dehybridization process for social enterprises involves several stages, starting with a clear understanding of why dehybridization is necessary. This understanding constitutes the initial step in the process model. In a more practical sense, it entails conducting a thorough evaluation of the transformation of the organization’s core values and its renewed focus on social impact.
The second aspect of the process model deals with legal and regulatory compliance. Shifting the emphasis from being a profit-oriented social enterprise to a more purpose-driven non-profit social enterprise entails two significant changes. Firstly, it results in a clearer sense of purpose and necessitates a reconfiguration of the organizational structure. This restructuring involves altering ownership and governance structures and transitioning the social enterprise’s legal status from a for-profit company to a charity or non-profit entity. This transition also involves adjustments in tax status and approaches to funding.
Key Factors Influencing Dehybridization
The primary factor influencing the decision of social enterprises to undergo dehybridization is the management complexity that arises within a hybrid operational environment. It’s important to state that certain sectors with hybrid structures require significant cultural adjustments to align with industry standards and demand substantial resources to maintain these dual values. Consequently, this complexity in a hybrid structure often results in reduced operational efficiency.
For instance, consider the case of Grameen Bank in Bangladesh, which successfully underwent dehybridization. In its hybrid social enterprise model, the organization primarily focused on providing microloans to impoverished individuals while relying on donor support. The dehybridization process transformed Grameen Bank into a full-fledged commercial bank, altering its core purpose. No longer dependent solely on donor funding to finance its loans, Grameen Bank diversified its revenue streams, allowing it to expand its financial services and access capital markets.
Conclusion
In conclusion, the concept of dehybridization in social enterprises represents an emerging trend that elucidates the changes in their business models. This shift occurs for specific reasons, primarily driven by a heightened emphasis on their mission and the pursuit of a more effective and streamlined organizational structure. The practical approach for a social enterprise contemplating dehybridization involves conducting a comprehensive evaluation of its future objectives and core purposes.
Dehybridization has proven successful for companies during times of crisis, as exemplified in the context of Brexit. Notably, one of the noteworthy case studies demonstrating successful dehybridization is the transformation of the Grameen Bank in Bangladesh, which transitioned from a hybrid business model to a different operational approach.
This article is written by Mateo Mane, Lancaster University, UK.
References:
International Review of Entrepreneurship, Article #1601, 17(2): pp. 107-126 2019, Senate Hall Academic Publishing.
Mikołajczak, P. (2020). Social Enterprises’ Hybridity in the Concept of Institutional Logics: Evidence from Polish NGOs. VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, 31(3), pp.472–483.
Plesa, M. (2021). Dehybridization of Social Enterprises: A Process Model. Proceedings – Academy of Management, 2021(1).
SMEs as Social Enterprises: Regional Disparities, Access to Finance, Strategic Intentions, and the COVID-19 Pandemic ERC Research Paper 97. (2022).