Leading a Large‐Scale Distributed Social Enterprise

• Author: James K. Hazy,Jim Gibbons
• DOI: http://doi.org/10.1002/nml.21253
• Published date: 01 March 2017
• Date: 01 March 2017

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N M  L, vol. 27, no. 3, Spring 2017 © 2017 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/nml.21253

Journal sponsored by the Jack, Joseph and Morton Mandel School of Applied Social Sciences, Case Western Reserve University.

Correspondence to: James K. Hazy, Adelphi University, Department of Management, 1 South Avenue,

Garden City, NY 11530. E-mail: hazy@adelphi.edu.

Research Articles

Leading a Large-Scale Distributed Social

Enterprise

HOW THE LEADERSHIP CULTURE AT GOODWILL INDUSTRIES

CREATES AND DISTRIBUTES VALUE IN COMMUNITIES

Jim Gibbons , 1 James K. Hazy 2

1 Goodwill Industries International, Inc.

2 Adelphi University

Distributed social enterprises with national or international footprints face unique man-

agement challenges. To cast a lens on these challenges, we analyze the case of the US -based

social enterprise Goodwill Industries, a century-old, hybrid nonprofit organization with

annual business-related revenue of more than $5.5 billion. The economic benefits that

accrue from this business are used to support a social mission that has continued to evolve

for more than 100 years. We explore how Goodwill is organized and how its management

works to continually balance economic and social objectives to facilitate long-term success.

Keywords: leadership , social entrepreneurship , social change , case study , research , non-

profit , sector

THERE HAS BEEN INCREASING INTEREST in organizing approaches that combine margin-

producing operations with social activism.  ese “hybrid organizing forms,” as they are called,

integrate sound business practices with a social mission and operate as “social enterprises.”

Rather than focusing on how new organizations of this type are being formed, we looked at

the exemplary case of Goodwill Industries ® to better understand how one large-scale social

enterprise has operated successfully over several generations on a national and global scale.

This article contributes to the field by describing the Goodwill distributed organizing and

governance structure, its complex leadership approach, and the key success factors that have

enabled it to operate as a highly successful hybrid organization. Although Goodwill is formed

as a nonprofit and is subject to the 501(c)(3) nondistribution requirement, it includes an

Nonprofi t Management & Leadership DOI: 10.1002/nml

300 GIBBONS, HAZY

efficient large-scale business operation that generates a positive margin. All of these resources

are applied directly in local communities to support its social mission. Goodwill thus oper-

ates a distinctly complex organizing form that we are calling the “distributed social enterprise

(DSE).” We believe that the DSE form is worthy of study because it can be imitated by other

social enterprises as they seek to achieve national scale.

When looking deeply into Goodwill, one discovers that the fundamental difference between

a traditional large-scale organization—whether a nonprofit or a for-profit business—and a

DSE relates not to the business engine and not even to the social mission. The primary fea-

ture that distinguishes a successful DSE is that it has learned to organize in a way that creates

value and accumulates assets through effective business practices, and at the same time it has

remained close to and relevant within the communities that it serves.

Why Goodwill Uses a DSE Form

The DSE organizing form has enabled Goodwill to be self-sustaining over generations while

supporting locally delivered mission services. For a social enterprise to meet the changing

needs of a community over time, the “imprint” of social mission by the founders (Marquis and

Tilcsik 2013 ; Stinchcombe 1965 ) is not enough, because needs in the community change and

evolve. The organization must therefore adapt both to changing local market conditions in its

business operations and to the evolving mission needs of its local communities.

Business Logic and Identity over Time

Typically, growth and adaptation are the realms of business strategy and are managed through

a centralized authority. However, in a DSE, the adaptive challenge applies to both the value

accumulation engine of the business, what Battilana et al. ( 2015 ) call “economic productiv-

ity” (1661), and to its localized approach to social value distribution, what Battilana et al. call

“social imprinting” (1662). The nature of each of these imperatives changes over time, and

each can be uniquely local, including the authority to decide what to do. Goodwill succeeds

by institutionalizing the distinction between value accumulation and social value distribution

within its locally enacted operating capabilities (Helfat et al. 2007 ).

In the nonprofit sector, social value distribution strategies to serve the mission might change,

but the method of value accumulation, through fundraising, typically does not. In contrast,

in the for-profit sector, value creation strategies might change, but value distribution, which

is to owners, does not. For DSEs, however, strategies of both value accumulation and value

distribution change simultaneously and continually, and many of the stakeholders overlap or

might even be the same individuals. The DSE form addresses this challenge. There are other

potential exemplars of the DSE structure, of course, for example, Girl Scouts, Boy Scouts,

the Salvation Army, or the YMCA, but our study focuses only on the Goodwill example.

The “Founding Paradox”

The DSE conundrum—how to integrate value accumulation from markets with value distri-

bution in support of a social mission—involves conflicting institutional logics (or business log-

ics) and organizational identities (Battilana et al. 2015 ; Bode, Evers, and Schulz 2006 ; Morand

and Gianfalddoni 2015 ). In a study of South American commercial microfinance, Battilana