The Effect of Management Control Systems
on Social Capital in a Social Enterprise:
a case study on Dynamo Group
Student name: Lorenzo Bonaccorsi Student number: 10828729
17th of August, 2015 Words count: 27.387
MSc Accountancy & Control, variant Control Amsterdam Business School
Faculty of Economics and Business, University of Amsterdam Supervisor: Dr. Rui J. Oliveira Vieira
Statement of Originality
This document is written by student Lorenzo Bonaccorsi who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Abstract
Social capital has been deeply discussed in research, but only recently it has been used in the field of management control systems. Social enterprise is an emergent typology of organization with characteristics that make it an hybrid between profit and non-profit organizations.
Putting together these three theoretical concepts provides opportunity to develop new research. The thesis goal is to investigate the effect that management control systems have on social capital in a social enterprise. In particular, social capital - comprised by its two dimensions, bridging and bonding - which has the effect to attract economic and cultural capital, and at the same time to solve the tensions between social and economic value creation, which characterizes social enterprises.
The research’s starting point is the work developed by Chenhall et al. (2010) in which the interplay between social capital and management control systems was investigated. The setting of the research was a non-profit organization, thus the different setting would provide different outcomes for what concerns the effect that management control systems have on social capital.
The concept of management control systems have been developed focusing on two frameworks: the first (Chenhall, 1995) considers informal and formal control systems; while the second one divides formal control systems into four categories, the 4 levers of controls developed by Simons (1995), namely belief, boundary, diagnostic and interactive control systems.
Findings have shown how management control systems have different effects on the two dimensions of social capital. Some of them have showed different outcomes if compared to Chenhall et al.’s (2010) findings.
For what concerns, informal controls help in strengthen the relationship between the staff, thus enhancing bonding. No downwards have been discovered in the use of informal controls, and the main answer is that this typology does not prevail on formal controls. Informal situations are circumscribed, and do not damage the staff’s professionalism or the procedures within the group.
Going to formal control systems, starting with belief systems, they appear to be the most effective control, especially for what concerns enhancing bonding. Values are what helps people achieve their goals, what overcomes most of the tensions present in Dynamo. In contrast with Chenhall et al. (2010), belief system do not seem to interfere on bridging, if compared to the connection they create with external actors. For what concerns boundary system, they appear to act in a symbiotic way with belief systems, strengthen their effect on social capital. This finding is in contrast with Chenhall et al. (2010) as well since in their research boundary systems are not perceived as being significant. Diagnostic control system, on the other hand, create some tensions,
in particular for what concerns developing the budgeting process. Solidarity arising from bonding, in this case, is fundamental to mitigate the tensions. The case has fulfilled in defining the effects of management control systems on social capital in a social enterprises, giving information that can be developed in future research.
Acknowledgement
I would like first to thank my supervisor, Dr. Rui J. Oliveira Vieira, for the great help he provided me with during this time. What I have appreciated the most is the passion and the care he put in his work, from the lectures I attended to the meeting we had when discussing about the thesis. i also would like to thank him for the great patience he had during my supervision. Sometimes I felt I didn’t deserve it.
My special thanks goes also to all the staff of Dynamo Group and to the CEO - Serena Porcari - in particular for their time and great helpfulness. I consider the passion and enthusiasm everyone showed in carrying on this project inspiring. I would also like to thank my dear friend Andrea Manes who made a direct contact with Dynamo possible.
At last, I would like to thank my family and my girlfriend, that made this experience in Amsterdam possible. Without their sustain, help and love everything would have been difficult.
Table of Content
1. Introduction 7 2. Literature Review 9 2.1 Social Entrepreneurship 9 2.2 Social Capital 11 2.2.1 Social Structure 122.2.2 Sources and Social Networks 13
2.2.3. Bonding and Bridging 14
2.2.4. Benefits and Risks 16
2.2.5 Social Capital and the Tension between Economic and Cultural Capital 19
2.3. Social Capital and Management Control Systems 20
2.3.1 Formal and Informal Controls 21
2.3.2. Formal Controls: The 4 Levers of Simons 22
3. Research Methodology 25
4. Case Setting - Dynamo Group 29
4.1. The Group 29
4.1.1. Fondazione Dynamo and Associazione Dynamo Camp: Social Value Creation 30
4.1.2. Dynamo Academy, Oasi Dynamo and Pro Dynamo: Economic Value Creation 32
4.2 Management Control Systems in Dynamo 33
4.2.1. Belief System 34
4.2.2. Boundary System 35
4.2.3. Diagnostic Control System 36
4.2.4. Interactive Control System 38
4.2.5. Formal vs. Informal System 38
5. Case Findings 39
5.1 Profit in the Non-Profit: the Tensions between Social and Economic Value Creation 40
5.2. Diversification: the Road to Sustainability 47
5.3. Social Capital in Dynamo 52
5.3.1. Bridging 52
5.3.2. Bonding 58
5.4. The Effect of Management Control Systems on Social Capital 59
5.4.1. Formal vs. Informal Management Control Systems 60
5.4.2. Belief and Boundary Systems 63
5.4.3. Diagnostic and Interactive Systems 67
6. Conclusion 69 7. Limitations 74 8. References 75 9. Appendix 80 9.1 Appendix A 80 9.2 Appendix B 83
1. Introduction
The concepts of social entrepreneurship, social entrepreneur and social enterprise are now attracting great interest, spacing from Europe to USA and recently covering other regions such as South America and Eastern Asia (Defourny and Nyssens, 2010). Social entrepreneurship's relevance is due to the fact that the growth of social enterprises is now a key feature in economic activity, of both developed and developing countries (Moizer and Tracey, 2010). Its growth can be explained not only as a response to market failures, but also as a consequence of institutional forces (Dart, 2004).
If we consider the experience of Grameen Bank, a microfinance organization funded in 1976 by Professor Muhammad Yunus to make loans to the necessitous without asking for collateral (Grameen Bank Official Website); or the experience of Manchester Craftsmen’s Guild, founded by Bill Strickland in 1968, developing community programs through the use of arts (Manchester Craftmen’s Guild Official Website), then we can say that the concept of social entrepreneurship has had a long global presence (Mair and Martí, 2006).
In contrast with its more than forty-years history, social entrepreneurship, as a field of study, has gained the attention and the interest of researchers only in recent years (Dees and Elias, 1998). Moreover, considering its theoretical underpinnings, there is still the need for more research contribution (Austin, Stevenson and Wei-Skillern, 2006).
A guide for future research has been drawn by Mair and Martí (2006). In their paper, they explain how social entrepreneurship can be understood only if examined considering the social context and the local environment. They, then, provide different perspectives for studying this concept. Social capital is one of those. Social capital consists of three different dimensions: structural, relational and cognitive capital. In particular, considering structural capital, it is referred to the overall pattern of connections between actors (Burt, 1992), and with respect to social entrepreneurship, it has been emphasized how important is the network surrounding the social enterprise, how social enterprises encourage the collaboration with other entities and foster the creation of networks (Di Domenico, Haugh and Tracey, 2010; Trivedi and Stokols, 2011).
Social capital, indeed, is one of the lenses that might be used to look at social entrepreneurship, but at the same time still less is known about management control systems in social enterprises. If we consider a research paper by Trivedi (2010), in which all the relevant bibliography regarding social entrepreneurship is included, then we can say that this topic still needs to be further developed.
Previous studies - Chenhall et al. (2010) in particular, which is the starting point of this research - were seeking to understand the impact of management control systems on social capital, but not in the set of social enterprises.
Taking into consideration all these different aspects, then, the research question will be: how management control systems affect the social capital in a social enterprise?
The aim of this paper is to shed light upon the effects that management control systems have on social capital in social enterprises. This would contribute to the limited research that has been developed with regard to this field. Taking as a starting point Chenhall et al.’s paper, that has been focused on a NGOs, this research would differ in the set, that for its specific characteristics would provide different outcomes. NGOs face a tension between the desire to maintain their core values, based on humanitarian ideals, with the need to raise funds; however, for social enterprises the tension between social and economic objectives is even higher (Tran Thi, 2011): the economic objectives are a mean to reach the social objectives (Mair and Martí, 2006), and social enterprises need to manage this double bottom line (Moizer and Tracey, 2010).
To summarize, this study responds to the call for research into the growing literature of social enterprises, focusing on a specific issue such as how the relationship between management control systems and social capital mitigates the tension between social and economic value creation. Social entrepreneurship is a field of study that needs to be researched due to the importance that social enterprises are gaining, on an economical and societal level.
The research will be developed as follows: since many theoretical underpinnings need to be taken into consideration, the next section will provide an in depth analysis of the different concepts - namely social entrepreneurship, social capital and management contro systems; after the literature review, a closer look will be given to the research methodology and to the case setting (Dynamo
Group); then, the findings will be provided and after them a discussion will be developed. The research will end with the limitations encountered together with suggestions for future research.
2. Literature Review
Because of the many concept to describe and develop, the theoretical framework will present three sections, focusing on the meaning of social enterprise, social capital and management control systems.
2.1 Social Entrepreneurship
The concept of social entrepreneurship has taken different meanings for different people and researchers (Dees and Elias, 1998; Kerlin, 2006), but at the same time it is still poorly defined, and its boundaries are not very clear (Mair and Martí, 2006).
Mair and Martí defined social entrepreneurship as “a process involving the innovative use and combination of resources to pursue opportunities to catalyze social change and/or address social needs” (Mair and Martí, 2006, p.37).
According to Trivedi and Stokols (2011, pp.4-5), social enterprises are “high-impact ventures that address long-standing socio-environmental problems, focus on long-term collaborative community capacity building, rely on collective wisdom and experience, foster the creation of knowledge and networks and facilitate sustained positive social change”. They have noticed how the arise of social enterprises is due to the will of reversing an imbalance in the social, structural and political system, through the production and the sustainment of a a positive social change.
Kerlin (2006), in her research, has highlighted different ways on how social enterprise is intended in the USA and in Europe, showing that definitions and comprehension of social enterprise concept depend on the surrounding environment.
Starting from the American conception, the definition of social enterprises changes from practitioners to academics. In the first case, the term social enterprise was strictly connected to the revenue generation in NGOs. The Social Enterprise Magazine Online defines social enterprise as “Mission oriented revenue or job creating projects undertaken by individual social entrepreneurs,
non-profit organizations, or non-profits in association with for-profits” (Social Enterprise Magazine Online). On the other hand, academics include in the concept of social enterprise different organizations, spread along a continuum from for-profit businesses committed with social activities (CSR or venture philanthropy) to businesses with double bottom line (mediating profit with social objectives), to NGOs that develop commercial activities in order to support their mission (social purpose organizations). Defourny (2010) addressed this typology of social enterprise under the category of Earned Income School of Thought. This stream of literature focuses on the will of non-profits organization to develop strategies in order to start profitable activities that would bring resources (income) (Massarsky, 2006).
Also in Europe there are two different streams around the concept of social enterprise. The first one stresses the social entrepreneurship dynamic developed by firms who seek to enhance their productive activities’ social impact. The other stream limits the analysis to the field of social enterprises belonging to the third sector, including social cooperatives.
To be more specific, we will consider two different examples of how countries of Western Europe intend social enterprises. In the UK, the central government’s Department of Trade and Industry (DTI, 2002) defines social enterprise as “businesses 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 shareholders and owners”.
Even though with different facets, what we can gather from all these definitions is the focusing on economic and societal value creation, with the former - the goal for corporate enterprises, as in Trivedi and Stokols (2011) - being the mean to achieve the latter, which is the main goal for social enterprises (Mair and Martí, 2006). Social enterprises face a high tension, since they need to achieve two different and distant goals, a double bottom line (Moizer and Tracey, 2011).
In order to distance this research from Chenhall et al.’s paper, which is the starting point of the proposal, a key issue is to understand differences between social enterprises and NGOs, which is where Chenhall et al.’s paper has been set.
Dart (2004) noted that social enterprises blur boundaries between non-profit and for-profit, enacting activities that can be considered an hybrid form between the two. Moreover, social
enterprises are focused on a double bottom line perspective, social and economic, while NGOs are focused on a prosocial mission bottomline.
Another evidence has been developed by Trivedi and Stokols (2011), who shed light upon the main differences between social enterprises, corporate enterprises and NGOs. In this case we will only consider the distinction between social enterprises and NGOs.
First of all, both NGOs and social enterprises aim to mitigate a social problem, but social enterprises put the effort on seeking a positive social change, which is defined as a “structural transformations of political, social and economic systems and institutions to create a more equitable and just society” (Fund For Southern Communities). This is not necessarily the case for NGOs. Subsequently, social enterprises have as primary goal identifying and addressing longstanding unsolved social problems, while for NGOs this is not essential (just consider an emergency disaster relief program). Other differences concern the organization's boundaries, which are porous for the social enterprise, while for an NGO they can be both rigid and porous, depending on contextual circumstances and type of service provided. This means that for social enterprises the social value creation can take place within and outside organizational boundaries, and that the creation of knowledge and social networks is essential to them.
2.2 Social Capital
The concept of social capital has become increasingly popular in a wide range of social science disciplines, particularly in studies regarding organizations (Adler and Kwon, 2002). This popularity is mainly due to two reasons: first, social capital is focused on the positive consequences of sociability; second, “it places those positive consequences in the framework of a broader discussion of capital and calls attention to how such non-monetary forms can be important sources of power and influence, like the size of one’s stock holdings or bank account” (Portes, 1998, p.2). The fungibility of different forms of capital (social, economic and cultural capital, which will be explained in detail in the following sections) ties sociological and economic perspectives, and captures the attention of actors seeking solutions to social problems. Under this consideration, rises the concept of social enterprise. Trivedi and Stokols (2011) looked at social enterprises as having the ultimate goal to produce a positive social change, but in order to do so they need to fulfill profit seeking requirements (Mair and Martí, 2006).
Social enterprise and social capital are, then, tight together by the assumptions made by Mair and Martí (2006), who considered social capital as one of those perspectives on how to look at research in social entrepreneurship, suggesting how the different dimensions of social capital can be used to study social entrepreneurship.
In the following sections, we will describe the concept of social capital, taking into consideration its main features (namely, sources, dimensions, benefits and risks) and its relations with other forms of capital (how social capital mediates in the tension between economic and cultural capital, and the relationship with management control systems).
2.2.1 Social Structure
Adler and Kwon (2002) focused on the use of social capital in organizational studies, drawing a conceptual model of it. They started from social capital’s sources and where they lie, finishing with its outcomes - both benefits and risks.
Social capital’s sources are assumed to rise from social relations - where favors and gifts are exchanged -, which is one of the three dimensions forming social structure. Of course, market Source - Adapted from Adler and Kwon, 2002
Figure 1 - Conceptual Model of Social Capital
Market Relations Social Relations Hierarchical Relations Social Structure Ability Motivation Opportunity Sources
Social Capital Information
Solidarity Power
relations and hierarchical relations together are fundamental in the creation of social capital, since practical relations are assumed to involve all the three dimensions (Adler, 2001). To be more specific, the role of hierarchical relations - in which obedience to a higher level is exchanged for material and spiritual security - is to shape the structure of social relations and to influence social capital’s sources as motivation and ability. On the other hand, market relations - where products and services are exchanged for money - has been seen as both enhancing (Paine, 1951) and corroding (Hirschman, 1982) social capital. The interplay between the three dimensions, with social relation being the underlying dimension to social capital, give rise to its sources, being - according to Adler and Kwon (2002) - opportunity, motivation and ability.
2.2.2 Sources and Social Networks
Despite the common knowledge that social capital arises from social relations, scholars still argue about which key aspect of them creates social capital. There are two streams: the first one “locates the source of social capital in the formal structure of the ties that make up the social network” (Adler and Kwon, 2002, p.23); while the second one focuses on the ties’ content (e.g. effect of friendship versus work ties in managers’ promotion rate)(Burt, 1997).
The concept of social network has been extensively used in literature as a source of social capital, but what researchers mean by social network changes consistently. In order to understand the network’s structure, it is first necessary to look at the quality of the constituents ties - in terms of frequency, intensity and multiplicity - and at their configuration (Adler and Kwon, 2002).
Regarding configuration, the most influent authors are Coleman and Burt, who focused on two different aspects of the same topic. Coleman (1988) stated that closure - the degree of connection between actors - strengthen social capital by easing the arise of norms and by maintaining trustworthiness of the actors. He also underlined the downwards of a more open network by arguing that in this case trustworthiness between actors would be damaged since violations of shared norms would be harder to detect, resulting in a a social capital’s erosion. On the other hand, Burt (1992) sustained that a sparse network produces greater benefits in term of social capital. Since information flows more within a certain group than between different groups, thus a focal source for social capital is to create a network with many linkages between different groups, that otherwise would not be related the one to the others.
The differences between the two views on networks’ configuration is mainly due to the internal and external foci Coleman (1988) and Burt (1992) took into consideration when developing their researches.
Despite the two branches we introduced in the beginning of the section, Adler and Kwon (2002), building on previous literature (Bailey, 1993; Blumberg and Pringle, 1982; MacInnis, Moorman and Jaworski, 1991), identify opportunity, motivation and ability as being the main sources for social capital.
Social networks create the opportunity of social capital transactions. In particular, external ties to others allow actors to extend their resources; while internal ties give the opportunity to collective actors to operate together.
For what concerns motivation, the most important research regarding this social capital’s resource has been developed by Portes (1998). He recognized as a key question what motivates some actors to help others even without a certain returns, and subsequently distinguished two different typologies of motivation: consummatory and instrumental. In the first case, motivation is based on strongly internalized norms, where social capital is under certain conditions motivated by norms of generalized reciprocity. In the second cluster, motivation is based on rational calculation, where social capital is enhanced in order to gain advantage (e.g. career’s promotion)(De Graaf and Flap, 1988) .
By ability, Adler and Kwon (2002, p.26) mean “the competencies and resources at the nodes of the network”. Its role into the literature is still vague, but a stream of research, labeled as the narrow
approach - lead by Portes (1998), considers ability as a complement to social capital. If an actor
doesn’t have the required ability then the benefits arising from social capital cannot be put in place.
2.2.3. Bonding and Bridging
In order to understand what social capital is, we need to go through the numerous definitions - or at least the different stream of definitions - that have been provided by researchers. It is possible to find great similarities between them, but most of the different features are related to whether they
are focused on the relation maintained between actors, the structure of the relations among actors within a group or those focused on both sides (Adler and Kwon, 2002).
The stream that focuses on external ties (relations between actors) - the “bridging views” - is lead by Bourdieu’s literature. He defined social capital as “the aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance or recognition” (Bourdieu, 1986, p.51). This branch looks at social capital as a resource residing in the social networks, tying one actor to the other. As we can see from Bourdieu’s work, social networks are resources used to build or gain other resources; social capital is fungible with other type of capital. Thus, through it, actors can have a direct (or better) access to economic capital - mainly stocks of assets, cash, shares, property - and they can increase their cultural capital - forms of knowledge, skills, education, and advantages that a person has, which give them a higher status in society (Bourdieu, 1986). Not only they can benefit from this resources, but as social enterprise, they can also share it, managing to increase both economic and social value creation. So, as mentioned earlier, the possibility to rely on a strong network, a strong connection, is essential for social enterprises in order to achieve their double goal (Di Domenico, Haugh and Tracey, 2010). Here it is recalled the tension between the attracting economic capital and delivering humanitarian services, which in social enterprises is even higher, due to its peculiarity of being a hybrid form of profit and non-profit organizations (Dart, 2004), and to its double bottom line: social and economic value creation (Moizer and Tracey, 2010).
In contrast to this “bridging” track, there’s a view of social capital focused on the network’s internal ties, called “bonding”. The organization’s social capital is in its inner structure, among the individuals that form the organization. Most of the literature developed in this branch of social capital has started from the research of Coleman, which will be later developed by Putnam. The former stated that “social capital is defined by its function. It is not a single entity but a variety of different entities, with two elements in common: they all consist of some aspect of social structures, and they facilitate certain actions of actors whether persons or corporate actors - within the structure” (Coleman, 1988, p. 98). As Bourdieu did, Coleman (1988) defined social capital as being a resource used by actors with specific goals, as if without it actors could not reach those goals. An important concept developed in Coleman’s work is the one of closure, which is the degree of connection between actors. Closure is seen to be fundamental to build social capital, since it eases the emergence of effective norms and maintains the trustworthiness of others.
Putnam (1993, p. 35) took as a starting point Coleman’s literature and enriched it. For him social capital refers to “features of social organizations, such as networks, norms and trust that facilitate action and cooperation for mutual benefit”. In particular, trust is the effect of voluntary associations that enable a horizontal linking of people, and it is the cause of interpersonal bonding. Putnam, then, moves a step forward, and showed how the informality engendered in social capital simplify the operations of modern economies. This means that it can work both as bridging or bonding (Putnam, 2000). Bridging broadens networks, while bonding strengthen their cohesion. This view brings to the last group of definitions that is considered to be neutral, that addresses both bridging and bonding. According to Adler and Kwon (2002) internal and external dimensions should not be considered as mutually exclusive. The behavior of a collective actor - e.g. a firm - is influenced both by its internal and external linkages: it’s success is usually given by the function of both. According to Adler and Kwon (2002, p. 23) social capital is “the goodwill available to individuals or groups. Its source lies in the structure and content of the actor's social relations. Its effects flow from the information, influence, and solidarity it makes available to the actor”. In line with Chenhall et al. (2010), this research will consider a definition of social capital which embraces both the bridging and bonding dimensions, since it provides a better overview towards the concept of social capital.
2.2.4. Benefits and Risks
As can be seen in all the definitions provided, social capital offers several potential benefits. Sanderfur and Laumann’s (1998) identified three advantages of social capital: information, influence and solidarity. They focused only on the benefits towards focal actors, while Adler and Kwon (2002) enriched their research by considering also the greater aggregate of which they are a part of. Social capital eases the access to broader sources of information and develop its quality, relevance and timeliness (Adler and Kwon, 2002). Many researches have shown that network ties help actors to get access to information about job opportunities (Burt, 1992; Granovetter, 1973) and about innovation (Burt, 1987). In inter-organizational networks help firms acquire new skills and knowledge (Powell and Smith-Doerr, 1994; Podolny and Page, 1998). The second benefit is constituted by influence, power and control. Coleman (1988) using an example about the “Senate Club”, where some senators are more influential than others, showed how power allow focal actors to achieve their goals. On an inter-organizational level, Burt (1992) showed how entrepreneurs who bridge disconnected groups are powerful actors since they can negotiate more favorable terms to the
interests served by the bridge. Third advantage of social capital is solidarity. Strong social norms and beliefs, together with a high degree of closure, encourage compliance with local rules and less need of formal controls. Examples are provided by Coleman (1988) in a study about the low dropout rate in catholic school students, and by Geertz (1962) in a study about the effectiveness of rotating-credits associations. At an inter-organizational level, Ouchi (1980) showed how organizations with strong shared norms benefit from lower monitoring costs and higher commitment.
At the same time, these three benefits may entail risks both at at the focal actor and at the 1
broader aggregate level. Beginning with the former, the main issue associated with information is that it is costly to maintain (Hansen, 1998); while at a broader level informational benefits may lead to a “tragedy of the commons”. Gabbay and Zuckerman (1988) showed how excessive brokering information may be an obstacle for innovation. For what concerns influence, its potential benefits may be a trade-off with the informational benefits, since more contacts (and thus more information benefits) would lower the dependance of an actor towards the other. Another risk of influence is that it can cause gridlock during the decisional process (Coleman, 1988). At last we have solidarity, whose main risk towards members of a group is that it creates overembeddeddness which leads to parochialism and inertia (Gargiulo and Bernassi, 1999). At the same time, solidarity benefits at a lower level can cause negative externalities at a broader level. A strong identifications with actor’s group may cause a fragmentation of of the greater whole (Foley and Edwards, 1996; Portes, 1998; De Souza Briggs, 1998).
Building on Adler and Kwon (2002) and other literature (Granovetter, 1992; Nahapiet and Ghoshal, 1998), Chenhall et al. (2010) provided a clear and detailed description (reported in Table 1) about the potential benefits and disadvantages of social capital, considering the two dimensions. In this sense, the distinction between the bridging and bonding dimension helps us in the identification of those benefits and risks associated to social capital.
Under Actor-Network Theory the definition of actor is “Any element which bends space around itself, makes other elements
1
dependent upon itself and translates their will into the language of its own” (Callon and Latour, 1981, p. 286). One of these actors is called ‘focal actor’, whose goal is to drive the process of engaging other actors to support a particular organizational transformation (Papadopoulos et al., 2011).
For what concerns bridging between networks, access to resources, information and knowledge are the most important potential benefits; while the fact that it is costly to maintain and that it would lead to parochialism and inertia are the potential disadvantages (Gargiulo and Bernassi, 1999).
On the other hand, for what concerns bonding, cooperation between individuals and solidarity are the most important potential benefits; while promoting parochial resistance in time of changes and crisis, and promoting socially unacceptable values and attitudes are the most avoidable potential disadvantages (Brass, Butterfield and Skaggs, 1998; Gambetta, 1993). The complete list is provided in Table 1.
Definition Properties Potential benefits Potential disadvantages
Bridging Social Capital
The impersonal properties of the social system and the network of social relations as a whole.
Number of social ties within a network configured in terms of density, connectivity, hierarchy and appropriability (Adler & Kwon, 2002)
Access to resources, information, and skills/ knowledge (Boxman, De Graaf, & Flap, 1991; Burt, 1997; Coleman, 1988; Knoke, 1999; Podolny & Page, 1998; Powell & Smith-Doerr, 1994)
Costly to maintain (Hansen, 1998)
Parochialism and inertia (Gargiulo & Bernassi, 1999; Powell & Smith-Doerr, 1994, 393)
Extent to which individuals’ contact within networks are themselves connected. High (low) levels of
interconnections indicate a closed (sparse) network (Burt, 1992; Coleman, 1988)
Secure benefits (Portes, 1998) Leadership, power and authority by brokering connections (Burt, 1992; Coleman, 1988)
Group level exclusion and insularity (Foley & Edwards, 1996, p. 39)
Excessive brokering restricting network opportunities and innovation (Gabbay & Zuckerman, 1998)
Compliance with local rules and customs (Coleman, 1988)
Bringing together dissatisfied actors can deepen social cleavages (Portes, 1998)
Bonding Social Capital
The existence of values or norms shared by members of a group that permit cooperation among them.
Trust, cooperation and shared values (Coleman, 1990; Fukuyama, 1995; Putnam, 2000) Cooperation between individuals (Fukuyama, 1997; Putnam, 1995)
Free rider problem and reduced incentives for entrepreneurial activity (Portes, 1998: Uzzi, 1997)
Generalized reciprocity (Putnam, 1995)
Sharing of fine-grained information (Krackhardt & Hanson, 1993; Uzzi, 1997) Solidarity (Granovetter, 1983; Putnam, 1993)
Promote parochial resistance in times of change and crisis (Krackhardt & Stern, 1998)
Faster dispute resolution and the prevention of sectarian grievances (Nelson, 1989)
Promote socially unacceptable values and attitudes (Brass, Butterfield, & Skaggs, 1998; Gambetta, 1993)
Table 1 - Bridging and bonding dimensions of social capital and their potential benefits and disadvantages.
By drawing on literature that examines the bridging and bonding dimensions of social capital and their potential outcomes (e.g. information, power and solidarity), we can focus on how management control systems may enhance or damage social capital.
2.2.5 Social Capital and the Tension between Economic and Cultural
Capital
Going back to the concept of social enterprise, Trivedi and Stokols (2011) have noticed how the arise of social enterprises is due to the will of reversing an imbalance in the social, structural and political system, through the production and the sustainment of a a positive social change. Thus, the ultimate goal of social enterprises is to create societal value (Mair and Martí, 2006), but in order to fulfill this achievement they first need to create the necessary economic value to support their operations.
Thus, social enterprises face a high tension, since they need to reach two different and distant goals, a double bottom line (Moizer and Tracey, 2011). This tension can be seen also - in social enterprises as well as in NGOs - in the will to attract funds and economic capitals, but at the same time to keep intact the core values of these organizations, built around humanitarian ideals (Chenhall et al., 2010). One way to manage the tension is throughout social capital, which is essential in both delivering social value and attracting resources (Chenhall et al., 2010).
Bourdieu (1986, 1993, 1998) showed how social capital can be used to obtain individual advantage. In particular, as highlighted by Tzanakis (2013), Bourdieu sees profit - not necessarily economic - as the inner motivation behind building and maintaining the links within a social network. Profit can be translated into the notions of economic and cultural capital. The former comprises different stock of assets, both tangible and intangibles, such as cash, properties and stocks. Cultural capital, on the other hand, includes three different aspects: habitus, which is “the disposition to act in conformity with a (quasi) systematic view of the world and human existence” (Bourdieu, 1987, p. 126); objectivization, as in cultural articles (e.g. works of art);
cultural institutions (e.g. certificates, diplomas). If we take it in consideration at an organizational
level, cultural capital can also be seen as the knowledge, practices, and goods which the organizations consider unique and fundamental in their social reproduction (Rubtsova and Dowd,
2004). Moreover, cultural capital is used by organizations for status attainment (Lamont and 2
Lareau, 1988).
These three forms of capital are closely related one to the others. While social capital is necessary to build and attract the other two, it can be seen how, depending on the organization’s typology, cultural capital is employed to maximize economic capital and vice versa. In particular, for NGOs, economic capital is seen as a tool to develop cultural capital, whereas in profit-seeking organizations the relevance of economic capital is such that cultural capital is used to create it. Within this continuum, the position of social enterprises should be closer to that of NGOs since, as mentioned, ultimate goal of social enterprises is to create societal value (Mair and Martí, 2006).
The inner tension between these two forms of capital, and how economic capital can damage cultural capital in an NGO, has been discussed by Oakes et al. (1998). In their research, Oakes et al. (1998) showed how formal planning and accounting systems moved the focus from cultural (the historic ideals of the organization) to economic capital. Under these premises, social capital, together with management control systems, can be seen as a way to manage the potential tension.
2.3. Social Capital and Management Control Systems
There is still little research that focuses on the relationship between management control systems and social capital, especially with regard to social enterprises. The aim of this paper, as mentioned earlier, is to understand the effects of management control systems towards the different dimensions of social capital, and thus understanding which are the consequences on those benefits or risks we have analyzed.An essential work, in this direction has been developed by Chenhall et al. (2010), the starting point of this research.
Their research has been focusing on two different management control systems frameworks. The first to be presented is the one developed by Chenhall and Morris (1995), explaining the differences between the concepts of formal and organic/informal controls.
Lin (1999) considers status attainment as a process through which actors mobilize and invest resources in order to obtain a return in
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An overview to the research framework is shown in Figure 2.
2.3.1 Formal and Informal Controls
Building on previous literature (Ahrens and Chapman, 2004; Chenhall and Morris, 1995; Simons, 1995), Chenhall et al. argued that, to understand the effect of management control systems on social capital, the combination between formal and informal controls is essential, since it explains how management control systems can be implemented, and which are the outcomes of the organization. Moreover, the association between the two control typologies’ interaction and the organization’s results is more significant “in entities following entrepreneurial rather than conservative strategies” (Chenhall and Morris, 1995, p.485).
Formal controls are “articulating action plans derived from strategies by way of detailed financial budgets” (Chenhall and Morris, 1995, p.486). They help the organizations in creating sustainable value, through the implementation of innovative strategies. On the other hand, informal - or organic - controls are based on informal processes, on flexibility, and are enhanced to create interactions within the organizations. If in NGOs organic controls are considered to be more relevant, the situation changes when considering social enterprises. The necessity to create interactions with the other ties of the network (social engagement necessary to create social value and the economic value creation target), through an innovative use and combination of resources
Management Control Systems Social Capital Benefits and Risks Formal Controls Informal Controls Solidarity Outcome Tension
Figure 2 - Research Framework
Source - Adapted from Chenhall et al. (2010)
Bridging
Bonding
Information
(Mair and Martí, 2006), would suggest that this typology of controls will be relevant for this kind of organization.
2.3.2. Formal Controls: The 4 Levers of Simons
To better explain the effect of management control systems on the two dimensions of social capital, bonding and bridging, another framework will be considered, the one provided by Simons (1995), about formal controls: the four levers of control.
Simons stated that controls are possible only if an organization develops four different levers of control, all with the same importance. These levers are: belief systems, boundary systems, diagnostic systems and interactive control systems (represented in Figure 3).
Belief systems are used by companies to “articulate the values and direction that senior managers want their employees to embrace” (Simons, 1995, p.82). They are enhanced to inspire employees, to promote commitment to the core values of the organization, but they achieve their goals only if employees think that the company’s beliefs represents deeply rooted values. Beliefs systems are necessary, because otherwise there would not be a clear understanding of the organization’s core values, and employees would not have in mind their role within the organization. Most importantly, beliefs system can inspire employees to enhance new ways to create value. Beliefs system, indeed, create “empowerment”, but on the other hand management need to provide other controls to avoid limit this power.
Beliefs systems are always considered together with boundary systems. Employees are empowered with beliefs systems, and this empowerment is controlled by boundary systems. They include rules, limits of what employees should avoid, in the form of a code of conduct. By setting the boundaries to action not to be undertaken, telling employees what should not be done, managers allow them to be creative, innovative, but within defined limits. Moreover, these systems are critical in organizations where “reputation built on trust is a key competitive asset” (Simons, 1995, p.84).
For social enterprises, reputation and transparency are a critical issue, necessary to build stakeholder engagement (Smith and Woods, 2014).
Diagnostic systems are feedback systems, enhanced to ensure that tasks are achieved effectively and efficiently. Managers use these systems to monitor goals and profitability, to measure improvement along certain targets, such as revenue growth and market share. Their most important goal is that they allow managers not to constantly control employees, since employees have now a performance target and a compensation based on that target. But diagnostic control, by themselves, are not enough to provide effective controls. It has been discovered that they create high pressure, that can lead to crisis, and this is way they are usually enhanced in combination with interactive control systems.
Interactive systems are “the formal information systems that managers use to involve themselves regularly and personally in the decisions of subordinates” (Simons, 1995, p.86). The goal of interactive control is to involve the attention and to force dialogue and learning throughout the
organization. They focus on constantly changing information that senior managers consider potentially strategic.
The remaining step is to understand the possible effects of management control systems on the two dimensions of social capital, bridging and bonding. The list of management control systems’ effects - both positive and negative - on social capital is given in Table 2, which takes as a starting point Table 2 in Chenhall et al. (2010).
Dimension Importance to bonding and bridging social capital Possible tensions
Formal MCS Enhancing bridging by demonstrating capabilities and
reputation towards different stakeholder groups. Enhance formal controls whether organic/informal controls where already in place may damage the bonding dimension: people may resist to formal controls.
Informal MCS Enhances bonding since, through interpersonal connection, it creates an easier and better communication and
interaction.
Belief Systems Enhances bonding by communicating core values, goals, directions and by inspiring the commitment from
employees to organizational objectives, trust of employees toward social ideals of organization; empowers
individuals.
Enhances bridging by communicating organizational core values and strategies with other parties and stakeholders in the network.
Boundary Systems Enhance bonding by defining the acceptable domain of individual actions, because it can mitigate risks of deviations that might cause conflicts.
Strong belief systems may be considered sufficient; as a result, boundary systems may be perceived by mistrusting employees, which will harm the bonding.
Diagnostic Control
Systems Enhance bonding by clarifying goals and showing expectations all over the organization. Enhances bridging by demonstrating the capability to engage in network activities, which may develop into relational signalling and goodwill trust.
Enhances bridging by identifying areas of joint interest thereby reinforcing parts of the network.
Diagnostic controls would lead to manage in a more business-like way.
This may cause incompatibility with informal controls and, indeed, damage bonding. Diagnostic controls may damage bonding, but they can enhance bridging by showing the organizational competence to stakeholders. Interactive Control
Systems Enhances bonding by promoting debate on values and future directions of the organization. Enhances bridging by helping managers to identify strategic uncertainties that may leads to a network’s enlargement.
The formality of the interactive processes may be inconsistent with customary organic controls, which may inhibit bonding.
Table 2 - MCS effects on Social Capital
3. Research Methodology
Because of the research question’s nature - how management control systems affect social capital
in a social enterprise - the best research typology, the one that would best answer the question, is a
qualitative research. In particular, through a case study it is possible to provide “a deep and rich understandings of social nature” with regard to management control systems (Ryan et al., 2002, p. 145).
Case study is the option that provides more insights about how management control systems work in a specific real life context (Yin, 2009). Considering literature about research methodology, Ryan et al. (2002) in particular, the most effective case study is the descriptive one, because it enables researchers to understand “nature and form” of the objects studied, in this case the effect of management control systems on social capital.
The case study has been conducted on Dynamo Group, an Italian group focused on social issues. The cornerstone of the group is Associazione Dynamo Camp, an ONLUS whose mission is to help 3
children with difficult disease and their family, offering them a period of fun in a structure set in a WWF oasis close to Pistoia. Together with Associazione Dynamo Camp, the group comprises a social enterprise, Dynamo Academy, who uses the structure when no sessions are run, Pro Dynamo, a ltd. company that sells products with the Dynamo logo, and Oasi Dynamo, a farm whose goal is to reduce the costs of the WWF Oasis in which the Camp is situated. Dynamo Group works to sustain the costs of Associazione Dynamo, in order to improve the services delivered to the children. If taking into consideration the Earned Income School defined by Defourny (2010), then Dynamo Group can be considered a social enterprise.
Several reasons affected the decision to set the research in Dynamo Group. First of all, thanks to a personal contact within the Group, there has been the possibility to communicate with the CEO directly. Through the help of the CEO it has been easier to manage meetings and gather internal documents. Despite this more practical reason, Dynamo was considered the best setting for the debate regarding the reform of Terzo Settore in Italy. The way the Group operates can be 4
Organizzazione Non Lucrativa di Utilità Sociale is the Italian name for non-profit organization.
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Terzo Settore refers to the legislation regarding voluntary work, social cooperation, non-profit organizations, foundations and social
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considered innovative for the non-profit in Italy. Under Dynamo, indeed, different typology of organizations work together to improve the sustainability of the Camp. Moreover, the strong societal value that Dynamo Group creates together with a more businesslike way to gather resources show the tensions between economic and cultural capital; and at the same time, its richness in social capital (described in Chapter 5) make Dynamo the best setting for this research.
A case study, according to Yin (2009), relies on multiple sources, that not only provide higher insights but also triangulation. Thus, data were collected from interviews with the staff and from internal documents gathered in loco. Other data were taken from the official websites of the Group’s different entities, in which Annual Reports were included.
Qualitative research interviews are according to Kvale (1983, p.174) “interviews whose goal is to gather description of the life-world of the interviewee with respect to interpretation of the meaning of the described phenomena”. Thus, the aim of qualitative research interviews is to understand the topic under the perspective of the interviewee, showing how and why they have developed this perspective (Kvale, 1983). In order to achieve its goal, qualitative research interviews need to have specific characteristics. In particular, there’s the need to have a “low degree of structure imposed by the interviewer; a preponderance of open questions; a focus on specific situations and action sequences in the world of the interviewee rather than abstraction and general opinion” (Cassell and Symon, 2004, p.11).
The case study was conducted from January when the preliminary contacts were done, till July when the majority of the interviews were conducted. The first interview was made with the CEO. It was an introductive interview through which internal documents were provided and the decision to whom to interview was made. According to King (2004), under the category of qualitative research interviews it is possible to put semi-structured and unstructured interviews. Interviews were conducted in a semi-structured way, to enable flexibility which would have helped into develop new ideas (Ryan et al., 2002), and in Italian, in order to help communication and increase insights. Flexibility made it possible for the interviewees to build their own story, letting themes come out, and subsequently following the interview track that was prepared before the meeting with the CEO (see Appendix A).
Because of the semi-structured nature of the interviews, a list of themes and questions was covered, but the way they were covered varied from interview to interview, meaning that the
questions’ order has not been the same for all the interviews and that in particular interviews some questions have been omitted (Saunders et al., 2007).
The choice of interviewees was dependent also on the fact that Group Dynamo has different entities, thus all of them had to be represented, in order to provide a more complete overview on the Group. Another issue was given by the fact that the headquarter is placed in Milan, where the strategy is developed; while the Camp is placed close to Pistoia, where the operative activities are performed. For this reason, six out of the ten interviews were conducted in the HQ of Associazione Dynamo Group, while the other four were conducted via telephone. Telephone interviews helped in making contact with people with whom it would have been impossible to conduct an interview on a face-to-face basis (Saunders et al., 2007). However, conducting interviews via telephone has also raised some issues. In particular, according to Saunders et al. (2007, p.342) interviews conducted via telephone reduce the opportunity to establish a personal contact with the interviewee, thus leading to “issues of (reducer) reliability, where you participants are less willing to engage in an exploratory discussion”.
Interviews were digitally recorder, with the approval of the interviewees. Each interview was then transcribed in Italian and subsequently translated in English, without a standard method to follow (Flick, 2006).
After the transcription of the interviews, combining them with the other data gathered, the data analysis started. As Saunders et al. (2007, p.479) suggest, the first thing that has to be done is dividing the data into meaningful categories. Data were divided and grouped into four categories - namely Profit, Sustainability, Social Capital and MCS . The selection of the categories was made 5
following Dey (1993, pp.96-97) who stated that “categories must have two aspects, an internal aspect - they must be meaningful in relation to the data - and an external aspect - they must be meaningful in relation to other categories”; the categories, indeed, “need to be part of a coherent set so that they provide you with a well-structured analytical framework to pursue the analysis” (Saunders et al., 2007, p.480). The definition of categories was also influenced by the theoretical framework, which was used as benchmark (Yin, 2009). After grouping data in different categories, regarding Social Capital and MCS sub-categories were identified, in order to improve the analysis.
The Profit category refers to the businesslike structure of Dynamo and the effect that it has; Sustainability refers to the strategy that
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Dynamo is pursing to increase its resources; Social Capital refers, of course, to social capital in Dynamo; at last, MCS, refers to the effect that management control systems have on social capital in Dynamo.
The role of the interviewees, the duration of the interview and the place where the interview was set are provided in Table 3.
Data collected from interviews, together with internal documents provided by the staff, led to the results discussed in Findings.
Interview
Number Role of the Interviewee Entity Duration Set Language
1 CEO Associazione Dynamo Camp & Dynamo Academy 50 minutes Dynamo HQ Italian
2 CFO Associazione Dynamo Camp & Dynamo Academy 40 minutes Telephone Italian
3 Major Gift Area Manager Associazione Dynamo Camp 50 minutes Dynamo HQ Italian
4 Individuals Area Manager Associazione Dynamo Camp 50 minutes Dynamo HQ Italian
5 Human Resources Manager Associazione Dynamo Camp & Dynamo Academy 40 minutes Dynamo HQ Italian
6 Communication Manager Associazione Dynamo Camp & Dynamo Academy 1 h Dynamo HQ Italian
7 Controller Associazione Dynamo Camp & Dynamo Academy 40 minutes Telephone Italian
8 Purchasing Department Manager Associazione Dynamo Camp & Dynamo Academy 40 minutes Telephone Italian
9 CFO Pro Dynamo 30 minutes Dynamo HQ Italian
10 CEO Pro Dynamo 50 minutes Telephone Italian
4. Case Setting - Dynamo Group
In this chapter, an overview on the Dynamo Group will be provided. Data are gathered from internal documents, the group website and from interviews with Dynamo’s personnel.
4.1. The Group
As mentioned already in the Research Methodology section, Dynamo Group has as cornerstone Associazione Dynamo Camp ONLUS. The Camp is the physical symbol of the group; it represents the Group’s social commitment. While the Camp is the set of operative activities, the headquarter is based in Milan, the heart of the Italian economy. The main feature that characterizes Dynamo Group is that each reality is run as a business-like organization. Since Dynamo comes from Intek S.p.A., an holding operating in the profit environment, the imprinting and the way to conduct operations is more similar to a profit organization. In Chapter 5 this theme will be discussed in more detail. Below, a description of the different entities will be provided, taking also into consideration the history of the Group.
Figure 4 - Dynamo Group
4.1.1. Fondazione Dynamo and Associazione Dynamo Camp: Social
Value Creation
Dynamo Group was born in 2003 as Fondazione Dynamo, a Milan-based foundation of Venture Philanthropy whose mission is to implement successful projects in the non-profit area. Fondazione Dynamo was the result of an idea developed by Vincenzo Manes, who is the president of the Group. His effort in the social field, together with its business competences (Manes is president of Intek S.p.A., a company listed on the Italian stock exchange market with a consolidated turnover of over 3,5 billions € and 8.000 employees throughout Europe and Asia), made the Italian Prime Minister Matteo Renzi choose him as counselor for the reform of the Terzo Settore, which focuses on private organizations aimed at the production of goods or services for the community.
In 2006 Fondazione Dynamo created Associazione Dynamo Camp ONLUS, a non-profit organization serving children with serious illnesses and their families. The camp, that became fully operative in 2007 and that is set in a WWF Oasis close to Pistoia (Limestre), is part of SeriousFun Children’s Network, a global community of independent managed and financed camps, founded by Paul Newman in 1988.
The camp fulfills a real need: every year in Italy more than 10.000 children are affected by chronic and serious diseases which oblige them to spend most of their time in hospitals. Children in this particular condition tend to loose their serenity and happiness, typical of their age. Thus, Associazione Dynamo Camp offers these children (between 6 and 17 years old) to spend for free a period in which they can have fun and where they can find and develop their confidence (Presentazione Dynamo Camp). Different activities are carried out during the sessions, as horse-riding, pet therapy, archery, art-factory, climbing and swimming-pool. The scientific concept which inspires the camp’s activities is Recreational Therapy, which has shown to have long term benefits, often permanently, and that helps the children to change the attitude towards their disease.
From 2007 until now, the camp has been hosting 5.828 children with 60 different pathologies. In 2008 also families have started to take part to specific sessions at the camp, reaching today an amount of 868 (see Chart 1).
For what concerns the staff, it is divided into three categories: employees, seasonal staff and volunteers. In 2014 the staff comprised 45 employees, 61 people part of the seasonal staff and 6
more than 600 volunteers, spread over the different sessions during the year. The number of volunteers is much more than the rest of the staff, both because there’s an high demand for being a volunteer at Associazione Dynamo Camp (from 2007 the number of volunteers part of Associazione Dynamo Camp has reached 3.154 people), and also because there are numerous sessions throughout the year. The camp opens its season the 27th of December and closes the 8th of November, with breaks during the year.
With regard to the financing of the camp, fundraising is by far the most important activity, but there are many differences compared with other Italian non-profit organizations. In particular, the public contribution is only 8% of the total (Dynamo Annual Report 2014) against an average of 36% for non-profit organizations that have costs higher than 500.000 € per year (Impresa3). Only in recent years the partnership with Regione Toscana has increased the public contribution on the total. On the other hand, what distinguishes Dynamo from other non-profit organizations in Italy is that it relies a lot on corporate contribution, while other relies more on individuals. Despite these two ways of fundraising, other grants come from charities and, of course, individuals.
Seasonal staff comprises members of the staff that do not work with Dynamo on a daily basis. They supervise volunteers and
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manage different activities during the Camp's sessions, receiving a compensation for that.
2007 2008 2009 2010 2011 2012 2013 2014 370 303 283 292 279 89 40 1.200 1.163 1.064 844 779 500 218 60 Children Families
Source - Presentazione Associazione Dynamo Camp 2015 Chart 1 - Children and Families host by the Camp
4.1.2. Dynamo Academy, Oasi Dynamo and Pro Dynamo: Economic
Value Creation
Due to the high costs that the Camp has (around 4.000.000 € per year), Fondazione Dynamo decided to diversify the funding sources. As a result of this, in 2010 Dynamo Academy was created, a social enterprise that uses the Camp when no session are running, helping to cover its operating costs. Its mission is to promote the culture of social responsibility starting from the experience of Dynamo camp, through the development of three business areas: Corporate Partnership, Training, Culture and Territory.
For what concerns the first area, the Academy's mission includes the development of valuable partnerships with universities, international organizations, companies and public bodies. The service supplied consists of all the activities that the Camp offers. In addition to these activities, others are carried out in classrooms, concerning sustainability and corporate social responsibility.
With regard to the second area, Dynamo Academy has the goal of creating training programs about the subject of sustainability. The programs can have different forms: contributions classroom, speakers, training more days, etc.
The last area is about the opportunity to visit the territory surrounding the Camp, which is a WWF Oasis. The entity that offers the various services for people that want to approach the oasis is Oasi Dynamo. Oasi Dynamo allows everybody to visit the area, and supports whoever approaches the area with people that share their competences with passion and respect for nature. The fruition of Oasi Dynamo is managed by Dynamo Academy.
During these years other activities have been developed in order to make the Camp more sustainable. In particular, Associazione Dynamo Camp started selling its own merchandise (in particular a clothes line), but since it is a non-profit organization, it was not possible to grow financially, due to the rigid standard that has to be considered for an ONLUS. For this reason, in March 2015 Fondazione Dynamo created Pro Dynamo, a ltd. company that uses the logo of Associazione Dynamo and that devolves the 100% of the after tax profits to Associazione Dynamo Camp (through Fondazione Dynamo ). 7
Pro Dynamo distributes the net profits to Fondazione Dynamo, which lately devolves them to Associazione Dynamo.
The most important issue was not to damage the brand of the Group, because there was the possibility that Associazione might have lost its status of ONLUS (together with the connected fiscal benefits). After a motion addressing the Italian Financial Administration, Pro Dynamo received the consent to use the logo of the Group.
The first business unit of Pro Dynamo is the clothes line. Activities that were already in place within Associazione, were now transferred under the competence of Pro Dynamo. Beside the merchandising business unit, taking inspiration from Newman’s Own - a company founded by Paul Newman which produces food products whose profit are devolved to SeriousFun - the Group has launched a line of food products. After Pro Dynamo was born, as for the clothes line, this business unit was put under its control, and now products with the Dynamo logo are present in 9 large-scale distribution selling points in Toscana. The selling articles consist of jam, honey, pasta and others, which are produced by farmers in the surrounding area of the camp. The idea is to expand the distribution also into smaller retail selling points and at a national level.
The last business unit is focused on the opening of cafes. So far there’s only one cafe open inside the camp, which is considered as a prototype for the forthcoming cafes. In particular, Pro Dynamo has already reached an agreement with some partners, that will equip the surface where to open the cafes; one will be in Firenze, at Coop (mass distribution supermarket company), while another one will be set in Milano, at BMW.
The greatest common divisor of the three business units is the high quality of the service/ product.
In the following paragraphs a description of the management control systems present in Dynamo Group will be taken into consideration, according to the theoretical framework developed in the previous Literature Review chapter.
4.2 Management Control Systems in Dynamo
In this part of the company overview, an outlook on the management control systems inside the Dynamo Group will be given, according to the Literature Review provided in the previous chapter.
