Management Issues in Stakeholder Managed Businesses and Co-operatives

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

2. 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

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

4. 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 . . .’

5. 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

6. 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

7. How does this apply to Sundance?

8. 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’

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

10. 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.

11. 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.

12. 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

13. 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

14. 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.