Essec Business School

Drawing ‘personality traits’ from a range of different sources, “hybrid organisations” embody competing institutional logics. They can include social enterprises that aim to achieve social goals through commercial activities, public-private partnerships as well as biotech firms that both research and market new drugs.

In order to achieve their goals, these companies must find a way to reconcile many contradictory values and demands, while convincing external stakeholders that they are both legitimate and effective. They must decide whether to operate as for-profit or not-for-profit entities, whether to reinvest profits or distribute them to their owners, and whether to operate as democracies or hierarchies. So how can hybrids effectively navigate the types of identity crises that are intrinsic to their very nature?

Previous theory suggests that managers within hybrid organizations tend to take one of two approaches – either they pay lip service to one logic while using another in practice or they try to balance competing logics through compromise – both of which can work if stakeholders don’t look too closely, but ultimately risk pleasing nobody. However, new research by Professors Anne-Claire Pache – “Inside the hybrid organization: Selective coupling as a response to competing institutional logics” (Academy of Management Journal 2013)and which was shortlisted for the prestigious Syntec Management Consulting Best Article Award- agues that a more nuanced approach is needed. 

Resolving the conflict between competing institutional logics 

Dealing with institutional logics that are incompatible or contradictory is a challenge, particularly over the long term. If they get it wrong, hybrids risk alienating external players or falling prey to infighting. But there is a significant knowledge gap as to how organisations actually go about resolving the conflict between logics.

To start to fill this gap and better understand the choices that these institutions make, Professors Pache and Santos studied four French work integration social enterprises (WISEs) that help the long-term unemployed back into work: WISEs hire them for two years to produce goods and services on the commercial market as a means to retrain them the skills of work. These are clearly organizations that have one foot in the world of social welfare and the other in the world of commerce. They are founded to pursue a social mission and  work closely with public-sector and non-profit organisations to provide their beneficiaries with the required social support and counselling. However, they are also fully commercial companies who sell quality goods and services to clients. They rely on sales for 80% of their revenues. Whereas WISEs require an accreditation from the state who monitor their focus on their social mission, they are free to choose their form (for-profit or non-profit) and how they organize to achieve their goals.

The research revealed that rather than just the two strategies mentioned above, managers of hybrid organizations also have a third option at their disposal. One that is far more widely used than was ever thought before. This third option is what Professors Pache and Santos call “selective coupling”: In other words, organizations can combine competing logics by drawing on different elements of each.

But the solution doesn’t seem obvious when one notes how different social and commercial logics are. Overall, the demands made by each logic are reflected in ten different organisational practices: legal status, ownership structure, how profits are used, how to incorporate new sites when expanding, how to manage new sites, adopting standard procedures across multiple sites, branding, monitoring, professional affiliation and the use of volunteers.

• For instance, in the social-welfare logic, being a non-profit or an association is seen as legitimate because it directs profits towards a social goal, while the for-profit form is favoured in the commercial realm.
• Social enterprises tend towards democratic control, while businesses prefer hierarchies.
• And for social-welfare organisations, professional legitimacy is all about the social mission, but for commercial firms it is about technical and managerial expertise.

When the researchers looked at the ways managers dealt with these conflicts and ended up adopting these practices, they found that – contrary to previous research – they very rarely used decoupling or compromise. Instead, they relied mainly on selective coupling: combining the logics by complying selectively with demands from each one.

For example, one WISE made some of its sites non-profit and some for-profit, giving them all autonomy but safeguarding its social mission by directing profits from the for-profit sites to a non-profit parent organisation. On the commercial side, it imposed a single brand identity on all its sites and standardised its operations nationwide too. And this pattern of combining logics was very stable over time, suggesting that it is a good way to manage a hybrid organisation over the long term, even during a turbulent period of rapid expansion.

All hybrids organizations are not created equal

That said, the origin of a hybrid has an important influence on the way it combines logics. While we might expect that hybrids with ‘social’ origins to adopt the practices of the social logic, and the ‘commercial’ ones to use commercial logic, in fact, the reverse was the case. Professors Pache and Santos call this a ‘Trojan horse’ pattern. The hybrids founded by multinational firms had to prove their legitimacy in the social field, so they adopted more characteristics of a social organization in a way to get acceptance in what was for them a new world. The two hybrids founded by prominent social actors did not have to work so hard for legitimacy, leaving them free to organise as they wished.

This research shines a light on the neglected area of how and why hybrids take the form that they do. It suggests that selective coupling is not just a coping mechanism, but an effective and desirable strategy. As well as helping hybrids deal with competing logics, secure external support and minimise internal conflict, it allows them to respond effectively to their environments and build a strong organisation over the long term.