II: Transforming Organizational Trajectory

Parr II provides an account of rhe managerial work and organizational processes involved in transforming the organization’s raison d’etre and its manifestations in organizational structure, recruitment and reward, governance and leadership.

Structuring for Purpose

“We need to be more professional, big business-like, and have moneymaking activity to meet the significant challenges with the continuing effect of global economic downturn.”

(CEO, 3-Year Strategy)

Corporate Philanthropy: Charity as Something we "do," not What we "are"

As we have shown, the former CEO’s framing of the association was simple, had clarity of purpose, and was aligned with organizational “type.” In essence: “We are a chartered body and we exist to do public good. We do public good by delivering the four Charter objectives ... money is our oxygen, but making money is not the end game.” The association’s structure reflected the same characteristics (see Figure 5.1).

In this structure, all areas had a focus on delivering to the Charter; international offices were positioned under membership and measured on developing the number of members and students in the region and providing local membership services. The organization’s legal status as a Charity was integral to Charter objectives, both focusing on public benefit.

There was a single subsidiary Limited Company set-up to manage the provision of one service that was delivered solely to the profession, but which did not contribute directly to Charter objectives. It was therefore treated as a distinct commercial entity that delivered significant funds to the association.

Under the incumbent CEO, various aspects of the organization were restructured in pursuit of commercialization, growth and globalization, becoming increasingly complex as the CEO tried to negotiate the various demands, regulations and legitimacy judgements of different stakeholder groups in the U.K. and internationally (see Figure 5.2).

The development of complex and at times contradictory structures accompanied the growth of the association, not least through the creation and maintenance of unnecessary charitable and non-charitable subsidiaries. For example, each international office was set up as a

74 Transforming Organizational Trajectory

Organizational structure - former CEO

Figure 5.1 Organizational structure - former CEO.

Organizational structure - incumbent CEO

Figure 5.2 Organizational structure - incumbent CEO.

wholly owned limited company in its own right, requiring governance, HR, finance and other infrastructure. The activities of the existing trading subsidiary ceased, but the entity was (unnecessarily) maintained as a contracting vessel for the association’s delivery of in-company training programmes to corporate clients within the U.K. Interestingly, corporate delivery in the U.K. would fall within the Charter and charitable objectives. Under English Charity Law this would be classed as mission-related trading income and could therefore legitimately be undertaken by the association within its day-to-day work. We saw in Chapter 3 how managers can, for example, artfully exploit such structural ambiguities to create perceptions of conflicts of interest and marginalize corporate delivery as “lesser” in moral and social good terms.

As shown in Figure 5.2, the association had, for a long time, benefitted from a ring-fenced fund to provide financial awards to students - e.g. for

“best marks.” Despire their long-term role within the association, these funds were allocated to a new subsidiary, set up as a linked charity with its own board of trustees, separate financial systems and branding from the parent charity. The association also made a commitment to making an annual donation to the subsidiary based on the financial surplus of the association. As illustrated in Chapter 2, a common narrative within the association was that the subsidiary charity was “a small part” or “side arm” and that it had been “divorced from the main business” so it could be “properly managed” and not “generally get lost in the mainstream business.” Though there was no technical or legal necessity to decouple the charitable activity of the subsidiary from the parent charity, symbolically it served as a powerful message that the “core” organization did not need to be overly concerned with social impact in “everyday business” as this was achieved through the charitable subsidiary. Such a model is closely aligned to private sector models of corporate social responsibility or corporate philanthropy. At the same time, the existence of both the charitable and trading company subsidiaries could be mobilized to defend the main charity from any internal and/or external criticism of being “too commercial.” The colleague who at one time was responsible for drafting the association’s annual return to the U.K. charity regulator, the Charity Commission, recounted the challenges she encountered in trying to meet the increasingly tough “public benefit” test:

“I went to a conference on it [the public benefit requirement]. And I sat there thinking ‘oh, God, we don’t meet any of these criteria.’ I came back thinking we’ve got to really, really up what we say we do in the public benefit arena. And I happened to be thinking about the restricted fund and I thought hang on, we don’t do anything that’s philanthropic because as part of this presentation, they were talking about philanthropic arms of commercial companies, a lot of big companies that would have a philanthropic foundation or something as a way of trying to, you know, tick the CSR box or improve their brand or whatever. And so this word philanthropy kept coming up. And I thought well, there’s nothing at all that we do that’s philanthropic. And I’d been talking to a contact at [name of organization] and they have an entire philanthropic arm which actually gives money to company secretaries who fall on hard times. I mean, they sort of have ... [a] benevolent fund, they have ... visitors who go around and look after elderly chartered secretaries ... so they have this really big thing that they do. And then I started looking into others and these people have got a charity that does this and we have ... we don’t do anything charitable.”

Carole: “Despite being a charity?”

“Despite being a charity, we don’t do anything charitable. And so I started talking to people and thinking about it. And I can’t remember who it was I spoke to originally, but it ended up being a paper ... I put to the board saying ‘we’ve got this fund, guys, do you think it would be a good idea to actually do something more philanthropic with it and find a way of building up the reserves in it so that we can do more stuff’ ... But the original cause came from the new requirements ...

It was happening at the time that charities were beginning to be discredited, so there was a lot of talk about the amount of cash charities spent on running themselves ... you know, by the time they’ve paid their bonuses and everything there was nothing left to give to the poor. So there’s a lot of criticism of that and a lot of criticism of chuggers and things like that... do you know where the money you’re putting in that tin is going? Is it going to buy the chief executive a new Jag? That kind of thing was coming out so a lot of charities were struggling and seeing drops in ... donations because the public were getting very cynical... so society' was getting cynical, the public benefit test came in.”

Carole: “I’m simplifying what I think I heard you say. When you went to that [event], you went, ‘huh ... we won’t necessarily be able to fulfil that public benefit test ... what are other similar organisations similar to us doing ... and then those other similar organisations are actually mimicking commercial organisations?”

“Yes. Yes. Yes. Yes.”

Such “Greenwashing” - spending more time, effort and money on looking like or claiming to be socially responsible than actually implementing responsible practices - among corporate entities has received much public and scholarly attention over recent years (Laufer, 2003; Alves, 2009; Nyilasy et al., 2014). Yet this type of “decoupling” is, perhaps erroneously, assumed to be absent from the charity world. There is a danger that this phenomenon of intentionally “faking it” becomes increasingly prevalent with the commercialization and managerialization of nonprofits, or where information asymmetries between stakeholders such as those discussed in this chapter are created (Crilly et ah, 2012).

On engaging with some of the early findings from my fieldwork, a colleague captured the hybridity identity “war” (Kerr, 1963) taking place within the association as follows:

“The comments about the charitable subsidiary are revealing and ring true. For me, they confirm that for some people the subsidiary has become a handy repository for all the charitable values. By hiving off the charity aspect to somewhere clearly identifiable as being for the public good, it is almost as though some people feel this box is now ticked and the rest of the organization can now be more overtly commercial. Before we had the charitable subsidiary the mix of charitable and commercial was more complex and subtle because it wasn’t possible to draw absolute lines between public benefit and business activities. There is a risk that people will over-rationalise in a desire to simplify things and decide that everything that isn’t the charity subsidiary is, by exception, commercial. I fully recognise that the subsidiary is for some a symbolic and low priority activity which ticks the charity box, freeing them to concentrate on making money.

Structurally, the limited companies are subordinate to the main body so it would be legitimate to view them as engines to deliver fuel to the parent. But then, the [subsidiary charity] is also subordinate to the main body, and the main body itself engages directly in commercial activity. No wonder people struggle to pin down what kind of organisation they are working for.”

Another reading is that the charitable and charter status of the association were now actively appropriated to gain competitive advantage in various ways. First, the idea was presented that the only benefit to being a charity (as far as the CEO was concerned) was “tax exemption.” Second, its legal status, organizational form and regulated activities differentiated the association from “charlatans” and other “cheque-book [i.e. money- orientated] institutions.” The senior manager who presented themself as the protector of public good within the association in Chapter 3, remarked:

“[The length of] Our presence here [in the U.K.], our reputation, and the UK being a mature market, would accept on face value and wouldn’t give two hoots about it [the association being a regulated education Charity]. The bizarre thing that’s driven all this actually is our international expansion and the fact international markets need to be satisfied that we’re not a charlatan. Because there are so many different institutions. And therefore how can international markets distinguish legitimate institutions that have a public good mandate and that were there to make money to do things and not do things to make money, as opposed to what I would call a cheque book institute, which is there for one thing ... behind this facade of the word institute, there’s a limited company with people wanting to make profit.”

Ironically, our own institute could be accused of creating exactly this facade, given the nature of its current strategy (refer to Chapter 4), and the apparent use of charitable status as a Trojan Horse (Pache & Santos, 2013) to “beat the competition.” This creates something of a paradox in that although elite actors aligned to the corporate logic use structure to sideline and reduce the level of influence and presence of “charity” [through the subsidiary], they simultaneously recognize its value to differentiate the organization in commercial conversations. This suggests that it is something that is valued for its moral legitimacy to specific audiences, but for the purposes of competitive advantage.

 
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