Managing tension in social enterprise supply chains

New research by Esade’s Annachiara Longoni has produced a practical series of techniques to help social enterprises deal with complex supply chain relationships.

In a paper for the Journal of Supply Chain Management, Longoni and her co-authors examined seven stakeholder relationships in the social enterprise Mescladis, which trains and supports migrants via activities and funding from its food service business.

“There is often a misalignment in the logic of the social enterprise and its supply chain stakeholders,” explains Longoni. “This creates tensions and a challenging context for relationship management, which impacts both social effectiveness and economic stability of the social enterprise.”

The answer, she says, lies in creating common purpose – or core logics – within each element of the stakeholder relationships. “These relationships include profit-oriented supply chain stakeholders and paying customers,” she adds. “We need to align the purposes of the social enterprise in each of these relationships.”

Case study: Mescladis

Mescladis is a Barcelona-based social enterprise that provides training and work placement for migrants via activities and funding from a food service business. This places Mescladis at the nexus of two complete supply chains with different purposes: social and commercial.

The misalignment between these purposes creates tensions and a challenging context for relationship management, with an impact on both the social effectiveness and economic stability of the social enterprise.

Longoni and co-authors studied these relationships to identify a series of relationship management techniques for social enterprises. “They also apply to traditional organisations struggling to manage conflicting stakeholder relationships,” she adds.

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Mescladis / Trainee

Mescladis has both social welfare obligations and commercial logics considerations in its relationships with trainees. Its support with training and finding work is only possible thanks to its commercial activities, which provide the trainee positions. Trainees also have dual core logics: they expect to receive help through the training programme (social welfare), and expect various social services provided by the government (regulatory).

The two parties experience tension between the common social-welfare core logic and the other’s differing core logic. The trainees’ regulatory logic can discourage their training commitment, creating tensions with the achievement of Mescladis’ social mission. This conflict then reduces the financial resources generated in the restaurant’s activities to help future trainees.

Solution: Trust

The diverse and multicultural team at Mescladis generate trust by sharing their own traumatic experiences and reiterating the message that they are working in the trainees’ interests. This establishes a personal and emotional connection, and trainees respond with increased motivation and commitment to their training.

The diverse and multicultural team at Mescladis generate trust by sharing their own traumatic experiences and reiterating the message that they are working in the trainees’ interests

Mescladis/Restaurant customers

After receiving initial training as kitchen or wait staff, migrants work at Mescladis’ own restaurant before further placement. This gives Mescladis core dual logics: social-welfare (training migrants) and commercial (satisfying customers). Customers adopt a commercial logic, expecting good food and service, and tension arises in complaints about slow service, incorrect orders and other service failures.

Solution: Provide context

Mescladis conveys its social mission in the restaurant, sharing migrants’ experiences through storytelling in menus, posters and food items. In parallel, Mescladis considers the delivery of good food and service crucial and believes customers should not tolerate a bad experience. Good food and experience should be the primary reasons for custom, which in turn enhance social efficacy.

Mescladis/Social Entity A (SEA) and B (SEB)

Mescladis collaborates with SEA and SEB, whose mission is helping migrants. SEA and Mescladis have a core social-welfare logic in common: to help as many SEA clients as possible. But SEA’s regulatory core logic to support migrants’ clashes with the commercial constraints of Mescladis and the amount of training it can provide.

Solution: Trust

SEA trusts Mescladis’ capability in training, its empathy with the migrant situation, and SEA’s own challenges. SEB applies a predominantly commercial logic to Mescladis and sees it as a service supplier via trainees. This creates tensions with Mescladis’ social-welfare logic.

The restaurants admire Mescladis for successfully pursuing their shared social mission, so put their business activity at their service

Solution: Formalism and expert power

SEB requires efficient service and timely feedback, so signed a yearly contract with Mescladis in exchange for a negotiated payment. Mescladis developed internal processes to collect and formalise the information SEB requires. As a result, Mescladis has preferred supplier status.

Mescladis/Restaurants RA, RB, and RC

Hospitality businesses are key stakeholders of the social-welfare supply chain, hiring migrants first as interns and potentially as full-time employees. RA has dual core logics: commercial and regulatory. It strictly adheres to Spanish labour regulations that allow short-term contracts but not hiring the undocumented. It prefers short-term contracts due to seasonal demand, while Mescladis trainees need a one-year contract to obtain legal status.

Solution: Legitimate power and formalism

Mescladis minimised RA’s regulatory risk by agreeing with authorities to take responsibility for trainees during the necessary working period. It developed a formal approach to evaluating professional and personal development before placing trainees with RA. There are limited tensions in the relationships with RB and RC. All are guided by social welfare, but tensions can arise from the restaurants’ peripheral commercial logic.

Solution: Referent power

The restaurants admire Mescladis for successfully pursuing their shared social mission, so put their business activity at their service. To overcome possible tensions with business activity, the parties act in a mutualistic way: Mescladis provides trainees when needed, and the restaurants help with job placement after the internship is completed.

social enterprise supply chains
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Three approaches to managing tension

Using these examples, Longoni and co-authors identified three specific relationship management approaches: complementarity, acceptance and accommodation.

The acceptance approach, through altruism and trust, gives each partner the empathy to accept tensions in the presence of both a common core logic and differing core logics (such as with trainees and customers). The accommodation approach through formalism and legitimate or expert power allows partners to accommodate tensions in the presence of differing predominant logics (such as with restaurant RA). The complementarity approach gained through mutualism and referent power allows each partner to acknowledge a peripheral logic in support of a common logic (such as with social entity SA).

Longoni concludes: “The study offers a portfolio of relationship management mechanisms that a social enterprise can deploy to tackle tensions in supply chain stakeholder relationships. Mescladis, and others like them, present a way for making positive contributions to society. They encourage efficiency and financial stability from the commercial side, and an innovative and positive way for the public to learn about social issues.”

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