Relationship Of Organizational Identity to Organizational Performance in Social Entrepreneurial OrganizationsAngela French & G. Tyge Payne

Agenda• What is social entrepreneurship and

why does social entrepreneurship matter

• Organizational identity

• Organizational performance

• Performance in social entrepreneurship

• Implications

Social entrepreneurship Why is it important?• Social entrepreneurship impacts the

global community by providing services that cannot be effectively offered by government or commercial entities (Sqauzzoni, 2009).

• In 2007, public charities reported over $1.4 trillion in total revenues and $2.6 trillion in total assets (NCCS Core

Files 2007)

• 26.4% of Americans over 16 volunteered for an organization in fiscal year 2008 (Current Population Survey, September, 2008)

Social entrepreneurshipWhat is it?• Nonprofit organizations that have

characteristics business (Lasprota & Cotton, 2003)

• Organizations that exploit opportunities and pursue innovation to tackle social problems (Zahra et al., 2009)

• Individual or organizations that perform entrepreneurial action to reach a social goal (Certo & Miller, 2008)

• Organizations that focus on creating social wealth over economic wealth (Mair & Marti, 2006)

Organizational identity• The characteristics of an

organization that −Define the organization−Make it distinctive from other

organizations−Endure over time(Albert & Whetten, 1985)

Organizational identity in social entrepreneurial organizations• Has both normative and utilitarian

identities (Albert & Whetten, 1985; Moss et al., 2010)

• Each identity has its own set of conventions and beliefs (Foreman & Whetten, 2002)

• Multiple organizational identities may be problematic when the identities are in conflict or one identity is emphasized over (Foreman & Whetten, 2002; Glynn, 2000)

• The organization’s identity influences the way the organization interprets issues, resolves conflict, establish competitive advantage, frames strategies, and sets goals (Dutton & Dukerich, 1991; Foreman & Whetten 2002)

Organizational identity in social entrepreneurial organizations• Multiple identities impact performance and

resources (Foreman & Whetten, 2002; Golden-Biddle & Rao, 1997; Whetten, 1981)

• Organizational goals, performance measures, and actions shape and are shaped by organizational identity (Fox,-Wolfgramm, Boal, & Hunt, 1998; Scott & Lane, 2000)

Organizational performance• Organizations need financial and

nonfinancial performance measures that are aligned with the organization’s strategy or value drivers (Ittner, Larcker, & Randall, 2003; Kaplan & Norton, 1992,

Venkatraman & Ramanujam, 1996)

• Organizational performance consists of three categories−Financial performance−Operational performance−Organizational effectiveness

(Venkatraman & Ramanujam, 1996)

Organizational performance in social entrepreneurship• Organizations with normative identities

struggle to measure organizational effectiveness because it is impossible to measure ideological goal fulfillment (Albert & Whetten, 1985)

• Social entrepreneurial organizations define their goals as they align to their organizational mission as opposed to defining operational or financial goals

• There is not a standardized way to calculate social value creation (Patton, 2003)

Organizational performance in social entrepreneurship• Organizations like the Better Business

Bureau Wise Giving Alliance attempt to quantify the relationship between donations and social impact by measuring the percentage of administrative costs to total expenses and other ratios− The validity of these measures as indicators of

organizational performance is questionable (Bhattacharya & Tinkelman, 2009).

• Performance is from the perspective of stakeholders and social entrepreneurial organizations have multiple stakeholders with dissimilar needs (Herman & Renz, 1998)

Relationship between organizational identity and organizational performance

Relationship between organizational identity and organizational performance• Proposition 1: Since organizational identity impacts

organizational goals and strategies, the degree to which an organization identifies with its normative versus its utilization identity will impact the goals and organizational performance measures the organization sets.

• Proposition 1A: The stronger the normative identity of an organization, the more difficult it will be for the organization to measure organizational performance.

• Proposition 2: An organization’s social impact is influenced by the organization’s financial and operational performance.

• Proposition 3: An organization’s financial performance will be influenced by the organization’s social impact.

Implications• If social entrepreneurship is about

building social wealth over economic wealth, then social ventures need both a strong normative and strong utilitarian identity that impacts their goals and strategies in order to thrive−Social entrepreneurs need to have

business savvy to fulfill their social goals (Vega & Kidwell, 2007)

Implications• Social entrepreneurial organizations

need to have both identities manifest in their organizational goals and strategies which are then translated into measureable performance goals −Scholars and practitioners have

introduced multi-dimensional performance indicators to social entrepreneurship like the balanced score card and social return on investment (Kaplan, 2001; Nicholls, 2009).

Implications• Operational performance and

financial performance are antecedents for social impact, so financial and operational measures could be effective, though only partial, methods to measure organizational performance in social entrepreneurship

Implications• Further research is necessary to

understand the unique organizational structures of social entrepreneurial organizations

• Understanding and possibly generalizing key performance characteristics of social entrepreneurial organizations could lead to determining key performance referents, which could lead to ways to improving way social ventures operate

• This type of model could be adapted to other organizations that exhibit multiple identities

Questions & Comments

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