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10.1111_aswp.12069

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10.1111_aswp.12069

  1. 1. ORIGINAL ARTICLE Journey from NGO to Sustainable Social Enterprise: Acceleratory Organizational Factors of BRAC Sangmi Cho and Razia Sultana Social Welfare, Ewha Womans University, Seoul, Korea The purpose of this study is to explore the organizational factors that accelerate for turning BRAC into a sustain- able Social Enterprise (SE). As such, using the organization BRAC as a case study, this study focused on two main objectives: first, to explore its organizational strategy or approach as SE and second, to evaluate the ability of the organization to maintain its organizational value as an NGO while operating SEs. This work constitutes explora- tory research based on case study method. The data collection method is divided into two parts: in the first part the relevant literature was reviewed, and in the second part purposive sampling method was used in the form of an in-depth interview. Findings suggests that BRAC generated some key organizational factors including addressing specific social and client’s needs, introduced unique ‘BRAC Model’ and strategy for their SEs, visionary leadership and competent management with proper organizational foundation assist the organization in its capacity to become a sustainable and successful SE. This research has policy implications findings common elements yet innovative approaches for establishing SE among NGOs in Bangladesh, in order to come up with institutional regulations in informal economy and instable political system. Keywords BRAC; NGOs; organizational factors; organizational strategy; social enterprise doi:10.1111/aswp.12069 Introduction The term “non-governmental organization” (NGO) has connotations of and literally refers to a group of people performing social projects parallel to services provided by the government. Most NGOs emerge from relatively small-scale origins and, over time, they develop into larger and more complex organizations. In one influential study, Korten (1990) argued that it is useful to conceptualize this evalu- ation process in “generational terms” and proposed a schema according to which the change undergone by an NGO as a function of time is portrayed in terms of four generations of development. Korten referred to this gradually changing role of NGOs as “catalyst” and “partners”, which he described as the third generation of NGOs. The pattern of evolution displayed by NGOs in Bangladesh has followed a similar pattern to that suggested by Korten. After the Liberation War of 1971, NGOs emerged on a large scale in Bangladesh “to undertake relief and rehabilitation activities to mitigate the sufferings of the war-torn people”.1 This orientation of the NGOs toward welfare and charity continued until 1974. Then the new orientation of NGOs, which focus on the poor in rural Bangladesh, adopted programs that went beyond their welfare concerns and concentrated on aspects such as group formation, training, non-formal education, health, and micro-credit across wide-ranging areas of development with the aim Correspondence concerning this article should be addressed to Sangmi Cho, Department of Social Welfare, School of Social Sciences, Ewha Womans University, 52, Ewhayeodaegil, Seodaemun-gu, Seoul 120-750, Korea. Email: sangmicho@ewha.ac.kr 1 Report of the Task Forces on Bangladesh Development Strategies, Vol. II, 1991: 374–5. © 2015 Wiley Publishing Asia Pty Ltd 293 Asian Social Work and Policy Review 9 (2015) 293–306
  2. 2. of accomplishing social change.2 However, the disadvantage of the NGO model is its tendency to create a culture of dependency among beneficiaries, which, together with the NGO’s own dependency on sup- port, especially in terms of funding and the goodwill of donors, limits NGOs’ legitimacy. The notion of a social enterprise (SE) has thus attracted the attention of academia, international organizations, chari- ties, and corporations, in efforts to better understand the phenomenon and scale of some of the new models and processes that could be followed by NGOs to create value. The transition from NGO to SE is very challenging, but rewarding, in the long term and could translate into sustainable social projects. This would require a change in the strategy and operation of an NGO and, additionally, a shift in the leadership’s mindset that would be critical for restructuring the organization to become a social enter- prise. These changes evoke the spirit of entrepreneurship, which requires determination by the leader- ship as well as the willingness to innovate. Fowler (2000) argued that many NGOs concentrate on resource sustainability at the cost of two dimensions: enduring impact (NGOs’ contribution to society) and organization viability (their ability to act on their own terms). SEs grounded in the ethos of innovation and transformational change can achieve significant developmental impacts because this creates social and economic values (Nagler, 2007). Striking a balance between an NGO’s social and economic goals is a critical element of social entrepreneurship. While the issue of financial sustainability is highly significant, social entrepreneur- ship is also about having a mindset of acting boldly without being limited by the resources currently in hand (Dees, 1998). The type of social entrepreneurship may vary according to the approach and strategy that are followed. Integrated social entrepreneurship is characterized by the simultaneous cre- ation of social benefits by surplus-generating activities. Integration can also generate additional bene- fits for the non-governmental development organizations themselves (Fowler, 2000). Many examples of an integrated approach can be found, of which the BRAC is one example. Another common method is to add production units to vocational training programs (Fowler, 2000). These additions provide practical “commercial” experience and generate income. The Grameen Bank is another exam- ple of an organization that has implemented integrative social entrepreneurship, where, by using micro-credit, a new self-sustainable type of rural association between women is established. These, and other integrative combinations, seek to reduce external financial dependency, increase the devel- opment impact and spread risk. These changes in approach prompted this article, which presents a study of the Bangladesh Rural Advancement Committee (BRAC), a large NGO in Bangladesh, as a case study. BRAC was established in 1972, in the aftermath of the Independence War, by Fazle Hasan Abed who was a Bangladeshi corporate executive. Over the past 40 years, BRAC has focused on breaking the cycle of poverty in Bangladesh. It provides a range of services — rural capacity building, education, health services, and micro-credit — to 5.54 million rural people, reaching an esti- mated 135 million people with over 100,000 employees worldwide.3 It has therefore been an excep- tionally successful SE and NGO that has developed the ability to contribute to its own financial sustainability. The purpose of this study is to explore the organizational factors that accelerate turn- ing BRAC into a sustainable SE. The first objective of the study is to explore its organizational strategy or approach as SE. The second objective is to evaluate the ability of the organization to maintain its organizational value (associate with its mission) as an NGO while operating SEs. BRAC’s holistic approach to socioeconomic development and its quite extensive commercial enter- prise activities provide an interesting analytical basis for evaluating the concept of social enterprise in Bangladesh as well as other developing countries. 2 Transparency International Bangladesh – Problems of Governance in the NGO Sector: The Way Out. 3 http://www.brac.net/ 294 © 2015 Wiley Publishing Asia Pty Ltd Sangmi Cho and Razia Sultana Acceleratory Organizational Factors of BRAC
  3. 3. Literature review Concept and definition: Social entrepreneurs, social entrepreneurship, and social enterprise Social entrepreneurs Dees (1998), who is considered a pioneer in this field, defines social entrepreneurs as people who play the role of change agents in the social sector by adopting a mission to create and sustain social value by recog- nizing and relentlessly pursuing new opportunities to serve that mission by engaging in a process of continu- ous innovation, adaptation, and learning by acting boldly without being limited by resources currently in hand, and by exhibiting a heightened sense of accountability to the constituencies served and for the out- comes created. Social entrepreneurship Social entrepreneurship is the recognition of a social problem and the use of entrepreneurial principles to organize, create, and manage a social venture to achieve the desired social change. The main aim of social entrepreneurship is to further broaden social, cultural, and environmental goals. Some consider it as focus- ing on combining commercial enterprises with social impacts (Emerson & Twerksy, 1996), others have emphasized its role as innovating for social impact (e.g., Dees, 1998), whereas some others see it as a way to catalyze social transformations (Ashoka Innovators, 2000). Social enterprise The Organization for Economic Co-operation and Development (OECD) defines SEs as “any private activ- ity conducted in the public interest, organized with an entrepreneurial strategy, but whose main purpose is not the maximization of profit but the attainment of certain economic and social goals, and which has the capacity for bringing innovative solutions to the problems of social exclusion and unemployment” (OECD, 1999). The UK-based Social Enterprise Coalition considers some of the common characteristics displayed by SEs, such as enterprise orientation, social aims, and social ownership. The Coalition also supports the UK Government definition, which many of its members were actively involved in helping to develop: A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximize profit for share- holders and owners.4 The concept and definition of social enterprise in Bangladesh: Country context An understanding of the policy and legal definition of entrepreneurship requires its observation across dif- ferent economic and cultural contexts. In the informal economy, neither the state nor the regulated market is capable of creating wealth and social justice, which, instead, is determined by affiliation to social groups (Mair, 2010). Many countries in Latin America and Asia, and India as well as Bangladesh, are examples of informal economies. A review of social enterprise literature reveals that the majority of the literary actors are based in developed countries. The broader focus of the social enterprise field makes it more suitable for analysis of developing countries. Social entrepreneurship in India, Bangladesh, and Pakistan is shaped by the socio-political and market failure context. It was found that the complex informal economy, multiple market failures, and dependence on foreign donors/creditors in developing countries like Bangladesh, sub- stantially change the debates about the notion of social enterprise. In Bangladesh, neither the government nor the market creates social entrepreneurship; rather, civic organizations, most of which are NGOs, imple- mente their own innovative strategies and approaches towards social entrepreneurship. Social entrepreneur- ial organizations such as BRAC or Grameen have assumed the role and activities of absent or ineffective government in Bangladesh. Social entrepreneurs have created organizations that complement and substi- 4 Social Enterprise Definitions, Social Enterprise Coalition website. http://www.socialenterprise.org.uk/ © 2015 Wiley Publishing Asia Pty Ltd 295 Sangmi Cho and Razia Sultana Acceleratory Organizational Factors of BRAC
  4. 4. tute for missing action by national and international relief activities in response to natural disasters (Mair, 2010). Besides, from the “market” point of view with government and business deficiencies in Bangladesh, social entrepreneurs have a stronger case for being in the best position to address market failure. For exam- ple, the failure of the Bangladesh government to provide grid electricity to rural Bangladeshis has led to Grameen Energy selling over 400,000 solar home systems to people in rural areas (see www.gshakti.org). In developing countries such as Bangladesh, however, the size and extent of the informal sector means that the role and design of social enterprises is more complex. Therefore, social entrepreneurship activities are started by holding the hand of non-government organizations; SE in Bangladesh is both an activity and at the same time a separate organization under the “brand name” of that particular NGO. NGOs in Bangla- desh working in different sectors and not all NGOs are involved with SE activities or have separate SEs under the brand name of that particular NGO. NGOs in Bangladesh operating SEs are considered both as SEs and NGOs, but NGOs who are working in a particular development sector or field are considered as NGOs. In Bangladesh there is no single definition of SE, and SEs are not governed by any governmental legislation or polices. In fact, SEs in Bangladesh are mainly governed by existing laws pertaining to compa- nies operating in the country. Operational definition World-renowned figures, such as 2006 Nobel Peace Prize winner Mohammed Yunus, have come forward arguing for the creation of “social business enterprises,” i.e., enterprises that are based on market principles but are dedicated to improving the lives of the poor (Yunus, 2006). Professor Rehman Sobhan focuses on enterprise ownership, arguing that a significant portion of equity in a social business should be owned by poor people, in particular its employees Bangladesh Social Enterprise Project (BSEP) Report (2010). The approach followed by BRAC more closely resembles the characteristics of the UK-based Social Enterprise Coalition, which is an integrated/hybrid model for SE. According to BRAC, a social enterprise is a business venture that aims to achieve financial returns while fulfilling social, environmental, and/or other develop- mental goals. BRAC is best described as a surplus-generating social entrepreneur that combines surplus with sustainability in order to alleviate poverty. Through each of its enterprises, BRAC aims to fulfill three criteria, referred to as the “3Ps”: serving the “people”, benefiting the “planet”, and also making “profit”.5 Therefore, the operational definition of social enterprise in the context of developing countries, more espe- cially in Bangladesh, comprises criteria such as: being run by non-governmental organizations following an integrated/hybrid approach; being reassembled with its organizational mission, vision, and value; address- ing society’s and its clients’ (employees’) needs; achieving financial returns while fulfilling social, environ- mental, and/or other developmental goals, mainly poverty alleviation; and working in conditions where formal institutions, governments, or markets have failed to ensure social justice. Organizational factors defining BRAC as a social enterprise: Findings from previous studies Despite its increasing salience, social entrepreneurship has remained largely under-investigated, especially in the context of the developing world. An organization can be said to have a strategy when the leaders and the organization as a whole have committed themselves to a particular vision as to how the organization will operate to create value and sustain itself in the immediate future (Andrews, 1971; Barnard, 1966; Moore, 2000). The sustainable initiatives underlying the BRAC SE have not been the subject of many studies, although some beneficial studies have been done to obtain an understanding of those organizational factors that are crucial elements for ensuring successful and sustainable SE for BRAC as an NGO. The study “Social entrepreneurs in Bangladesh” was conducted by Hossain and Hossain (2012) to analyze the characteristics and the entrepreneurial journey of the SEs of Bangladesh. The article analyzed the leadership qualities of two 5 BRAC Enterprises & Investments: An Overview, Retrieved, from https://docs.google.com/file/d/0Bw267JJM8 qd9VE9fNkZkck05bWM/preview. 296 © 2015 Wiley Publishing Asia Pty Ltd Sangmi Cho and Razia Sultana Acceleratory Organizational Factors of BRAC
  5. 5. prominent Bangladeshi social entrepreneurs: Dr. Muhammad Yunus (Grameen Bank) and Mr. Fazle Hasan Abed (BRAC). The study found them to be hard workers, opportunity seekers, innovators, good organizers, and future-oriented and risk-taking social entrepreneurs. Another study that discussed BRAC SE from the “institutionalist” point of view was done by Mair, Martı and Ventresca (2012). They proposed a grounded theory in the light of the institutional context in Bangladesh and found that the activities of BRAC suggest that the institutional voids are built on a rich empirical case in which market building is being used as a tool for economic and social development. Another study undertaken by Alvord, Brown and Letts (2003) provides a comparative analysis of seven cases of social entrepreneurship that have been widely recognized as success- ful. Comparing and analyzing three main characteristics, namely those of innovations, organizational arrangements, and scaling-up and social transformation among seven different SEs across the world, of which BRAC was one, they proposed the hypothesis that successful social entrepreneurial leadership would facilitate societal transformation. Another comparative case study of which BRAC formed part was carried out by See- los and Mair (2005), and involved entrepreneurs who were contributing to sustainable development by creat- ing innovative organizational and service provision models. The impact of social entrepreneurial activity on sustainable development measures, such as the Millennium Development Goals, is demonstrated. The find- ings suggest that social innovation may change the very structures and systems that recreate the circumstances for poverty and that development processes need to consider the link between social and economic develop- ment. A single case study by Salvado (2011) based its analysis on a financial ratio analysis of the years from 2005 to 2009. It concluded that a revenue structure based on SE initiatives, as opposed to donor grants, gener- ates a more financially sustainable organization. Examining BRAC as a case; above mentioned studies are beneficial to understand the unique characteristics, nature and success elements of social enterprises in Ban- gladesh. However, there is still a lack of understanding from the organizational point of view as to how an NGO could become a successful and sustainable SE and which organizational factors could contribute to this journey. Examination of the organizational factors of BRAC as a NGO journey to sustainable social enter- prise in Bangladesh reveals a gap in the literature of social enterprise, which current social enterprise debates focused on developed countries are unable to fill-up. Important dimensions of the social enterprise movement are not sufficiently analyzed in the developing world arena, including Bangladesh. This study aims to con- tribute to the understanding of these factors by providing an in-depth insight. The study will also have future implications for those development NGOs aiming to achieve long-term financial sustainability without losing their organizational value. Theoretical explanation One of the main objectives of this study is to evaluate the ability of BRAC to maintain its organizational value (associate with its mission) as an NGO while operating SEs. An organization’s mission, value, culture, work environment, and employees all are linked with ultimate organizational outcome. From the employ- ee’s point of view, the person–environment (PE) fit theory is most relevant for theoretical explanation for understanding organizational value associated with employee’s value and affective organizational out- comes. The framework, person–environment (PE) fit theory, is proposed as a method for understanding the process of adjustment between organizational members and their work environments. Research on person– organization fit shows essential implications for organizational outcomes and also individual well-being. Fitness between a person’s values and organizational values is associated with behavioral and affective out- comes. It has been shown as a predictor of job satisfaction, organizational commitment, and turnover (O’Reilly, Chatman Caldwell, 1991), with a direct relationship to positive work attitudes (Posner, 1992), and it is a predictor of task and contextual performance (Goodman Svyantek, 1999). Transformational leadership theory explains the unique connection between a leader and their followers that accounts for extraordinary performance and accomplishments for the larger group, unit, and organiza- tion (Burns, 1978; House, 1977; Bass, 1985). To accomplish this transformation, four key dimensions of lead- © 2015 Wiley Publishing Asia Pty Ltd 297 Sangmi Cho and Razia Sultana Acceleratory Organizational Factors of BRAC
  6. 6. ership are employed (Bass, 1985). Charismatic leadership or charisma is the key component that involves gaining respect, trust, and confidence of others and transmitting a strong sense of mission to them. Inspira- tional leadership, or inspiration, is communicating a vision with fluency and confidence, increasing optimism and enthusiasm, and giving energetic talks to energize others. Intellectual stimulation is actively encouraging others to look at old methods in new ways, fostering creativity, and stressing the use of intelligence. Individu- alized consideration is giving personal attention to all individuals, making each individual feel valued, and rec- ognizing each individual’s contribution as important. From the leadership point of view, “transformational leadership theory” is also relevant and supports the study objectives and findings. Fazle Hasan Abed, who founded BRAC, has all these leadership qualities and ability that are essential components for transforma- tional leadership to take the organization into next level along with its groups of employees and stakeholders. Previous literature findings (Hossain Hossain, 2012) also support this judgment. The conceptual model of organizational factors The conceptual model shown in Figure 1, explains the link between two main organizational factors, which led the organization, became a successful and sustainable one. The first factor namely organization’s mis- sion, vision and value as a NGO are connected and incorporated within its social enterprise strategy and approach which is considered here as second major factor. Finally the figure also shown that the other sup- plementary organizational factors such as leadership/management, resource management, organization’s culture, organizational foundations etc. are also contributed to accelerate BRAC into a sustainable SE. These organizational factors are also interconnected with main two above-mentioned factors. Research questions How did BRAC succeed in transforming itself from an NGO into a sustainable social enterprise? Which organizational factors contributed to its success? Method This work constituted exploratory research and was based on a case study. The case study mainly involved an empirical investigation of a contemporary phenomenon within its natural context using multiple sources of evidence (Yin, 2003). The method was divided into two parts: first, the available data resources were examined and the relevant literature was reviewed, and, second, an in-depth interview was conducted with a key person in BRAC. Sampling procedures We used purposive sampling to perform in-depth interviewing with one or more people working at the man- agerial level in BRAC. We officially contacted the organization several times by email and telephone with Other factors Sustainable social enterprise as an NGO Organizational mission, vision, and value Organizational strategy for social enterprise Organizationalfactors Figure 1 Conceptual model of Organizational Factors. 298 © 2015 Wiley Publishing Asia Pty Ltd Sangmi Cho and Razia Sultana Acceleratory Organizational Factors of BRAC
  7. 7. the plan to secure interviews with two to three people from top to middle management. However, ultimately we were granted an interview with a member of top management who was the program head of the BRAC SE division. BRAC is a large and international organization; hence, there is some situation that we could not handle, such as securing a longer interview time and more interviews, especially with people at manage- rial level. One of the limitations of this study was that there was only one interview with the program head of the Social Enterpise Division; however, it was well justified to select that person as our respondent. Because of her position, she had access to information and knowledge regarding social enterprises of BRAC and could provide the data and information that we required. In addition, she had a diversified academic background with two different majors, namely civil engineering and an MBA from two renowned universi- ties in Bangladesh. She also had extensive work experience in information technology (IT), development, and business sectors as well as in BRAC. Moreover, she has excellent leadership skill and ability to conduct rational decision-making skill for the organization. The sources of data were as follows. Data were extracted from the purposive interview with the BRAC SE program head and from personal observations, organizational material (annual reports, website mate- rial, research, and evaluation outputs), and other secondary literature, academic and policy studies, and documentation. Some official documents were also provided by the respondent to gain more detailed knowledge about information, figures, and facts. The duration of the interview was about 40–50 minutes and, with the full consent of the participant, the interview was audiorecorded and then transcribed in order to categorize information according to the questionnaire. She was also informed about the purpose of the study and was acquainted that she could withdraw from interview at any time or had full freedom not to answer any question that seemed to violate her personal feelings or organization’s confidentiality. Informa- tion gaps and the clarification of misunderstanding during the report writing stage were addressed by subse- quently emailing the respondent. Interview questions The interview consisted of open-ended questions with the questionnaire probing nine main factors relating to the purpose of the study including: (i) ventures and beneficiaries; (ii) organizational strategy for social enterprise; (iii) organization’s operational capacity; (iv) organizational culture; (v) organizational value; (vi) resource support and funding; (vii) leadership/management role; (viii) social development impact; and (ix) monitoring and evaluation. Each of these factors were examined by using three to five open-ended ques- tions intended to probe that particular factor more deeply. Data analysis technique The interview data was transcribed from Bangla to English. A list of initial codes was constructed in light of the interview content (both the conceptual foundations of the study and the nature of the interview ques- tions). Then, the thematic analysis method was used to interpret interview content under the categorization of questionnaires. Information from all sources was thoroughly reviewed; themes for which the preponder- ance of information supported a tentative answer were retained and reported as findings. Results Ventures and beneficiaries The BRAC enterprise sourced its products from local suppliers who were mostly poor villagers. The most important point was that there was no prior plan to establish an SE. As the program head of BRAC SEs elaborated: In the initial stage most of the BRAC’s micro-credit loan borrower members used their money for small-scale business. They usually bought cows. When the cows produce milk on a large scale they have little access to the market to sell their product. At that time BRAC thought to establish a milk collection center in order to provide © 2015 Wiley Publishing Asia Pty Ltd 299 Sangmi Cho and Razia Sultana Acceleratory Organizational Factors of BRAC
  8. 8. market access for their members and to bring them into the value chain in order to get a fair price for their prod- ucts. This is an example of starting a social enterprise of BRAC and how the beneficiaries benifitted by BRAC’s ventures. This is more or less the truth for starting other BRAC social enterprises. . . The creation of a viable enterprise, such as a commercial business venture, requires sufficient product volume and quality to enable it to enter larger markets. BRAC ensured that local suppliers received training, skills, and resources to produce their products efficiently and sell them in larger markets where they obtained a fair price for their product. As a result, these fragmented suppliers became small entrepre- neurs and advanced on their path to financial solvency through BRAC’s enterprises. Currently, BRAC operates 18 financially and socially profitable enterprises across the health, agricultural, livestock, fisheries, education, green energy, printing, and retail sectors, thereby making a significant contribution to local economy through the creation of market linkages, entrepreneurs, and employment opportunities. Organizational strategy for social enterprise After carefully examining BRAC as an organization, it was found that the organization had three basic organizational strategies that underlay its success. First, BRAC continuously restructured to find syn- ergies between development, business, and investment. Second, it opened up its organizational bound- aries to form strategic alliances with donors and poor beneficiaries, instead of becoming dependent on them. Third, it continuously developed explicit projects and programs of investment and training to stimulate the creation of new ventures from within. It is very important for an NGO to select its way of conducting business wisely and appropriately to ensure the organization’s strength and, at the same time, remains viable in the marketplace. When BRAC initially thought about its business venture in terms of achieving social and environmental goals, they considered three main strategic aspects. First, the enterprise would have to be aligned with the organization’s mission to help lift people out of poverty by providing job training, income, capital, and improved health. Second, it would have to complement BRAC’s existing programs. Finally, the business opportunity would have to address a market need. As the program head of BRAC SE mentioned clearly: The mission and goal of the BRAC SE program is similar to BRAC’s organizational strategy and more specifi- cally making a surplus but that is not the main purpose . . . The unique “BRAC model” that comprises an integrated network of “Enterprises”, “Development Pro- grams”, and “Investments” together provided a distinctive synergy. As BRAC enterprises had expanded from development program support mechanisms to profitable enterprises with financial and social missions, it took a holistic approach to conceptualizing and developing each of its enterprises. BRAC had succeeded by enhancing the fundamentals of SE. As mentioned by the program head of BRAC SE: The most innovative strategy for the BRAC SE program is to provide training to the people who want to do small-scale business. BRAC helps the small entrepreneurs to find out what would be a viable business for them to run and then provides them with training but not just giving money . . . Organization’s operational capacity BRAC Enterprises had five distinctive advantages in terms of its operational ability: synergy, cross-collabora- tion, cross-subsidy, continuous innovation, and holistic support. According to the SE program head of BRAC: BRAC social enterprises are run as other commercial ventures. There is no operational difference between a social enterprise and commercial enterprise but the difference remains in concept and objectives. The operational capacity also reflected the outstanding infrastructure of BRAC, which helped the orga- nization to minimize its operational risk. The operational strategy of BRAC reflected on the statement of the BRAC SE program head: 300 © 2015 Wiley Publishing Asia Pty Ltd Sangmi Cho and Razia Sultana Acceleratory Organizational Factors of BRAC
  9. 9. BRAC mainly follows its organizational strategy and mission for its SEs whereas the operational approach varies within enterprises. For example, it is impossible to run the same operational approach for the poultry enterprise and Aarong. Production at BRAC enterprises was delivered in two forms, namely the provision of services and the production of goods. Across its enterprises and programs, BRAC’s selection process was based on skills and financial need. Organizational culture Organizational culture largely develops from its leadership, whereas the culture of an organization can also affect the development of its leadership (Bass, 1985). Therefore, it is important for an organization to have staff with values supportive to the organizational objectives. This was BRAC’s intention with the provision of Organizational Culture and Values Training (OCV) for its entire contingent of staff, namely to develop appropriate values as required. The sense of inclusion achieved in this way could also be observed among the members of staff, from top management down to the lowest level. For example, the program head of BRAC SE always mentioned “we”, “our value”, and “our goal” instead of naming the organization. The success factors that were embedded in the organizational culture included changes in the provision of opportunities to the poor, social awareness, prioritizing women and their core issues, participative manage- ment, decentralization, consistent and visionary leadership combined with a democratic organizational environment, change in national systems and policies to gain sustainability, and a shared set of core values. Organizational value As an international organization and development NGO, BRAC had its own vision, mission, and values, which reflected the organization’s uniqueness and identity. The question became: how did the vision, mission, and values reflect on their SEs’ end result? Considering the BRAC SEs, there were some basic characteristics that separated them from purely commercial businesses whereby they maintained their organizational values, namely the requirement to address a need: i.e., a gap in existing service delivery and the availability of market access. BRAC progressed into businesses even though the organization was not set up as a business. Profit was necessarily a function of sustainability and not a primary objective of the business. There was a degree of cross-subsidization among their different enterprises to ensure the overall objective was reached. It aimed at maximizing “stakeholder” value, not at maximizing “shareholder” value (Ali, 2013). Resource support and funding The profit generated by BRAC Enterprises (mainly referred to as surplus by BRAC) was 50% reinvested within the enterprises, whereas the remaining 50% was added to BRAC’s “core fund” to support the overall expenditure, including the non-profit development programs. Donor funds were used only towards BRAC’s development program. Although in the initial stages, donor funds were partly used for the SEs, BRAC has since provided all the funding for its SEs itself. There is another problem with incorporating donor funds in SEs in that it can sometimes restrict an organization’s ability to use the funds according to its original mis- sions and visions. BRAC’s funding policy currently ensured the financing of its annual expenditure by about 73% across its enterprises and development programs, whereas only 27% came from donor funds. When the program head of the BRAC SE division was asked about funding and donor contributions for SEs, she provided the following information: BRAC has its own fund and BRAC also invested for its social enterprise. There is no government involvement in terms of funding for BRAC social enterprise and donor funding is also very negligible . . . The BRAC holistic model also enabled the organization to be self-sufficient and maintain sustainable SEs in terms of its resource strategy, thereby ensuring its future sustainability. © 2015 Wiley Publishing Asia Pty Ltd 301 Sangmi Cho and Razia Sultana Acceleratory Organizational Factors of BRAC
  10. 10. Leadership/management role BRAC proved that nonprofit organizations can launch SEs that function on a large scale. Should the growth of BRAC as an NGO and SE be carefully examined, it would be found that the leadership of Fazle Hasan Abed contributed enormously to building BRAC into a successful, sustainable, and international organization. He is especially self-confident, future oriented, with good leadership and risk- taking skills, apart from being innovative. Fazle Hasan Abed placed much emphasis on the transparency and efficiency of management. He started his social entrepreneurship venture in a country with a ragged war-destroyed economy, thereby assuming considerable risk. As recognition for his work excellence, leadership qualities, and huge contribution to society, he was honored with a number of national and international awards. In terms of management and networking, BRAC was governed by a governing body and it had three committees — Finance Audit, Investment, and the Executive Management Committee — all of which consisted of distinguished professionals, activists, and entrepreneurs of excel- lent repute who contributed their diversified skills and experiences toward governing the organization as a whole. As BRAC expanded, it leant heavily on its organizational foundation. According to the BRAC SE division program head: The management requirement for running the SEs of BRAC is almost similar to that of for-profit businesses. BRAC believes that a leader should have all the qualities to run a successful business. Leaders should have good financial management ability, responsibility, and knowledge about market conditions, all of which are mainly fol- lowed by the BRAC leaders and mangers. BRAC SEs have followed its organizational mission and objectives with a controlled management system throughout . . . Social development impact The current surplus-generating model of BRAC’s enterprises synchronously achieves scalability, greater outreach, and maximum impact. The program head of BRAC SE described the outcome of the BRAC SE program as follows: The outcome is the same as for for-profit organizations in terms of creating a surplus, but as an NGO, BRAC mainly emphasizes the measurement of social outcome. It is very difficult to measure social outcome compared to economic outcome. But BRAC defines social outcome as employment generation, poverty alleviation, and human resource development . . . It remains difficult to ultimately attribute measurable impacts to a single organizational intervention. The problem is that, although a non-profit organization may influence or contribute to a policy or attitudi- nal change, it is more difficult to attribute that change solely to its interventions. As the BRAC program head of the SEs division defined the SE outcome of their organization: When BRAC creates more surpluses through the SE, they don’t use them for personal purposes; rather, this sur- plus becomes BRAC’s own funds, which they use for social development purposes, such as for health, education, etc. BRAC defines this as an indirect outcome, whereas the direct outcome of the BRAC SE program is defined by using numbers. For example, how many entrepreneurs they have created, who their stakeholders are . . . The social development impact of BRAC SEs was assessed by using two measures: output, and outcome or impact. Thus, the output of BRAC SEs was determined by measuring product quality and volume. In contrast, measuring outcome or impact requires the measurement of value creation and the change that has been accomplished by adding value to industry and communities, and the impact on particular target groups in terms of the long-term impact on poverty alleviation, employment generation for farmers, the ultra-poor, communities, and the protection of the environment. For example, by achieving product quality and volume through scaling, BRAC Dairy, which had a 24 percent share of the national market, processed up to 170,000 L of milk a day. In terms of entrepreneurs, training, and employment generation, BRAC 302 © 2015 Wiley Publishing Asia Pty Ltd Sangmi Cho and Razia Sultana Acceleratory Organizational Factors of BRAC
  11. 11. Dairy achieved scaling by establishing regular business for 50,000 rural dairy farmers in western Bangla- desh. On the other hand, adding value to industry and communities, BRAC Seeds salespersons’ time was spent supporting farmers in improving their knowledge of modern and agro-technologies and harvestable yields. BRAC Green Enterprises were engaged in the production of environmentally friendly products, and consequently contributed to the social uprising of green initiatives in both rural and urban communities. Monitoring and evaluation BRAC had a particularly strong focus on internal monitoring, for which it operated two separate depart- ments, one of which was the Monitoring unit. In order to ensure transparency, this unit conducted periodic analyses to determine whether the expected outcomes were being achieved. In 2013, the department moni- tored 140 issues, the findings of which were shared with BRAC’s senior management. The other was the Research Evaluation department, which provided an analytical basis for BRAC’s program-related deci- sions. Feedback from the field was also a cornerstone of BRAC’s monitoring and evaluation activities because it ensured accountability. On a regular basis, BRAC had meetings with donors, the government, financial institutions, partners, and other NGOs. BRAC’s finance and accounts ensured effective financial control and transparency of the financial data of their projects and enterprises. The next step for BRAC enterprises was to continue capturing new opportunities in existing and new sectors, which would further enhance the potential of new enterprise creation and sustainable development; this was also mentioned in the statement of the program head of the BRAC SEs division: There is a new idea for BRAC’s SE program, which is about health and education. Before, BRAC only ran infor- mal primary schools, which were completely free. Now BRAC is thinking about establishing secondary schools. BRAC already owned some land for this purpose . . . Discussion The key objective of this paper is to determine the organizational factors that enabled BRAC to become a sus- tainable SE, and it is demonstrated here that there are some key organizational factors and successful ele- ments which assist BRAC in its capacity as a development NGO to become a sustainable and successful SE. The research has a major limitation in its design. We managed only one interview with the key person of the organization, which may raise the question of reliability and validity of the research. However, as the research is exploratory in nature, no primary field research was undertaken in BRAC SEs; rather, the focus was on the views of senior management and not on the perspectives of field staff or beneficiaries. Official data sources were also collected from the organization provided by the respondent. Using a qualitative case study method, this study reveals some key organizational factors that the study demonstrates as follows. Almost all of BRAC’s enterprises started by either addressing a social need or by addressing the needs of their clients, which remains the strength of the BRAC enterprise. Consider, for example, BRAC Cold Storage, which was established in 1980 in Comilla, a mid-eastern region of the country. This was the first commercial BRAC enterprise, and it started its journey by providing an improved service with regards to maintaining the quality of stored products.6 Other BRAC enterprises also came into existence at various times as a result of similar efforts to create economic space for the poor. BRAC has extensive field-level learning experience in developmental sectors. As an NGO, BRAC had an advantage to reach grassroots level, which assisted the organization finding out social, communal, and client needs as well as opportunities and risks for beginning viable social enterprise. This judgment is also supported by the study findings of Alvord et al. (2003). For example, through its health program, BRAC 6 BRAC Annual Report 2013 © 2015 Wiley Publishing Asia Pty Ltd 303 Sangmi Cho and Razia Sultana Acceleratory Organizational Factors of BRAC
  12. 12. witnessed first-hand the large number of people suffering from an iodine deficiency, which led it to create a salt enterprise in 2001 to help fulfill the need for iodized salt throughout the country.7 BRAC understands the market void. Their understanding of the demand and supply side of the market during the establishment of their SEs contributed greatly to the success of their enterprises. Most of the BRAC enterprises were formed as program support enterprises, and today the majority of these operate as surplus-generating ventures while maintaining their ongoing commitment. This finding is also reinforced by a previous study by Mair et al. (2012). The nature of the Bangladesh SEs is that it is a self-innovative system with innovative leadership form- ing the key to this characteristic. The founder of BRAC, Fazle Hasan Abed, directed his policy towards helping the poor to develop their capacity to better manage their lives by providing training and establish- ing SEs. This finding is consistent with work by Alvord et al. (2003). Innovation, organizational arrange- ments, scaling-up, social transformation, and leadership are the keys to building a successful organization as a whole as well as SE activities. The “BRAC model” is another durable component maintaining a synergetic approach which has led BRAC to become a large, successful, and sustainable SE as an NGO. The success of BRAC SEs also relies on its organizational foundation. The organizational system not only harmonizes the success of the organi- zation’s SEs, but also shapes the organization to be successful and sustainable one. BRAC’s success factors are also embedded in its organizational culture and a shared set of core values that is incorporated with the values of its SEs. All of the successful components and organizational factors found in this study answered the research questions and achieved the objectives of this study. The BRAC SE approach and activities have already had great impact on people’s lives. Through their SE activities, they have achieved their organizational mission and goals: social and community develop- ment, alleviation of poverty, increase in income-generation activities, creation of employment, introduction of environmentally friendly businesses, and innovative solutions to social and economic problems of soci- ety. Moreover, as a large and nation-wide working organization, BRAC has made immense contribution to fulfill MDGs targets and could also make an impact in achieving sustainable development goals in Bangla- desh. Conclusion There are some important organizational factors and successful elements that the study findings illustrated. Successful elements such as addressing social and clients’ needs finding out through extensive field-level learning experience, which benefited the organization mapping opportunities and risks and help them to find out the market void for their SEs. In addition, innovative approach and unique BRAC model, compe- tent management, efficient organizational foundation, transformative leadership, and strong internal and external monitoring system supported BRAC became a sustainable and successful SE and NGO. The find- ings of this study have established the purpose and key objectives of this paper. However, barriers remain for both small and large social entrepreneurs and enterprises in Bangladesh, as there is no legislation for, formal definition of, or categorization of SEs. Barriers, such as the lack of access to credit or other financial products, basic skills, information, technical knowledge, and expertise, continue to exist. Large organiza- tions, such as BRAC or Grameen Bank, can overcome the abovementioned barriers with their own organi- zational strategy. However, small and medium social entrepreneurs and enterprises face those kinds of barriers to progress. The BRAC holistic approach has proven advantageous for building strong networks within organizations, which led them self-sustained, but on the other side it may weaken the organization’s social network with outside agents, especially with government and other NGOs, specifically in terms of funding, policy formulation, and integrated development work. These weaknesses may result from competi- 7 http://www.brac.net/ 304 © 2015 Wiley Publishing Asia Pty Ltd Sangmi Cho and Razia Sultana Acceleratory Organizational Factors of BRAC
  13. 13. tion with other NGOs, the fear of losing their unique identity, and the fear of attracting too much interfer- ence by government. Conventional businesses play a key role in value creation and economic development, but for SEs it would be challenging to compete with conventional business ventures with the same product in the same market by targeting a particular social goal. Future research is needed in some sectors to under- stand the nature, scope, and development of SEs in Bangladesh. Particularly studies are needed for under- standing the evolution process, and network building process among organizations, government, NGOs, and different stakeholders for probing the nature and scope of SEs in Bangladesh. Future research is also needed to develop institutional regulations for SEs in Bangladesh as well as in developing countries in the reality of existing informal economy and instable political system. A prominent SE such as BRAC should build strong networks and lobby with government, civil society, and the private sector to build legal institu- tional and financial structures supporting the creation of a “brand” or “label” that meets various criteria suitable for a not-for-profit organization to become a recognized SE. However, “innovation” always needs to be encouraged because political and socio-economic problems, market demand, and supply potentials are diverse in different societies and in different countries. Development NGOs are well known for their cre- ative and innovative strategies and approaches to reaching the grassroots level of society. SE is one of the innovative approaches available for development NGOs that not only is a useful means to reach their orga- nizational goals (social, economic, and environmental protection), but also enables them to build the orga- nization to attain financial sustainability and to reduce external dependency; BRAC has proven this already. For those development NGOs seeking financial sustainability and aiming to increase their organi- zational legitimacy, BRAC would be a good example to follow and to learn from. References Alvord, S.H., Brown, D., Letts, C.W. (2003). Social entrepreneurship. Leadership that facilitates societal transforma- tion—an explanatory study. Working Papers. In: Centre for Public Leadership (Ed.). Ali, M. A. R. (2013). Social enterprise – Role in poverty alleviation and job creation: BRAC’s experience and learning. Asia–Europe Foundation speech, Berlin, Germany. Retrieved, from http://www.asef.org/images/docs/Public% 20Event_Speech%201_Rummee%20Ali.pdf Andrews, K.R. (1971). The concept of corporate strategy. New York: Irwin. Ashoka Innovators for the Public (2000). Selecting leading social entrepreneurs. Arlington: Ashoka. Bangladesh Social Enterprise Project (BSEP) Report (2010). Retrieved, from http://www.beibd.org/images/report/ whc4f30f4975c4de.pdf Barnard, C. (1966). Functions of the executive. Cambridge, MA: Harvard University Press. Bass, B. M. (1985). Leadership and performance beyond expectations. New York: Free Press. BRAC Enterprises Investments: An Overview. Retrieved, from https://docs.google.com/file/d/ 0Bw267JJM8qd9VE9fNkZkck05bWM/preview BRAC official website. Retrieved, from http://www.brac.net/ BRAC (2013). Annual Report (2013). Retrieved, from http://issuu.com/brac/docs/brac-annual-report-2013. Burns, J.M. (1978). Leadership New York. NY: Harper and Row Publishers. Dees, J.G. (1998). Enterprising nonprofits. Harvard Business Review, 76(1), 55–66. Emerson, J., Twerksy, F. (Eds.) (1996). New social entrepreneurs: The success, challenge and lessons of non-profit enterprise creation. San Francisco: Roberts Foundation, Homeless Economic Development Fund. Fowler, A. (2000). NGDOs as a moment in history: Beyond aid to social entrepreneurship or civic innovation? Third world quarterly, 21, 637–54. Goodman, S. A., Svyantek, D. J. (1999). Person–organization fit and contextual performance: Do shared values matter. Journal of Vocational Behavior, 55, 254–75. Hossain, D. M., Hossain, M. (2012). Social entrepreneurs in Bangladesh. International Journal of Research in Commerce, IT Management, 2(9), 7–12. © 2015 Wiley Publishing Asia Pty Ltd 305 Sangmi Cho and Razia Sultana Acceleratory Organizational Factors of BRAC
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