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Balancing Legitimacy in a Context of Nonprofit-Business Hybridity: The Case of the Flemish Wellbeing and Social Economy Sector

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Abstract

Nonprofit organizations (NPOs) hybridizing toward the market domain by adopting business practices has sparked an ever-growing debate. There is research showing a rather positive effect on organizational legitimacy. However, considering the literature discussing other performance dimensions (e.g., social effectiveness), this trend is argued to erode the prosocial underpinnings of NPOs, increasingly leaving their stakeholders wondering what distinguishes them from business enterprises. When examining these previous studies, most research only focuses on one dimension of organizational legitimacy and/or one type of stakeholder. In this study, we aim to provide a more fine-grained picture of how nonprofit-business hybridity impacts nonprofit legitimacy by adopting (a) a multi-dimensional understanding of legitimacy and (b) a multi-stakeholder perspective. We draw on survey data from Flemish NPOs to sample two matched pairs of opposite cases, i.e., a ‘low’ and ‘high’ hybridized NPO for qualitative examination. Our findings suggest that nonprofit-business hybridity is significantly detrimental for stakeholders who are closely involved, and beneficial in the eyes of stakeholders who are more distant from the organization.

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Notes

  1. Despite our intention to select two human wellbeing organizations that are similar in their capacity, it was not possible to meet this condition because (1) a large variation in managerialism and commercialization is strongly associated with a large variation in capacity and (2) several organizations that had been selected at first, did not wish to participate. Nonetheless this shortcoming, it is clear that these two organizations are similar in sector and age and dissimilar in their degree of commercialization and managerialism.

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Acknowledgements

This research was supported by VLAIO (Agency for Innovation and Entrepreneurship) Research Grant No. 150025.

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Authors and Affiliations

  1. Department of Sociology, University of Antwerp, 2000, Antwerpen, Belgium

    Björn Carré

  2. Department of Public Governance and Management, Ghent University, 9000, Gent, Belgium

    Ben Suykens & Bram Verschuere

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Appendices

Appendix 1: Case Description

WISE-HIGH

This first organization was established in 1994 as a reuse center. The organization has grown over the years after a couple of mergers, and they provide work for 16 employees and 73 client-employees. The most important activity for this organization is the sale of second-hand goods geographically spread over eight different locations. The commercial income accounts for nearly 60% of the overall revenues of the organization. This organization confirms that commercial income has increased proportionally over the years. Moreover, they expect this trend to continue in the future. Moreover, the organization confirms that the use of management instruments has intensified, and the output is more frequently monitored. They implemented a strategic plan a couple of years ago and perform SWOT analysis on a regular basis. They also use indicators to track their performances. A couple of times, the organization even worked together with a consultancy firm.

WISE-LOW

This organization was established in 2000 and originated from an organization active in mental health care. They work with client-employees that have serious medical, mental, psychological and/or psychiatric problems. They predominantly perform green maintenance, cleaning, refurbishment and logistical support in residential elderly care centers. They provide work to 12 employees and 47 client-employees. This organization does not feel the need to hybridize in the same way as WISE-HIGH and wants to stick close to the mental health care sector from which it originated. The commercial income accounts for 45% of the overall revenues of the organization, and it did not change over the years. Moreover, the organization does not want to build up a buffer. They invest it directly into the wellbeing of their ‘weak’ client-employees. The use of management instruments and performance measurement is lacking in the organization as well the necessary competences to use them.

WELLBEING-HIGH

This organization, established in 1982, supports minors and more precisely girls with complex problems and needs. They organize residential as well as outpatient care. Through the years, the organization is divided into several sections depending on the theme (dealing with psychological problems through sports and culture) and/or specific subgroup (e.g., girls with a difficult parenting situation). The organization is a very active partner within projects and collaborations in its sector. When looking at commercialization, around 4% of total revenues is commercial in nature. These commercial activities are present within one section in the organization where they literally try to bring the business and nonprofit world closer together (e.g., organizing team building activities for business enterprises together with girls). This profit is used to offer better guidance to the clients as well as unfolding new ideas and projects (e.g., developing a sports and cultural program). Second, the organization is frequently using management tools (e.g., SWOT analysis) and to a lesser extent performance measurement. However, this has been changing recently (e.g., first time they measure the amount of clients reached).

WELLBEING-LOW

Last, a recognized organization offering care and support to disabled people, active since 1977. They offer residential care, both daycare activities and/or housing support. These are offered on different physical locations within the geographical span of a local community. They limit the number of clients at each location because they find it important to project a family atmosphere and treat all the clients as individuals with their own needs and problems. The organization does not really have commercial income. Nonetheless the fact that they sell certain artisan goods made by their clients (e.g., bread, honey and recently beer), these activities do not really generate profit and are thus not commercial in nature. They predominantly serve as a creative day activity. The frequent use of business-like management instrument and performance measurements, is something the organization management is suspicious of (e.g., it is regarded as too time consuming).

Appendix 2

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Table 5 Case selection
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5.

Appendix 3: Example Organization Sheet

"At the request of people with a disability and their family supporters, WELLBEING-LOW is committed to: organizing and/or supporting various forms of housing, organizing and/or supporting an internal job offer, supporting an external job offer, support in other areas of life such as relationships and leisure time and to organize and offer basic services.”

Organizational Characteristics

Functions (scale 1–5)

  • (w1v1) Community building function: very much—score 5 (Me: 5)

  • (w1v1) Service delivery function: quite a lot—score 4 (Me: 5)

  • (w1v1) Politicization function: quite—score 3 (Me: 4)

  • (w1v1) Advocacy function: quite—score 3 (Me: 4)

  • (w1v4) Political function (scale 0–10): score 7 (Me: 7)

Structure

  • (w2v49) Two hierarchical levels

  • (w2v51/w2v52) The work is for 100% performed by teams

  • (w2v6) Legal status: associations without profit distribution (VZW)

  • (w2v5) Age: 43 years (Me: 35 years)

Capacity

  • (w2v74) In general

    • The operating resources (scale 1–5) of the organization have remained stable over the past ten years: score 4—agree

  • (w2v74) Knowledge

    • The organization has (scale 1–5) sufficient expertise to carry out its core activities: score 4—agree

  • (w2v40) Number of employees: 29 (Me: 33)

    • (w2v43) If it concerns new jobs or positions in the past ten years: coach

    • (w2v74) The organization has sufficient staff (scale 1–5) to carry out the activities: score 5—completely agree

  • (w2v29) Number of volunteers: 53

    • (w2v32) A small majority (60–79%) of core volunteers is highly skilled

    • (w2v74) The organization (scale 1–5) has sufficient volunteers to carry out the core activities: score 4—agree

  • (w2v16) Total revenues are estimated at € 1,765,876 (Me: € 18,250,000)

    • (w2v74) The organization (scale 1–5) has sufficient financial resources to carry out its core activities: score 4—agree

    • (w2v74) The organization (scale 1–5) has a financial buffer: score 5—completely agree

  • (w2v7) Number of board members: 13 (Me: 9)

Degree of Nonprofit-Business Hybridity

Commercialization: index 0 (Me: 0)

  • The emphasis is therefore on creating financial added value. It concerns (w1v47) a share of 0% in commercial income.

  • In the (w2v23) past five years (scale 1–5), it is indicated that the financial situation of the organization has remained approximately the same: score 3.

  • People indicate that they do not agree (w2v25) with this statement (1–6): Compared to ten years ago, governments today opt more for temporary contractual support than for structural subsidies for the provision of basic services: score 4.

  • Making (w2v26) a profit or achieving financial surpluses will not become more or less important for this organization in five years (scale 1–5): score 3.

Managerialization: index 0.39 (Me: 0.56)

  • There are only two management instruments used (w2v53): SWOT and quality standards.

  • The different forms of performance (w2v56) are also included, namely: accessibility, efficiency, effectiveness, legitimacy, quality and transparency.

Rhetoric

  • (w1v2) The organization describes itself as a business enterprise (scale 1–5): score 2—a little.

Different Stakeholders and Proxies of Organizational Legitimacy

In general:

  • (w2v74) The organization succeeds (scale 1–5) in meeting the expectations of its target group(s): score 4—agree

  • (w1v56) It is indicated (scale 1–4) that the legitimacy (meeting the expectations of their target groups) is regularly measured: score 3

Per stakeholder

  • (w2v39) Volunteers (scale 1–7)

    • People are very satisfied with the number of new volunteers that the organization recruits (score 6).

    • People are extremely satisfied with the motivation of the new volunteers (score 7).

    • People are extremely satisfied with the average time that a volunteer is active in the organization (score 7).

    • People are very satisfied with the retention of volunteers (score 6).

  • (w2v69) The employees and the possible problems in one year (yes or no)

    • High absenteeism: no

    • Difficulty in keeping employees: no

    • Low motivation of the employees: no

    • Difficulty in finding suitable workers: no

    • Understaffing: no

    • A difficult, general working climate: no

    • (w2v74) Staff turnover (scale 1–5) has been high in the past three years: score 1—completely disagree

    • (w2v74) The staff (scale 1–5) is generally satisfied: score 5—completely agree

  • Government

    • (w1v19) Government: Flemish, Provincial and Municipal

    • (w1v20) The Flemish government controls (scale 1–5) to a large extent the finances (score 1) and is an indispensable financier (score 1). To a certain extent, the daily operations (score 2) and the performances (score 2) are checked. Moreover, no control on the social impact (score 4).

    • (w2v22) It concerns (scale 1–5) a lot of paperwork (score 2) and all this takes a lot of time (score 2) but it is not pointless after all (score 4).

    • (w1v24) In practice (scale 1–5), it does not turn out to be an easy task (score 2).

    • (w1v28) Cooperation (scale 1–5) with the main government is not considered as a close partnership: score 2.

  • The partner/umbrella organization

    • (w1v29) People often participate in the meetings of an umbrella organization (scale 1–5): score 4.

  • Service beneficiaries/clients

    • People with disabilities

    • (w2v74) The organization certainly succeeds (scale 1–5) in opening its operations (accessibility) to its intended service beneficiaries: score 5—completely agree

  • Business enterprises

    • (w1v33) It is stated that they never want to cooperate with business enterprises (score 1) and occasionally receive funds from business enterprises (score 2) and provide services to business enterprises (score 2)

    • (w1v42/w1v43) In addition, it is also indicated that there is no competition (scale 1–5) with business enterprises for clients or members: score 1—none

Appendix 4

See Table

Table 6 Topic list interviews
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6.

Appendix 5

See Table

Table 7 List of interviewees
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7.

Appendix 6

See Table

Table 8 Code tree
Full size table

8.

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Carré, B., Suykens, B. & Verschuere, B. Balancing Legitimacy in a Context of Nonprofit-Business Hybridity: The Case of the Flemish Wellbeing and Social Economy Sector. Voluntas 32, 944–963 (2021). https://doi.org/10.1007/s11266-021-00320-2

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