Employee Motivation in Social Enterprises: Tackling the Dual Mission Dilemma Mohammad Zainuddin Ida Md Yasin Putra Business School, Malaysia Abstract Social enterprises are on a dual mission of creating social value and achieving profitability This combination of non-profit and for-profit identities within a single entity creates tensions and dilemmas at the organizational level Tensions may emerge across various domains and the enterprise may, over time, lose focus on the initial social mission in search of increased revenues Social enterprise management, thus, being at an institutional crossroads, face significant challenges to sustain focus on both the objectives and counter pressure to compromise on social mission As a result, managers need to devise business models and policies appropriate for this unique context and ensure the continuous involvement of employees with the dual goals of the organization Employees of social enterprises are to be motivated with the right incentive schemes, the design of which is consistent with the competing objectives, viz., social mission and commercial success This paper aims to explore and critically examine the mechanisms management use to motivate employees to simultaneously achieve both the objectives by effectively dealing with the dual mission dilemma An archival research followed by an in-depth best practice case study is proposed to meet the research objectives Keywords: Social Enterprise, Hybrid Organization, Dual Mission, Human Resources, Employee Motivation, Incentives JEL classifications: L31, M12, M52 Introduction Social enterprise is a hybrid organization with ‘double bottom line’ as it integrates both social and commercial aims in its core Although the primary mission of social enterprise is social value creation, financial profitability is also important as it ensures self-sustainability and thereby helps to pursue the primary mission in the long run This joint pursuit, however, creates a lot of tensions and dilemmas at the organizational level As a consequence, the organization may compromise on the initial social mission in search of increased profitability So, the difficulty associated with keeping focus on the differing objectives for a long time and the conflicting institutional demands, both within or outside the organization, pose a real challenge for social enterprise management While existing research points to social-commercial tensions as a core characteristic of social enterprises (Wry & York, 2017), little is known about the management responses to these tensions and associated challenges (Smith, Gonin, & Besharov, 2013) These are particularly important because the existing literature on management related to public sector, for-profit and non-profit does not provide any model and approaches which can account for the specific nature of social enterprises (Borzaga & Solari, 2004) Moreover, employees 312 of social enterprises, who face this dual—often conflicting—objectives, are a specific area that remains largely neglected within the academic community (Bacchiega & Borzaga, 2004) Social enterprise employees need to be motivated, with the appropriate schemes, to simultaneously achieve both the objectives A key challenge for social enterprise managers, therefore, is to use the right incentive mix to motivate employees to deal with the social-financial dilemma Literature Review Whereas two decades ago the concept of social enterprise was rarely discussed (Defourny & Nyssens, 2010), it has now become an important global phenomenon (Santos, 2012) and has grown dramatically across various regions of the world (Kerlin, 2010) Both the practitioners and the policy makers have turned their attention to this new tool in order to address such pressing problems as poverty, economic inequality and environmental degradation (Smith et al., 2013) A number of celebrated social entrepreneurs have already emerged (P A Dacin, Dacin, & Matear, 2010; Nicholls, 2010) who make significant social impact in developed and developing countries alike All these advances have sparked a growing interest in the academic world (Teasdale, 2012), not only in the form of research articles and booksInvalid source specified., but also in the form of creating academic centers and offering new courses in business schools (Mair & Martí, 2006) The increasing popularity of social enterprise and its ability to provide novel solutions to a range of both new and old social problems which the existing public and private sectors have been unable to solve (Mair, Battilana, & Cardenas, 2012; Sepulveda, 2015), make it a very important domain of scholarly investigation While researchers clarified how social enterprise is different from the existing public, private and nonprofit sectors with its interdisciplinary focus (M T Dacin, Dacin, & Tracey, 2011), they also pointed out the failure of the state and market to satisfy social needs (Kerlin, 2010; Santos, 2012; Teasdale, 2012) On the one hand, state social programs are weak (Kerlin, 2010) and state enterprises are ineffective to deliver welfare services (Teasdale, 2012) because of inefficiency and bureaucracy Invalid source specified On the other hand, market-driven private sectors not account for social mission and values, rather their primary purpose is to maximize profit for the owners which can lead to social and environmental costs (Sepulveda, 2015) The problems are further compounded, in this globalized world, when “states are powerless to halt the inequities created by market forces” (Teasdale, 2012, p 103) Moreover, the traditional non-profit organizations operated in the social sector are mostly unsustainable and vulnerable due to non-distribution constraint (Besley & Ghatak, 2017) and reliance on donor support Social enterprise eschews these shortcomings of the existing sectors by combining for-profit and non-profit organizational activity (M T Dacin et al., 2011; Smith et al., 2013) and integrating both social and commercial aims in its core (Mair & Martí, 2006; Wry & York, 2017) Although such integration makes social enterprise a hybrid organization (Besley & Ghatak, 2017; Mair et al., 2012) with ‘double bottom line’ (Defourny & Nyssens, 2010; Sepulveda, 2015), its defining characteristic remains intact: the primacy of social aim The same has been concluded by Dacin et al (2011), after analyzing 37 definitions, that the primary mission of social enterprises is to create social value, and thus, social enterprises are not in the business of ‘maximizing profit’, which is hardly compatible with social goals Invalid source specified Rather their purpose is to make such profit as necessary to ensure self-sufficiency and longterm sustainability (Kerlin, 2010; Mair & Martí, 2006) in order to achieve the primary mission As Santos (2012) nicely puts it, social enterprises “maximize on value creation and satisfice on value capture by aiming to capture just enough value to sustain operations and re-invest in growth” (p 339) This joint pursuit, however, makes social enterprises pregnant with tensions The dual mission tensions may emerge across various domains as commitments to both social and financial goals put together divergent identities, norms and goals within one organization And secondly, the attention may slowly drift away from the initial social mission, and business venture may get the priority over social 313 welfare Invalid source specified So, pursuing both the objectives and countering pressure to compromise on social mission are a key management focus Management of social enterprises, being at an institutional crossroads, face significant challenges that impact strategic decision making (Santos, 2012; Smith et al., 2013) and require different human resource practices (Kupolokun, 2014) Social enterprise has all the characters of an ‘enterprise’ So unlike some non-profits, its direct involvement in the production of goods and/or services (Defourny & Nyssens, 2010) requires an increase in operational efficiency and an emphasis on customer satisfaction and quality management (Borzaga & Solari, 2004) At the same time, since the main driver of action is social mission (unlike for-profits), its managers must devise business models and policies appropriate for the context Thus, social enterprise managers need to simultaneously demonstrate both social and economic competence (M T Dacin et al., 2011) Moreover, adequate attention must be given in managing human resources as they constitute the key competitive advantages The continuous involvement of employees with the dual goals of the organization needs to be ensured through the right motivation mechanisms Managers must motivate the social enterprise workforce through an enriched incentive mix (Borzaga & Solari, 2004) Although researchers have diverse opinions regarding the right mix in an incentive structure, its importance to motivate and engage employees is, however, widely recognized For instance, a meta-analysis of all adequately designed experiments on the use of incentives to motivate performance reveals that the overall average effect of all incentive programs is 22% performance gain, whereas a 44% performance gain is reported for incentive programs extending beyond a year (Condly, Clark, & Stolovitch, 2008) The importance of incentives is rightly emphasized by Borzaga and Solari (2004), who mentioned that the commitment and satisfaction of social enterprise employees “derive from the ability of social enterprises to provide them with a more consistent incentive mix” (p 343) But, as there are different categories of incentives, viz., monetary, tangible non-monetary and intangible non-monetary Invalid source specified., a right mix among them is crucial along with a proper balance between extrinsic and intrinsic incentives Whereas some authors stress more wage moderation for social enterprise sector (Bacchiega & Borzaga, 2004), others argue that such policy would fail to attract skilled human resources (Kupolokun, 2014) Some researchers highlight the role of intangible non-monetary incentives, such as meaningful work, training, participation, more autonomy and flexibility (Borzaga & Solari, 2004), while others are in favor of monetary rewards (McKim & Hughart, 2005) In addition, Borzaga and Solari (2004) opine that intrinsic rewards play a major motivating role in social enterprises, but Kupolokun (2014) underlines extrinsic rewards and contends that lower compensation causes difficulty in retaining commercial talent in this sector, while others claim that the opportunistic risk related to low-powered incentives can be averted by cohesiveness, trust relations and higher degree of freedom (Bacchiega & Borzaga, 2004) So, balancing and better integrating different incentive systems are a real predicament for social enterprise management Social enterprise managers need to achieve a constant balance between organizational goals and the incentive structure They must motivate their employees with the right incentive mix, the design of which is consistent with the competing objectives, viz., social mission and commercial success Yet, almost no study has been done thus far to understand the mechanisms management use to motivate employees to effectively deal with this dual mission dilemma Research Objectives The overall aim of this research is to understand the incentive mix used to motivate social enterprise employees and how it helps to tackle the social-financial dilemma For the purpose of the study, the research statement is broken down into two specific objectives: first, to identify the incentive mix management uses to motivate employees in social enterprises, and second, to critically examine how a well-designed incentive mix may prevent the risk of compromising on social mission and address the dual mission dilemma The study 314 also intends to make some policy recommendations for the human resource managers for the effective design of incentive mix in light of the research findings Methodology Two methods will be used as complementary approaches: archival research and case study An archival or documentary research will be conducted to meet the first research objective Archival research is a very important and effective research strategy and the potential documentary sources are plenty (Lee, 2012) The data will be collected from plans and policy statements, administrative records, reports and strategy documents of social enterprises and the data will be quantitative in nature An exploratory factor analysis will be undertaken to analyze the data collected The second research objective will be addressed qualitatively through an in-depth case study Case study is especially appropriate in new topic areas (Eisenhardt, 1989), like social enterprises Data will be collected through open-ended interviews of managers & employees of Grameen Bank, a Nobel Prize winning social enterprise from Bangladesh Interviews are a highly efficient way to gather rich, empirical data (Eisenhardt & Graebner, 2007), and open-ended responses are useful in exploring and investigating a new area of research (Judd, Smith, & Kidder, 1991) Finally, for transcribing the interviews and analyzing the data, the principles of Miles & Huberman (1994) will be used as a guide Conclusions Social enterprise managers must use the appropriate mechanisms to motivate employees to achieve the dual objectives of the organization Unfortunately, empirical research is very limited in this context In fact, to a large extent, the social enterprise literature to date is descriptive (M T Dacin et al., 2011) and there is a heavy focus on conceptual over empirical research (P A Dacin et al., 2010; Kupolokun, 2014) In the organizational level, motivating employees with the right incentive plans has a profound influence on the effectiveness and sustainability of social enterprises So, exploring and examining the design and effects of incentive systems 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