The Hybrid Organization: A mutation or a harbinger of New-age Dharmic Firms

Credit – Stanford Social Innovation Review

The Rise of the Hybrids

Introduction

The RISE of HYBRIDS

Traditionally, most organizations, if not all, were classified across two buckets –

The first class or type of firms were ‘for-profit organizations’ that embellished the values of market capitalism, and steeped in Friedmannian ethos and ideology, existed and still exist – to maximize wealth for their shareholders.

The second class of firms constitute both ‘non-profit firms’ or public organizations, that create public benefits or further a social cause such as hospitals, universities, charities et al as well as ‘not-for-profit’ organizations including NGOs that work with social issues and challenges.

This divide between the two classes, and endorsed by taxation laws, has been sometimes questioned by the first type of firms – for many ‘for-profit organizations’ would donate lavishly to charities, to communities and to social causes, and often regardless of tax benefits that possibly accrue. However most shareholders, analysts, and boards were united in their stance – ‘create and maximize wealth’.

Interestingly, in my consulting with non-profits and NGOs, many NGO founders would see benefits in the ‘corporatization’ of the NGO – in terms of structures, processes, performance management, and role-taking, but the identity and primacy of the commitment to public service or social causes is seen as sacrosanct, and very often the same attempts at corporatization would be pushed away the moment it counters the beneficiaries or the mission of the firm.

However, in the last two decades or so, there is a new type of organization emerging – and for lack of better words – these organizations are labelled as ‘Hybrids’. Hybrids seem to want to blur this grand divide, and combine the purpose, salient forms, activities, organizing et al. Hybrids ambitiously ‘seek’ to serve a social cause, create social value, and yet generate wealth and profits for their investors.

Criticism

The Near Impossibility of ‘co-holding the dualities’ in the Identity of the Firm

Hybrids have been pooh-poohed from both the erstwhile classes – nonprofits and for-profits, as well as questioned by many researchers and academicians. The latter are exploring the typology of the Hybrid – through its form, its design, its management principles, the mix of entrepreneurship and social entrepreneurship, its dilemmas, its dualities, and its identity. Some of the critique levelled against the Hybrid includes:

  1. There is enough skepticism around ‘co-holding’ of, and the perseverance required to do, of the seemingly bipolar goals – of making profits and serving a social cause. Skeptics often point to the phenomenon of ‘mission drift’, where – consciously or unconsciously, the firm abdicates its resolve to persevere with its mission, of creating social value, when engaging with stresses of making money and survival.
  2. Secondly, there are others who accuse this new category of firms with ‘impact washing’ – when a firm makes impact-focused claims in bad faith, without truly having any demonstrable positive social or environmental impact, in its need for infusion of more capital, or building a brand. Impact washing has its own hues for Hybrids as opposed to it and allied green washing for non-profits.  
  3. Thirdly, there are many who question this new type of the firm and believe that unless the hybrid is designed and structured differently, where processes, targets, roles are aligned to its purpose, most hybrids ‘regress’ into the first or the second category over time.
  4. Lastly, and as recently pointed out by Julie Battilana in her linked-in article, an academician of repute and who has been researching on hybrids at Harvard for almost two decades, the ecology of stakeholders including funds, investors, government bodies that set standards etc. needs to shift considerably for the hybrids to flourish.

There are other questions raised against the rise of the Hybrids, but I have chosen to offer the four most prominent and key challenges.

Hope

Are Hybrids the harbingers for the new-age organisation?

We seem to be witnessing the rise of this new form – the Hybrid – the type is quite nascent, imbued with romanticism, stressed with pragmatism, and evolving before us. Organization theory around design of hybrids, its forms, its models of value generation, its goal setting and its organizing is still evolving.

However the context today creates hope for the new form, because of:

  1. The Covid pandemic seems to have triggered a support for this new form when I speak of Hybrids in my circles. The pandemic has raised doubt, outrage and even anger to the Friedman’s slant. For example, the combined market value of FAANG (Facebook, Amazon, Apple, Netflix, and Google or Alphabet) exceeds US$ 6.1 trillion. If you were to add Microsoft’s market cap of US $ 1.8 trillion, the six firms individually and collectively are wealthier and perhaps more powerful than most countries in the world. In 2020 and despite the pandemic, the big six have clocked huge increases in their toplines and gross margins, while their customers have suffered deaths, illnesses, unemployment and other ills immensely.
  2. A friend was just stating a strand of gossip – Bill Gates has made more money in the last 20 months from the pandemic than what he loses while paying out to Melinda in his divorce. I see this gossip as a sign of huge dissatisfaction amongst many as they view the burgeoning profits of many firms amidst social turmoil and environmental destruction.
  3. CNN has been carrying reportage on how 10 firms account for 50% plus plastic pollution today – all these firms are immensely profitable – and yet have failed us as citizens of this planet.
  4. The pandemic has also witnessed the mobilization of millions of volunteers using technology – from WhatsApp networks, to google slack, and being able to generate value – from import of ventilators, distribution of oxygen cylinders, real-time updates on availability of beds and infrastructure for the rich and poor alike…  some of these efforts are giving rise to ventures that have embraced the underlying axioms of the Hybrid, recognizing the need to create wealth, as well as serve stakeholders. Nursing services, palliative care, manufacturing of oxygen, and medical testing are areas that see the potential of palliative care.

Many of these efficient and value-adding ‘networks’ – both permanent and temporary were not bridled with the design and structure of the two typologies;  traditional organizing and management theory have played a marginal role in how networks of trust and faith managed processes of control, quality of information, and efficiency.

However for these initiatives to be sustainable – we go back to the essential question – how does the Hybrid succeed in delivering social and economic value simultaneously. While there is ongoing research on several facets and dimensions, I would like to draw your attention to something that is often not worked with – and that is the paradigm of ‘Dharma’.

What lies ahead …

The Hybrid and the scaffolding of ‘Dharma

Nearly sixty years ago, and in a 1962 publication – Capitalism and Freedom, Milton Friedman had stated his ideological stance that free markets are key to liberal societies and that free markets would help nations and individuals in the long run. He firmly opposed governments and government bodies interventions, and was extremely prejudiced against welfare dependency, criticizing the role of the US government to social welfare programs during the depression. This came from his own personal experience of having seen the tragic consequences of the depression. Friedman then created the magic mantra that “all organizations should focus on maximizing wealth for their shareholders.”     

Today, this dream of laissez faire capitalism has only shown its limitations, and its impact on human society as well as the environment we live in.  While many Indian businesses and many politicians wish to mimic the western principles of capitalism – there is an openness to look at the new typology.

I would like to argue that the hybrid, without sacrificing some of the core principles of entrepreneurism, opportunity sensing, innovation, and scaled impact, is the new form of organization that is aligned to creating and delivering social value. It becomes important then to re-write and re-calibrate many of the systems and institutions that created the first type of firms.

For this transformation to happen, I believe that hybrids need to be seen and reinforced, to be evangelized and even branded through a lens or an ideology that is perhaps not as fashionable any more – and it is the lens of Dharma and Dharmic existence.

Some of my readers are not familiar with this word – and often the westerner reduces the notion of Dharma to ‘law’ or ‘order’ or ‘duty’ or ‘morality’ …  Most Indians would define Dharma as the ‘rightful way of being and of living’ and which is aligned to the order of existence, with an intent to prevent chaos not just for individuals, family and communities but also for nature and the environment. Into this complex definition, would come its derivatives of duty, rights, and moral behaviours.

I believe that the Hybrid, can not only get legitimized by Dharma, but energized, and evangelized in this part of the globe, where the profit-making firm integrates social needs as well as the demands of the environment, because it is ‘dharmic’ to do so. This means that all stakeholders – customers, investors, managers, employees, and communities are able to state ‘dharmic’ goals and purpose for themselves, their constituencies and the organization.

Dismantling Systemic Greed – The way forward

Implications & Choices

Let me begin by asking you three questions –

  • Would you, as a reader, be willing to subscribe or to promote a Hybrid that promises a modest 6-8% ROE, but pledges an allegiance to Dharmic being / existence – where the key values are being inclusive, humanistic, dialogue centric, non-patriarchal, and green?
  • Would you build a portfolio of investments that also promise intangible returns to the communities the firm is vested in, as well as offers evidence or data – maybe derivatives of triple bottom-line (TBL or 3BL) that reveal its mission focus.
  • Would you agree with Gandhi – who in many ways questions the Chicago School / freshwater lakes ideology when he claims that “the world has enough for everyone’s needs but is not built for everyone’s greed.

Just like, systemic racism is being dialogued in USA today – and a lot more intensely than never before, I think it is time to explore the notion of systemic greed – and how the current systems including banks, financial organizations, audit firms, investment bodies, venture capitalists, and lastly ivy league business schools collude…

When I was a young adult at the best business school in India, and with its clear affiliations with Harvard, I was not aware of a certain socialization, indoctrination, or interpellation of certain tenets of capitalism. I never questioned Friedman and several others for there were no alternatives.

The notion of a Hybrid organization offers a space to question all of this and a lot more. It may also offer an Indian lens of looking at the new-age organizations, and how these perpetuate the notion of Dharmic existence …

End Note

This blog has been inspired by my research on my executive doctorate area – there are several thinkers – and many of them are women, that I would like to rave about and the list is very long. But it would be churlish on my part to ignore the following:

  • Anne-Claire Pache
  • Filipe Santos
  • Jean Battilana
  • Mary J Hatch
  • Marya Besharov
  • Mathew Lee
  • Nardia Haigh
  • Wendy Smith

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