A Study of Purpose-Drift in Danish Social Enterprises

BACHELOR THESIS

A Study of Purpose-Drift in Danish Social

Enterprises

Victor Emil Madsen

Statement of Originality

This document is written by Student, Victor Emil Madsen, who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document are 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

Mission-drift has been a main focus in the study of social enterprises in the last decades. This study extended this focus to purpose-drift – this being a more encompassing concept

capturing the inner workings of who social enterprises are and what they want to be to their stakeholders. The author analysed four Danish social enterprises with differing relationships with funding partners to explore the effects that these differentiations may have had on purpose-drift. No purpose-drift was found in the social enterprises, however, mechanisms and activities within the enterprises were identified who had the effects of preventing exposure to purpose-drift. More specifically, participative management, involving stakeholder, as well as oversight mechanisms were concluded to be the main drivers in preventing possible drift.

Table of contents

Chapter 1: Introduction ... 5

Chapter 2: Literary Review ... 7

2.1. Social Enterprises ... 7

2.2. The Importance of Preventing Mission Drift ... 8

2.2.a. Purpose Drift and its Difference from Mission Drift ... 10

2.3. Social Enterprises in Denmark ... 11

Chapter 3: Conceptual Framework ... 13

3.1. Conceptual Framework ... 13

Chapter 4: Methodology ... 15

4.1. Participants of the study ... 15

4.2. Research Design of the Study ... 16

4.3. Data Analysis Technique and Procedure ... 17

Chapter 5: The Investigation ... 19

5.1. Urban13 ... 19

5.2. Birkemose Golf Club ... 20

5.3. Settlementet ... 21

5.4. Væksthuset ... 23

Chapter 6: Analysis ... 24

6.1. Answering the Research Question ... 24

6.2. How Purpose-Drift was avoided ... 24

6.2.a. Values-Based Complexity ... 24

6.2.b. Participative Management ... 25

6.2.c. Oversight Mechanisms ... 25

6.3. Reliance Versus Non-Reliance on Funding Partners ... 26

Chapter 7: Conclusion ... 28

7.1. Managerial and Academic, & Personal Implications ... 28

7.2. Limitations and Weaknesses of the Study ... 29

7.3. Personal Implications ... 29

References ... 30

Appendices ... 32

Appendix A – Urban 13 ... 32

Appendix B – Birkemose Golf Club ... 42

Appendix C – Settlementet ... 45

Chapter 1: Introduction

One of the increasing and more “profound trends in the social sector in the last 35 years has been its steady rationalization and marketization” (Ebrahim, Battilana, & Mair, 2014, p. 82). Whereas prior to this period there was a full focus on achieving social goals, we have now seen an increasing focus on commercializing activities with an attempt to stay competitive in the market next to being socially viable. The organizations that dabble in the areas of both social development and commercial viability, as well being non-profit oriented, are characterized as social enterprises.

An aim of research in the area of these organizations in recent decades has been the study of ‘mission drift’ as a consequence of focusing more on commercial viability. A natural determinant of the move to commercialization, that is increasingly affecting all donation and funding dependent organizations, are decreasing levels of public funding being available (The Nonprofit Starvation Cycle, 2020). However, rather than investigating the short-sighted mission of social enterprises, what is interesting is the possible extension from mission-studies to purpose-mission-studies (Do Carmo, 2020). More specifically, who are these social

enterprises in terms of their core societal and cultural goals as well as their deeper purpose in society? And furthermore, in times with less public funds up for grabs to organizations relying heavily on them, will changing circumstances alter how synchronized these enterprises are with their deeper purpose?

In the Danish economy, social enterprises have the biggest variation in terms of the sources of funding and income that they receive compared to other types of organizations (Hulgård & Bisballe, 2008). However, these social enterprises predominantly still attain upwards of 70% of funds from public sources, in the form of subsidies. This allows the organizations to act quite exclusively within their social development domain without focusing much on their commercial viability and giving up on the narrow amount of values that they have as social organizations. What would be interesting is the exploration of the effects that different levels of commercial and market activity have on social enterprises in Denmark compared to their reliance on external funding from government- or private entities.

That is what this research will focus on: the subsequent effects of relying more, or less, on external entities for income on avoiding purpose-drift in small, social

examine possible two-directional effects of different income sources in social enterprises. This will be investigated through a focus on, as seen in Figure 1 below, the possible effects of relying on, or not, on external funding partners.

Figure 1. Visual of the potential drift outcomes of different sources of income in social enterprises.

Considering that this investigation is based in organizational behaviour, the value for managers will lie in finding value in how to avoid not the drift away from the short-sighted mission, but rather the drift away from the very essence of who the organization is and what they want to be to their stakeholders, i.e. their purpose.

In terms of the value that this investigation will add to the research field on social enterprises, this will be seen in expanding the reach of the field. More specifically, it will provide a starting point to extending the literature on drift into the broader field of the

principle core values and purposes of social organizations. The journey will let us delve into: what, if any, the characteristics of a balance of reliance on funding partners are that will ensure the best outcome for social enterprises in their present quest to add to the economy, as well as pushing forward a social agenda of inclusivity and social development.

To best explore the topic of purpose-drift in social enterprises, it will be done through the research question: How are social enterprises dealing with income sources, to avoid

purpose-drift? An attack angle via this research question will allow this research endeavour

to explore broader, yet meaningful, differentiations of income sources with an openness to both negative and positive effects of these.

Chapter 2: Literary Review

The purpose of this literary review is to provide an overview of social enterprises, mission-drift, purpose-mission-drift, and lastly a locational history of social organizations in Denmark. This will provide the basis for the conceptual framework, which will act as the backbone of this study.

2.1. Social Enterprises

Social organizations are an interesting phenomenon through their evolution in the last decades. They used to embody the purest definition of social development with their sole reason for existing being their want to change individual cases, or society at large, for the better. More specifically, “nonprofit or charitable [organization’s] primary activties has traditionally been premised on achieving a social mission” (Ebrahim, Battilana & Mair, 2014, p. 82). Slowly, these organizations have in recent developments experienced a changing stakeholder and competitor environment pushing a trend that signified a change towards making use of procedures that are usually affiliated with normal businesses

(Frumkin, 2002). What this meant specifically has been the implementation of practices that include “more attention to market discipline, […] efficiency and reduced cost structures, and (broadly) focusing on the financial bottom line” (Dart, 2004, p. 293), which is all done to a much greater extent than previously. This transformation of the basic characteristics of what social organizations dabble in is what changed the terminology to them being known as social enterprises. In the field, this change of vocabulary has involved new wordings that include ‘hybrid’, which speaks to the duality of social enterprises in terms of their aim to achieve certain social outcomes using market mechanisms. The literature is clear on the matter that such a duality in the objective of these organizations has had the potential to cause tension, but what specifically?

2.2. The Importance of Preventing Mission Drift

The tension between income sources and achieving social outcomes involves the “risk of losing sight of their social missions in their efforts to generate revenue” (Ebrahim, Battilana & Mair, 2014, p. 82), which has been coined as ‘mission drift’. This type of drift has been the core study in the field since the first scholarship on social enterprises with research taking the stance of the main concern being that “involvement with commercial activities produces mission drift” (Jones, 2007, p. 300). This reasoning is premised on there being is a significant “diversion of time, energy and money away from a nonprofit’s mission” (Jones, 2007, p. 300), which signifies a negative outcome.

The issue, broadly, concerns the mixing of interests between public and private interests that intermingle in social enterprises with potential consequences to democracy and citizenship (DeLeon & Denhardt, 2000) and how there is a disconnect between the market-model and the system of democratic accountability. In general, the market embraces the act of “satisfying individual clients’ self-interest” (Eikenberry & Kluver, 2004, p. 132), which is “incompatible with democratic citizenship” (Eikenberry & Kluver, 2004, p. 138) and its focus on a society’s common actions for the well-being of broader public interests. The ultimate consequences of mission drift that have been worrying the minds of practitioners, include the possible loss of “future funding since finance providers” (Chambers, 2014, p. 37) can no longer identify the mission in the day-to-day activities of the organizations. What is further found in the literature regarding negative effects of this type of drift exists in the possibility of internal conflict and damage to “organisational culture by lowering employee morale” (Chambers, 2014, p. 37) as they also no longer can find the connection between supposed mission and daily activities. However, which are the main findings that suggest what causes mission drift in social enterprises, and ultimately the negative outcomes due to the phenomenon?

Research suggests that there are multiple causes that lead to worsened funding partner relationships and internal conflict through mission drift. There are direct links

between organizational alignment, which is “the perceived alignment between organizational action and organizational identity” (Grimes, Williams, & Zhao, 2019, p. 9)

and organizational responsiveness, which is “the perceived alignment between the organization’s actions and its environment” (Grimes, Williams, & Zhao, 2019, p. 10), as being the main source for mission drift in social enterprises. Their research, being published

recently, acts as a literature review of the findings that have been made on the causes of the subject throughout the last three decades. Here it is theorized that these types of

responsiveness and alignment are swayed out of order by forces created by values-based complexity, which makes it increasingly challenging “to interpret organizational reality, [and] what constitutes appropriate behavior” (Thornton & Ocasio, 1999, p. 804). However, what is this values-based complexity?

The complexity occurs when organizations go from, in their initial state, having a focused mission identity and added values to being “confronted by multiple coexisting, dynamic, and often times incompatible, values” (Grimes, Williams, & Zhao, 2019, p. 13) from multiple stakeholders in their environment causing the sway in responsiveness and alignment. Having explored the sources of mission drift from the main literature, what are ways that organizations are dealing with such drift?

An interesting sub-topic of the scholarship on mission drift involves the actions that organizations take in order to readjust and undo their drift. The other side of this coin has been focused around the strategies that enterprises employ that are unsuccessful in undoing the perceived mission drift. The successful strategies include

so-called “mission work” (Grimes, Williams, Zhao, 2019), which are the dynamics that involve impression management and strategic governance, which are “symbolic and material efforts to manage impressions” (Grimes, Williams, Zhao, 2019, p. 7) surrounding the existing mismatch between enterprise mission and their specific actions. These findings are furthered by emphasizing the importance of stakeholder engagement and communication through efforts to “rationalize and reintroduce previously abandoned, socially oriented motivations and beliefs” (Ramus & Vaccaro, 2014, p. 319), which had the effect of steering the

enterprises back to their original missions. Addressing the unsuccessful strategies of ‘mission revamping’, it has been shown that social accounting efforts, which is establishing “a

framework for ongoing monitoring and evaluating of impact as part of the company’s accountability to internal and external stakeholders” (Haski-Leventhal, 2018), as a stand-alone strategy is ineffective in undoing mission drift. However, what was shown by Ramus & Vaccaro (2014) was the importance in social accounting in its role in adding to and

strengthening the “positive effect of stakeholder engagement on the repositioning process” (Ramus & Vaccaro, 2014, p. 320), which shows that the combination of these strategies has provided the strongest framework for dealing with mission drift.

2.2.a. Purpose Drift and its Difference from Mission Drift

In the review of the literature, a clear confusion arises in terms of a lacking differentiation between missions and purposes in social enterprises and organizations at large. So, what is the difference and what value may this differentiation bring if emphasized?

What makes the focus on the drift in purpose, rather than in mission, interesting is based on the inherent difference between the two. The mission of an organization is based on “what business the organization is in [...] both now and in the future” (Kenny, 2014), but the purpose of an organization is a about “why you do something or why something exists” (Cambridge Dictionary, 2020). It seems that the current scholarship on ‘drift’-tendencies are focusing on the factual, at-hand information about the dealings that an organization have. What is missing in the literature, which is what will be addressed in this research, is the inherent drift from the purpose, the heart and soul, of social enterprises as seen in strategy and in the minds of the employees. It will represent a more encompassing perspective on how drift affects the very essence of what these enterprises are focusing on in terms of what they want to do and be in the minds of stakeholders.

To better understand the value that may lie in making a distinction between purpose and mission, we look to previous research done on other organizations that share

characteristics of social enterprises. We see purpose studies showing up in the scholarship on cultural organisations, specifically museums, with a clear argument being made regarding the concepts of vision and mission aiming “to determine what the organisation is pursuing to achieve, and what will be affected by its production” (Do Carmo, 2020, p. 20). In such research, the point being made concerns the problem of current scholarship having to stay focused on the core of organizations in identity studies by focusing on “why does the

organisation exist” (Do Carmo, 2020, p. 26), instead of mission only. The danger of not doing so lies in the mission-focus “[leaving] out the crucial issue of the actors, their will and

strategy” (Zan, 2001 in Do Carmo, 2020, p. 26) as a reality and an important variable within organizations.

2.3. Social Enterprises in Denmark

When considering the geographical location of the study it is important to realize the cultural differences in conducting socio-organizational work. The United States, on one hand, has largely adopted a system of having a social enterprise setting that “prioritizes revenue generation and exploitation of business opportunities” (Ramus & Vaccaro, 2014, p. 308), whereas the European states, through the influence of European Union standards, have bred an environment of social enterprises whose main focus lies in “social value creation and participative management” (Ramus & Vaccaro, 2014, p. 308). What is particularly

interesting is the commonality, among all social enterprises in Denmark, in that they must have an element of democratic participation with all stakeholders having a say in decision-making. The effect of this participative management will be explored, but first, what are the antecedents of the nature of social enterprises in Denmark?

To better understand the reasons for the nature of social enterprising in Denmark we need to understand the sociocultural background of the Danish economy. It has often been noted in Danish media that “the underlying premise behind the employment and social politics in Denmark has long been that it is the productive individual that has socioeconomic value” (Schøning & Post, 2016), which has had a carry-over effect onto to organizational politics. Concretely, the trend that has developed is a view of social enterprises serving a function, yet a relatively unimportant function, in terms of the productive capability of the Danish economy as a whole. It is almost as if the field of social enterprising has been negated to being a class of organizations that is not worth funding in the long run, which has played a key role in both public and private funding decreasing for these enterprises.

However, there have been moments of positive development for the environmental factors for social enterprises as seen in for example the creation of the Public Advisory Board for Social Enterprises. This board had the goal of removing the barriers to success for social enterprises, including a political push towards increasing the potential funding again and advocating for the sociocultural benefits that these enterprises have for the economy. The advisory board was relatively quickly dismissed and the political momentum that was created for social enterprises disappeared in 2016 (Schøning & Post, 2016). What are the effects of this political outlook on social enterprises in Denmark?

The subsidy funds made available to purposes involved in the work of social enterprises has declined in the last decade. More specifically, the subsidy schemes that are being relied on declined in the national budget by 34% in the period from 2010 to 2018 (“Statistikbanken,” 2020). What we see here is a factor that greatly reduces the financial safety of social enterprises, as it has been shown that financial resource changes have an impact on the work that social enterprises focus on.

This research will expand understanding of the results of being forced further into commercial activities in order to survive. What has been found, in terms of the effects of less funding in Denmark, has included the greater focus on the need for market activity to stay afloat and stay a viable option for being a driver for social change and development

(Hulgård & Bisballe, 2008). What was further shown as an effect was the increasing want for independence in social enterprises through desires to be social players in terms of change-making, being able to support one’s own organization financially, and ultimately not wanting to succumb as the result of the non-existing possibility of public and private funding.

Chapter 3: Conceptual Framework

This section will provide a conceptual framework through an integration of findings from previous research, as well as expectations of the author concerning the direction of this study on purpose-drift.

3.1. Conceptual Framework

The study of purpose-drift – as an extension and addition to mission-drift – is relatively nascent in its current form. This study has the objective of adding to the alleyway of research that will drive the study of purpose-drift in the future. With this in mind, the conceptual framework of this study will take the approach of finding possible conceptual links in the literary review and use this body of knowledge as a starting point in the exploration of the research question. So, where do we see potential in the established theory regarding concept creation in the field of purpose-drift in social enterprises?

An interesting finding in the literary review was the conceptual model developed by Grimes, Williams, Zhao (2019) and its focus on values-based complexity being the starting point for perceived mission-drift. This thought of a wide array of values and expectations entering the social enterprise, through a social purpose and the market needs of staying financially viable, may impact purpose-drift by the same mechanisms. It is my belief that similar dynamics in social enterprises will have an effect of the level of purpose-drift, as will be explored in the participants’ cases.

An interesting observation seen in the literature review was the type of focus in the commercial and market activities that lead to purpose-drift. This focus has entirely been in the sole factor of marketization occurring, however, there has been no clear distinction in how the social enterprises obtain an income. This study will make this clear-cut distinction and distinguish between how incomes are obtained in social enterprises. I see this as a route of potentially adding to the scholarship on drift as frameworks can be developed to explore and map the intricacies that exist in social enterprises that have similar characteristics yet are different in their approach to obtaining financial resources.

As seen in the previous findings in the literature review, cultural differences in managing and governing social enterprises exist as exemplified in the United States model and the European model. It is the opinion of this study that a focus on the European model with its historically larger focus on social value creation that observations concerning drift will be less tainted than a focus on the United States model that encourages market

participation, which in turn will be more challenging to record mission drift in as the focus on social value creation is consistently lower. Furthermore, the European model as seen from the Danish social enterprise perspective, is going through fundamental changes and is moving towards having a larger market-based focus. I believe that this model is more valid to look for drift in as there is elemental focus change occurring in the level of priority there is on social purpose compared to the United States model.

The largest common aspect that stands out the most involves the fact that all social enterprises in Denmark must have a degree of participative management in their organization, which draws on the voices of all stakeholders in the social enterprise. It is my opinion and prediction that such a requirement will bring with it a risk of purpose drift with multiple, internal and external, stakeholders affecting the inner workings of these enterprises.

Chapter 4: Methodology

In this section of the study, a comprehensive overview will be given of the methodology that will be put into use. This will include an introduction to the participants of the study, as well as an overview of the research design that provides the backbone of the study in terms of the measures regarding data collection.

4.1. Participants of the study

My research will be revolving around an exploratory and descriptive case study of three different social enterprises based in Denmark, including Urban13, Birkemose Golf Club,

Settlementet, and Væksthuset. The enterprises share common characteristics in that they

have all been evaluated and accepted by the Danish Committee for Social Enterprises through the common criteria that were required. These criteria, include (1) having a social purpose, (2) engaging in some level of active commercialization, (3) having an extent of strategic and economic independence from public institutions, (4) involving stakeholders in part of the decision-making process, and finally (5) reinvesting a significant amount of profits back into the enterprise. The interviews will consist of singular instances within each organization with individuals in management positions who have integral roles with deeper knowledge of the enterprises they work in.

1. Urban13, founded in 2017 based in Copenhagen, have designated themselves as being a ‘city laboratory’ with the intention of turning one of the most socially criticized areas of Copenhagen, Bispeengen, into a cultural hub of creativity and community. This is achieved through encouraging active participation of all local citizens in changing the area through events and entrepreneurship. Urban13 is categorized as not relaying on funding partners due to their sole interaction with market mechanisms. I argue that this categorization being justified as Urban13 bases their survival solely on the income they can generate through their market presence. The enterprise plans and hosts events, as well as sell merchandise and foods, to generate their income.

2. Birkemose Golf Club (BGC), located on the Western mainland of Denmark in Kolding. The golf club was designated as a social enterprise by the Danish state based on its heavy social work under the guidance of the UN development goals.

Characteristically, and as the only known instance in Europe, BGC uses

volunteers to drive local and social participation of fringe citizens through junior, and general, club work in order to create a more inclusive local society in

Kolding, which serves as the main base of social work that they perform. In this study, Birkemose Golf Club has been categorized as not relying on funding partners due to their interaction with market mechanisms. More specifically, I justify this categorization as this social enterprise generates its revenues through membership of club members to drive its financial survival.

3. Settlementet, located in the famous Meatpacking district of Copenhagen. Noted as one of the oldest social enterprises in Denmark, Settlementet was birthed by newcomers settling in the area who had capital and social resources to revamp the area which at the time was dominated by heavy poverty and social decline. Today the social work is still being performed with the scope of driving community interests through the many facets of the social enterprise, including their stores, wood shops, and legal help to local citizens to name a few. In this study, Settlementet has been categorized as relying on funding partners due to their reliance on government support and private investment in order to survive financially.

4. Væksthuset that is based in multiple locations around Denmark. This social enterprise has provided job training and engaging job practice to fringe and socially exposed citizens for decades. Known for their specialized and tailored approach to each individual case, Væksthuset has played a key role in the practical application of key research in the area of job activation. Recently, Væksthuset created their own centre for unemployment research, which has catapulted them to the forefront of practice meeting theoretical research on unemployment. In this study, Settlementet has been categorized as relying on funding partners due to their reliance on government support and private investment to survive

financially.

4.2. Research Design of the Study

It will be exploratory and descriptive in that it will be investigating changing financial situations applied in Danish social enterprises to explore the effect on purpose-drift. The study will also be case-study based through its focus on four social enterprises, which is a

decision made with regards to this investigation being a starting point for research in the field of purpose-drift. More specifically, the small number of participants allows for a detailed initial look into the inner workings of the relationship between purpose and how financial resources are obtained.

In terms of data collection methods, it will be based on interviews with employees within the organizations, whom have active strategic and operational roles, involving their views on their purpose, their stakeholders, their organization’s current position in terms of funding, and finally mechanisms that they employ to deal with purpose. Financial records on the given organizations is not readily obtained, so an approach of the categorization of the level of funding partner reliance has been done arbitrarily by researching how they obtain financial resources.

4.3. Data Analysis Technique and Procedure

The analysis procedure that has been chosen for this study is based on the suggestions made by O’Connor & Gibson (2003) regarding the methods that can be made use of to analyse qualitative data. The overall framework that these authors suggest when it comes to analysis, include the following steps: (1) organizing the data, (2) finding and organizing ideas and concepts, and (3) building overarching themes from the data.

The first step involving organizing of the data will be done by making tabular overviews containing themes based on the interview questions and what the interviews mentioned in terms of the different themes. This will be visually seen with themes being seen on one axis and the specific interviews, and the content of these interviews, on the other axis. What this will achieve is providing a complete overview of data, so that further

categorization can be made and to look closer at possible overarching themes.

The next step, according to O’Connor & Gibson (2003) involves finding broader themes within the tabled data. This process will encompass broadly identifying further themes, within the table that was created prior based on question type, followed by coding of the different themes, talking points, and specific quotes from this same table. What will then

be performed is cross-coding, which will involve coding across question types in the table. This will naturally lead to allowing for identification of larger themes in step three.

In the final step of the data analysis, central themes will be identified from the coded and categorized data as “each of the response categories has one or more associated themes that give a deeper meaning to the data” (O’Connor & Gibson, 2003), which will lead to including several categories of smaller themes under the umbrella of main themes that will be identified in this step. The themes that will have been found through this data analysis

Chapter 5: The Investigation

This section of the study will lay out the results of the investigation of Urban13, Birkemose Golf Club, Settlementet, and Væksthuset. The results are based on the data that were found during the interviews. The following results have been organized according to the themes that were explored in the interviews (interview transcripts can be found in Appendix A, B, C,

and D) to understand who the enterprises are and their relationships with their purpose, their

financial situations, their stakeholders, and mechanisms to evaluate themselves. These fields were explored to investigate the possible purpose-drift that exists and the role of potential funding partner reliance.

5.1. Urban13

In terms of who this social enterprise is, the interview with Urban13 shed light on them being an organization created in order to better social and entrepreneurial life in the debated

Bispeengen area in Copenhagen. This was done through an offer put up by the Copenhagen Municipality to social entrepreneurs for them win a contract to take over the 4000 square meter Bispeengen area and develop it with their social goal in mind. The purpose that was bred from the visions of the founders (one of whom was interviewed) was seen in:

“…but the aspects of inclusivity will be kept in our project. So that kind of lies in the

DNA of Urban13 that there needs to be space and a spot for everyone from society.”

(Appendix A)

This insistence on inclusivity, as seen in their purpose, is what ran through the whole

interview with Urban13 and in all the activities and events that are put under the name of the enterprise, as well as in the office spaces they have created at Bispeengen.

When discussing the finances and the income streams of the social enterprise, a historical pattern developed – one of having started with funding partners in order build basic facilities at the location, but later having developed to stand on their own two feet financially, which was the catalyst to not relying on funding partners. More specifically, Urban13 started with the financial help of funding partners as the founders themselves had no capital and the estate offer from the municipality did not include any tie to the public sphere financially. The trend of having become a fully commercialized entity had brought financial struggles of

ensuring the survival of Urban13 through a heavier focus on money-making activities. Specifically, a focus that would “hardcore earn our money for everything” (Appendix A), which brought a mentality from the board down to individual employees that a higher income was necessary to stay alive after the move to become fully independent from funding

partners. This was seen concretely in the decision to employ more resources to night club activities, which were a certain money-maker, but such choices came with the effects of the “financial side is definitely taking over more with the development of the outdoors and the art

[scene]” (Appendix A) at Urban13.

When it came to the major stakeholders of Urban13, and the effects that these had, it was clear that their now financial independence from the municipality and funding partners were giving them strategic freedom. More specifically, this was seen in their free reign in deciding on projects to include within their organization, but also leading to a stronger

relationship with another important stakeholder: the citizens and social actor in the local area. The organization quickly built relationships with local social actors who helped “in unlocking

its potential in people coming here and helping out with developing this area” (Appendix A),

which grounded Urban13 in their purpose with local actors having the same purpose of creating inclusivity in the local area.

Lastly, in terms of the mechanisms to stay on track of the purpose, Urban13 employed a board to stay on top of things strategically and what needed to be done to maintain the business. The interview revealed that this function did indeed have a balancing effect of staying vigilant in the social aspect, but also provided a forum to “have good discussion

about how stuff is planned and what the purpose of everything is” (Appendix A).

5.2. Birkemose Golf Club

The specifics of who Birkemose Golf Club (BGC) is lies in their transformation from being a “very ordinary golf club with 10 employees” (Appendix B) to a social enterprise with more than 100 volunteers backing their purpose. The drive to become a social enterprise player in the Danish market came from the club’s fascination with the UN Global Goals, specifically the ones concerning employment standards worldwide. This has led to the deeper purpose of

affecting the Danish market for accessible employment and “being a place where we

could take social responsibility and take in people that struggle in their everyday life”

(Appendix B) in order to eliminate unemployment in the local area of Kolding. This is further seen in their pride in being a part of “golf as a closed sport that all of a sudden takes social responsibility” (Appendix B) and using that to better the community.

With regard to the finances and income streams of BGC, we again see not relying on funding partners in that the “income comes from the memberships, guest players, and also the businesses that we cooperate with, which is also a sort of membership” (Appendix B), which had created a self-perpetuating system in the golf club’s community. This is highly related to the major stakeholders of BGC who according to the interviewee had “ended up being extremely proud of the project and being affiliated with it” (Appendix B), which was

connected to the participative management that this bred. This became clear on the subject of the general attitude being that:

“the art doesn’t lie in starting the process, but it lies in solving these problems together as a community.” (Appendix B)

This sense of solving the social problem of unemployment in the local area had become an issue that the members and management were fighting together with inputs on strategy from both sides.

In the matter of mechanisms that BGC employed to evaluate their relationship with the purpose a board was created to be “involved with looking at all the global goals and see what we can do in terms of adding it to the purpose of helping people back into work” (Appendix B), which is seen being combined with the participative management with members of the club. Together these two mechanisms serve as the framework for staying on path with the deeper purpose of the golf club.

5.3. Settlementet

In the matter of who Settlementet is in the work that they do and the purpose they embody and live by, we see a similarity to BGC in their focus on the employment situation in

Denmark, but Settlementet stands out in their persistence in helping out citizens on the outermost fringes of social life. Notably it was revealed that this effort has been part of Settlementet for more than a century in their work whether it is in their wood shop business, their socioeconomic stores providing internships, their volunteer programme, or through their legal advisory. Through these offerings, Settlementet connects these with its purpose:

“giving people a sense of self-determination, as well as creating social bridges between social life, so that exposed people mix and interact […] with communities that have strong

resources” (Appendix C)

About the finances and income streams of Settlement, this enterprise represents the first entity that was categorized as relying on funding partners. This is confirmed in the interview with connections to several sources of income, including their stores, funding partners, as well as subsidy schemes from both the Municipality of Copenhagen and the Danish State.

The amount of income streams that Settlementet has also reflected the importance of these funders as stakeholders in the enterprise as they indeed play an important role in

ensuring the continued success of Settlementet. This also meant that they have a larger role in determining the direction Settlementet go in, but that it was found important that “we always know what we are at the core and what we want to achieve” (Appendix C), which showed the ability of funding partners in changing strategic direction, but with no effect on the focus on the deeper purpose. The comment, “we are an organization that have extremely few

resources to do something that deviates because everything is planned for specific actions” (Appendix C), also shows the inability to deviate from a purpose due to the designated purposes of the resources.

The mechanisms that Settlementet employs to keep on track of their purpose and strategic direction is also highly related to the funding partner relationships. This is mostly seen in the fact that they “have to remain accountable to the money [they] receive and in that there are always some mechanisms in terms of evaluation” (Appendix C), which shows the checks and balances that exist in these relationships. The board of Settlementet was also said

to provide a platform for evaluating where things were headed in the everyday running of the enterprise.

5.4. Væksthuset

Finally, we have Væksthuset whose identity is also based around the work they perform regarding work integration and unemployment in Denmark. They differ however, on the fact that they focus mainly on job training, skills attaining, and psychological health when it comes to employment of socially exposed individuals. This directly relates to the purpose of

Væksthuset, which lies in specializing in providing social help and making sure that citizens

get the right education and skills that they need, as well as supporting the research effort in the field of work integration.

The financial aspect of the social enterprise represents the second organization that relies on funding partners in that their only income stream is supplied externally. This is interrelated with the fact that Væksthuset relies solely on the job centres in the greater Copenhagen area for not only an income, but also the actual work that they perform, as the job centres provide individuals for Væksthuset to work with. Characteristically, the public service of the job centres have no obligation to uphold a relationship with the social

enterprise as a training provider, and so contractually speaking, Væksthuset can end up not receiving funds from the day that the job centres decide to quit their partnership. As was noted in the interview this was understood to be a very vulnerable system to be a part of. However, in terms of the effects that the stronghanded position of this stakeholder has on the enterprise it is seen as strengthening the purpose of Væksthuset. This is seen in the standard that the social enterprise must maintain to keep fulfilling the wishes of the job centres so that they will keep receiving clients. According to the interviewee, the job centres set the direction of the agenda in that the specific needs of “target groups change a lot” (Appendix D) but has no effect on purpose-focus.

This is strengthened by the board and management team of Væksthuset who regularly keeps an eye on the purpose statues of their business. This maintain the focus of the

enterprise and it was noted that they discuss “things like how do we meet that purpose today” (Appendix D), which signals a constant effort to stay on track of the purpose.

Chapter 6: Analysis

In this analysis chapter, the research question will be answered, as well as describing how the findings found in the results section relate to the research question with a connection to previous literature. Other interesting findings will also be discussed. For visual representation of the findings, an adapted visual from section 3.2 will be presented including the actual evidence from this study.

6.1. Answering the Research Question

The research question of this study was: How are social enterprises dealing with income

sources, to avoid purpose-drift? What was found in the results showed that the

differentiations between the social enterprises, in terms of income sources, led to no difference in their purpose-drift. In fact, no purpose drift was found in any of the four

organizations that were part of this case-study. What then becomes interesting, in relating to this research question, are the mechanisms that were present in the social enterprises that are put into use to avoid purpose-drift, but also how the differences in income sources relate to how they avoid purpose-drift.

What is focused on here are the mechanisms that were discussed in the conceptual framework, which relate to what has been found in previous literature. These phenomena were integral to previous studies on social enterprises, and thus were intriguing to explore in relation in purpose-drift: participative management, values-based complexity, and the role of how financial resources are obtained. These concepts are the fundamental reasonings behind why no purpose-drift was found as they help the enterprises stay on track with their purpose.

6.2. How Purpose Drift was Avoided

6.2.a. Values-Based Complexity

A concept that played a major role in the findings from previous literature on mission-drift was the occurrence of values-based complexity. This specifically spoke to the plethora of opinions and input that come to social enterprises as they involve a larger number of different stakeholders, but also the effect such values-based complexity has on causing mission-drift. The results of this study suggest that this phenomenon indeed is present in all the social enterprises that were investigated, but that it does not lead to drift in the deeper purpose of

these. What came across in all the enterprises were their ability to stay ahead of the potential purpose-drift, but what mechanisms were made use of to enable this trend?

6.2.b. Participative Management

The concept of participative management was explored in the literature review and was shown to have a large impact on how social enterprises dealt with mission-drift that was occurring. This study found evidence suggesting that the social enterprises that did not rely

on external funding partners use the concept of participative management to deal with

questions of purpose. This was done through cooperation with stakeholders, mainly

individuals and groups that actively use the services of the enterprises, through using them to develop work that the enterprise is doing and have a constant dialogue regarding the direction that the enterprises are going in.

What is interesting, however, is the fact that no actual purpose-drift was found in any of the enterprises. This shows that there may evidence that participative management can be used proactively to deal with potential purpose-drift, rather than sim using it when the damage has been done. The previous literature showed that the concept is used to correct for drift, whereas these results point to the concept playing a preemptive role in keeping the enterprises on track with their deeper purpose.

The connection that is made in this study reflects on participative management having a relationship with the values-based complexity that occurred. The results of the interviews suggested that the participative management often acted as a protective layer to the negative effects of values-based complexity. This was seen especially in Urban13 and Birkemose Golf Club with both enterprises making heavy use of engaging their immediate users and members with perpetuating their purpose, which also had the effect of the enterprises not steering away from this purpose.

6.2.c. Oversight Mechanisms

Two oversight mechanisms were observed in the results of the interviews with the first one being the natural evaluation mechanisms that came with being funded. This oversight

mechanism was only observed in Settlementet and Væksthuset who were also the only

enterprises that relied on external funding partners. The evaluation mechanism that was found in both involved the oversight that came naturally with getting the funding. This meant that they would consistently have to report back to the funding partners regarding how the funding capital was being budgeted and subsequently used. This created an environment where purpose was discussed continuously in the management teams, which led to not

straying away from the overarching purpose of the enterprises. This mechanism thus acts as a preemptive mechanism to avoid purpose-drift.

The second oversight mechanism that became prevalent through the interviews was the use of management boards and executive boards. This measure was the only mechanism that was used in all the social enterprises and had an oversight effect that was very similar to the evaluation mechanism required by funding partners. However, the board mechanism occurred internally in the enterprises and served more as a platform that allowed for continuous discussion around the large strategic questions, as well as purpose questions, in the enterprises. Again, this mechanism had a preemptive effect, which proved to keep all enterprises on top of their purpose and thus preventing purpose-drift over time.

6.3. Reliance Versus Non-Reliance on Funding Partners

A central goal of this study was to investigate the effects of differentiating between social enterprises based on how they obtain an income to run their businesses. Overall, the results suggest that no difference exist between the enterprises based on whether they rely, or not, on external funding partners for financial resources when it comes to purpose-drift. Although facing different situations and different stakeholders, the enterprises were shown to manage possible drift through values-based complexity by having oversight mechanisms in place.

The evidence on the differences that existed between the two income-source

categorizations suggest that different approaches to avoid purpose-drift are required based on what relationship you have with funding partners. The enterprises that relied on external funding partners seemed to naturally lean towards accounting for their purpose-direction due

to the oversight mechanisms imposed by the funding partners. However, the enterprises that did not rely on external funding partners seemed to engage voluntarily with immediate stakeholders, which bred an environment where the common purpose would stay intact throughout the functioning of the enterprise.

What these results tell us is that pre-emptive methods are available to avoid purpose-drift in social enterprises. This confirms the findings from previous literature on mission-purpose-drift and extends these findings to purpose-drift studies.

Chapter 7: Conclusion

The analysis showed us that the threat of purpose-drift is not occurring in any of the investigated social enterprises in Denmark. Although no purpose-drift was observed, it is interesting to note the environmental the strategies and mechanisms put into place by the enterprises to fully avoid trends towards losing sight of purpose. What then, based on these findings and the study in general, were limitations and implications for managers and academics in the field of social enterprises?

7.1. Managerial and Academic, & Personal Implications

This study set out to break ground on purpose-studies in the field of social enterprises as a natural extension of mission-drift studies in the same, as well as other fields. The intention was to add not only to the academic development, but also to everyday practice standards for managers who work in and around social enterprises.

For managers and professionals in social enterprises, this study has emphasized practices and mechanisms surrounding the accountability in obtaining and using financial resources in order to avoid purpose-drift. What was highlighted specifically was the effectiveness that Danish social enterprises had in employing accountability and oversight tools with the effect of controlling the possible negative effect of values-based complexity that arises naturally with a heavy stakeholder presence. These results may lend themselves handy in the development of practices in how to prepare for possible purpose-drift in all social enterprises alike.

For the academic scene surrounding social enterprises, what this study shows is the importance of including purpose questions in the already developed literature on drift-trends. What was uncovered in this study went far beyond the daily missions of social enterprises and ventured into the true DNA, identity, and purpose of the enterprises and the

considerations they make about staying on course with who they truly are and want to be to their stakeholders. What was highlighted was also the importance of continued study into the understanding of the power of accountability practices and mechanisms in its potential to both prevent and minimize purpose-drift. What was highlighted was also the importance of

further research into the understanding of the power of accountability practices and mechanisms in its potential to both prevent and minimize purpose-drift. Such study will further framework-building for best-practices in social enterprises.

7.2. Limitations and Weaknesses of the Study

With regards to the limitations and weaknesses of this study, the main ones regard the inability to perform deeper investigations of the staff at the participating social enterprise. The intention was to explore the organizations with interviews with multiple employees at different organizational levels. It was however only possible to interview one management employee from each enterprise, which did indeed give a good perspective as they were knowledgeable, but it was a limiting factor in terms of overall validity. This situation arose through the COVID-19 pandemic with all four enterprises only being able to participate in limited capacity as other objectives were their main priority.

Another limitation of this study is regarding the interview process with the participants. Inexperience in the field of research welcomed problems in terms of what questions to ask, how to lead the interview process, and how to naturally follow up answers to achieve an optimal environment for the respondents. After the first interview where the process issues were discovered, I decided to stick with the same interview questions to achieve external validity. Thus, issues were indeed present in the interviews, but consistency in the questioning was achieved.

7.3. Personal Implications

On a more personal note, what this study of social enterprises in Denmark has shown me are the intricacies of organizational behavior that are involved in the day-to-day functioning of these entities. I have been faced with a steep learning curve with regards to extending my interest in business administration to organizations that have a specific social purpose in mind – a purpose that is largely different from the profit-oriented businesses that I am usually introduced to. Through this investigation, I have definitely expanded my understanding of the inner workings of social enterprises and the relationships these have with the purposes that drive them.

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Appendices

Appendix A – Urban 13

Transcript of Interview with Urban 13 (Translated from Danish to English)

Q: Hi Alexander, can you hear me? There should be an unmute button in the bottom left

A: Can you hear me?

Q: Yes, I can hear you.

A: Well we made it!

Q: How does it look for you guys right now with the Corona and so on?

A: Uh, we’ve been sent home and have been lucky enough to receive wage compensation, so everything is kind of at a standstill at the moment, but that’s just how it is at the moment for the time being.

Q: Nice that the wage compensation is there though

A: Yeah yeah exactly, we’ll all be fine with that being the case. What about you?

Q: Yeah all good here! Just want to ask if it’s okay that I record just so I can analyze it later. You guys will of course be kept anonymous under the study.

A: Yeah that’s completely fine

Q: To start I'd like to give an introduction to who I am and what this study is about. As I said I’m Victor and I study Business Administration at the University of Amsterdam and I am currently majoring in entrepreneurship, creativity, and innovation.

So, the study that I am conducting involves the further development of administration and governance frameworks surrounding organisations, like your own, which I have classified as WISEs

More specifically, I am doing it through the lens of what your purpose is and what your missions are.

And lastly, I am doing this study because I am really interested in the development that we have experienced in socioeconomic organisations like your own. And through the previous research that I have exposed myself to it has been found just how big and positive impact organisations like yours have on social development and the economy. But I have also

realized that a lot of dynamics in social enterprises aren’t understood that well, and I think that there is plenty to continue researching.

A: Yeah definitely

Q: So here to begin with it would be awesome if you could give an overview into who you are and what you do in your daily work

A: Yeah definitely. I think the easiest would be to talk about how it all started. We are a weird example, as we started the project in 2017 where we had the opportunity to win a project from the Municipality of Copenhagen and Frederiksberg and the area that is located under Bispeengen. And before this we had created a festival called Carpark Festival that kind of opened for the first time in 2014, or like now its cancelled but next year it’ll run again, with underground music and voluntariness and talent incubation spot. The festival has always been those things to us and the people that have been involved. Uh and so we have been working in the local area where the Bispeengen is and the municipalities then make the offer for private entities to take the area and make a project out of it. There has been a lot of work up until this point where the municipalities have been trying to figure out what to do with the Bispeengen area since it has always been a shitty place that has mainly been known for vandalism and the sale of hash in an illegal manner, but also as a place that has been unclean and a lot of people have wished for it to be shut down completely and it has been a major political debate as well about what should happen. Should it be green, and urban place, or a place where cars can go to get to the city faster. So, there are a lot of interesting details regarding this place. Other than that, Bispeengen is between Frederiksberg, being a nicer area, and Lundtoftegade that is a ghetto. So there is also the interesting contrast between these two city areas and the border between these two places lie in our area. The 4000 sqm we have are equally split between these two areas. In 2017, the municipalities came with the offer for someone to renovate it through a project and where they had found out that to renew this area it is needed to make a project where the centre point is about the different cultures that can be found in this culturally sprawling area. So, in essence, they were looking for a multi project that invites a lot of different people.

What happened simultaneously was that on Refshaleøen, Papirøen was closing which was the essence of street food in Copenhagen. When that happened, the municipalities decided to take some of that concept and wanted to bring it to Bispeengen. So they made an offer to someone already, but this participant jumped ship in the last minute, and then me and my friends made an offer to the municipalities to bring these activities, that they wanted, to the area of

Bispeengen. The only problem was that we didn’t have any background is such a project. I came from a background of just having finished my Master in immigration studies at

Copenhagen University. And the others weren’t architects either or anything so we knew how to make a festival and how you run a bar and we also knew how to navigate the political landscape when it comes to getting a conversation started with funding partners, so on that point we were quite far ahead.

We were three guys who did it, but then we end up winning the offer from the municipality at the end of 2017 and then we are there with 4000 sqm to do stuff with but without any money to do anything with it. We then make allies in a few funding partners, including Aldania, Frederiksbergfonden, and another one to a smaller extent. Then we started building a network of architects and so on and it was a long process getting from there to where we are now.

The thought about Urban13 was that we were going to not peak at the moment, but we went through an experimental phase after construction was complete to test out the different activities like events and so on, but then the corona crisis hit and we have cancelled a lot of things.

Q: Sounds like really bad timing

A: But that’s just how it is though, but essentially then the project was about putting a character and personality to an area that hadn’t been known for it before and including the different citizens, that had been there before and ones that hadn’t been there before, and then changing people’s perception of an area that has been known as a really shitty area or at least was known as it, but also has a lot of amazing attributes in that it embraces people from all around the city from all demographics and belief systems. So next to the shitty aspect then there is also a lot of room for people from all kinds of backgrounds and allow them to just be. And of course some of these previous aspects like drug dealing and stuff will be abolished when we continue operating, but the aspects of inclusivity will be kept in our project. So that kind of lies in the DNA of Urban13 that there needs to be space and a spot for everyone from society. Apart from that then we made this project that needed to contain all of these good aspects. So, these include 3 key words that we live by, which are community (so about creating community in a spot that haven’t been amazing beforehand for the broader society, so we want people to come down and be a part of the area and be a part of developing things

together through the facilities e build in the area). Also, it needs to be a laboratory where there also is space for new ideas. It is isn’t us that needs to come with all the ideas. We want to facilitate the space for things happening, but we don’t need to be the ones that come up with all the good ideas. This will breed a community with all kinds of different projects being bred from our space that will be running. Also, we work with social innovation which is the third key word for us (this being a social purpose with the whole enterprise that we are running). This is also seen in that we are reinvesting our potential profits into the projects OR we are reinvesting it into the local area in different projects there. This really fits with that we have always wanted to create and breed great energy in the social life in this area, but also based on a principle that we want this project to become a general boost to the social life around here and in general push a more inclusive agenda. So that kind of summarizes who we re and how we came to be.

Apart from that, from a materialistic perspective, hardcore facts, then we have built a sound venue, a public space for public events, and then we have 229 sqm of a 5 meter high building with sound and light production, kitchen, backstage, and bar, and this is kind of the heart of the events and activities, so we have both movie showings, in a movie club that shows movies on a big screen and we have concerts for underground music artist and we have common eating events and theatre as well. Different party events and it’s kind of there where we have to hardcore earn our money for everything and that something that is insanely important for our survival and its something that is easy to forget when we have the higher social goal, but if we don’t have the money then we wont survive and then there wont be all

the events and stuff. So, in that sense we are definitely also a business and that is something

that we are still learning by doing. So, we have the sound venue, but also an office

community where multiple people are sitting, such as city consultants and architects and we also have someone who is doing their PhD and we have a music manager and different things. The thought is that it is supposed to be a cultural hot spot, but also for people that have different approaches to developing the city of Copenhagen through their work. And we can kind of sit down there and learn from each other. We are also in the middle of building a street court together with different social project managers in the area where the project has kind of been about wanting to criticize the way the municipality of Copenhagen is building outdoor sports facilities where you most often come with some money and talk to an architect or entrepreneur that have standard way of doing things. Then these useless outdoor facilities are built where the football field is together with the basketball court and there are a lot more

insane examples of this. So, then we made a project with some project managers in the local life and want to make a user developed outdoor street mecca. So, they have developed a football field and a basketball court and then they will also create a club house where they can hang out and develop more projects like this and be a hub for people to come by. What also makes them nice to chill with is that they are super cool projects they work on but they are also inhabiting a role in society, in my opinion, where they connect children and youths that are going though rough lives in their daily lives and who aren’t part of the classic Danish sports community where there is a lot safety usually. If you don’t have the support from home then there are a lot of youths that get forgotten on the street, so multiple sports projects have created stuff like Panna House around the world that runs offline but also online where different participants can show off their skills. So, what we are trying to do is facilitate the process of these people crating their own outdoor project with different facilities, so that is great. This should have opened next week, but then of course COVID came.

Another project is coming called Buen og Engen, which is an art project for children and youth which is also about picking up youths that aren’t naturally exposed to art. Now I’m not the biggest art fan, like I think art can be beautiful and other stuff, but these guys are going to come down and are on the same page as we are in terms of developing inclusivity in the local area. What we are also trying to do is connecting the art scene and the sports scene together. And we are trying to bring resourceful funding partners to the table, which we already did, in order to really bring the possibilities to create these societal developments. So we have that, and then we are about to develop with more containers for offices, but right now we are still in a development face and we are still building more things and trying to figure out how

many resources we have left. VAT is a funny thing and it’s affecting this process, especially

when making a project like ours. It should be a lot easier, but it’s really not. So right now are trying to figure out that financial part, but after that there will be clear development, also for the people that will be coming here.

Anyway, that’s the heart of our organization, but the entrepreneurial and more financial side

is definitely taking over more with the development of the outdoors and the art and the social purpose in all of us. But yeah that is generally who we are.

Q: Yeah listening to you I can also hear that I is the purpose that has the biggest priority and that this is the what is behind the partnerships that you have formed