With cross-sector collaborations on the rise, a new book exploring partnerships between business and social organizations in the Americas comes at just the right time. Social Partnering in Latin America: Lessons Drawn from Collaborations of Businesses and Civil Society Organizations, looks at the underlying framework that compels such partnerships as between a food bank in Mexico and a supermarket in the United States, providing insights into the DNA of a successful collaboration that are broadly applicable.
Our excerpt from the book, coauthored by Harvard Business School professor James E. Austin, explores the motivations behind such partnering.
What motivates organizations to collaborate?
It is important to understand the motivating forces behind the decisions of businesses and Civil Society Organizations (CSOs) to enter collaborations, because they form the cornerstone upon which alliances are built. By motivations, we mean the conscious values and explicit purposes that initially drive individuals and organizations to explore the possibility of working across sectors. It is vital that each partner have clarity regarding their own motivations so that they can shape the relationships to attain the desired outcome. Of comparable importance is an understanding of why the other partner wishes to engage in the collaboration so that the participant can be responsive to those goals and needs.
In thinking about motivations systematically, it is helpful to have a framework, and we have derived one from our examinations of cross-sector collaborations in the Americas. A basic element is the recognition that there can exist a wide range of motivations across the partners and a mix of motivations for each partner. We conceptualize this as the Partnering Motivation Spectrum. At one end are the Altruistic Motives aimed at benefiting others rather than the partners themselves. At the other extreme are the Utilitarian Motives that focus on the benefit to the partner rather than others.1 In either case, there is the potential for benefits to accrue to the partners or to others, but in the Partnering Motivation Spectrum, the focus is simply on the partners' motivations rather than the ultimate outcomes.
Altruistic motives are centered, for example, on helping individuals in need, solving community problems, or making other general contributions to the well-being of society. Such motives spring from the humanitarian values possessed by the organizations or individuals involved. Utilitarian motives, on the other hand, cater to the partners' organizational needs, focusing on issues like risk management or the creation of competitive advantages. These motives are rooted in serving the particular institutional interests of the partners. Since NPO's missions are generally imbued with social purpose, their general motives tend to be predominantly altruistic in nature, but collaborating with businesses can also meet specific CSO institutional needs. The basic focus of businesses is to generate economic returns, so it makes sense that some motives would tend toward the utilitarian, coexisting with altruistic motivations of business leaders and manifesting themselves in the collaborative undertakings. Thus, motives can be idealistic or utilitarian, altruistic or self-interested.
Our cases show that regardless of the precise motivational starting point, as long as cross-sector collaborations continue to serve the interests of all partners, their motivations are likely to evolve. In most real life cases, organizations are motivated by a mix of altruistic and utilitarian motivations that differs from case to case. As Figure 2 below shows, any kind of motivation, or combination of them, can trigger a sustainable partnership as long as it is intense. When the intensity is lacking, depicted as the darker zone in the southwest corner of that figure's quadrant, that represents the area of lowest sustainability for the partnership. Our research suggests that as the collaboration progresses, motivations gain intensity (represented with arrow #1 in Figure 2 below) and become more blended (represented with arrows 2a and 2b). In principle, we should expect to see more sustainable ventures when motivations are placed higher and closer to either end of the spectrum (utilitarian or altruistic drives), becoming most sustainable when they become strong and blended, as represented in the northeast corner. Figure 2 can help collaborators gain clarity about their motivations by plotting them on the two axes. The resulting location is a qualitative self-assessment and judgment of what is the driving behavior rather than a precise calculation.
Figure 2: Cross-Sector Collaboration Motivational Spectrum Strong
Successful collaborations influence motivations:
(1) Even if mix of original motivations remains constant (50%-50% in example), intensity may increase.
(2) Even if intensity of original motivation remains constant, it may become more blended:
2a Generating a value-oriented and emotional connection in the ultra-pragmatic actor
2b Generating a utilitarian connection in the purely-altruistic and idealist actor
Before undertaking any sort of substantial motivation analysis, it is worthwhile to focus on two different but related questions: what drives organizations to engage in cross-sector collaborations, and what do they expect to gain from them? The first question focuses on motivations, while the second one has more to do with the benefits sought in interactions with future partners.
As a general rule, collaboration efforts between companies and CSOs have an inherent social dimension. While the main objective of the private business sector is economic value creation, the altruistic dimension prevails in the third sector. In our cases, social leaders approached companies for a variety of reasons that most certainly included accruing some organizational advantages, thus giving their approach a utilitarian component. However, these social leaders viewed those advantages as a vehicle for contributing to solutions of certain social problems. According to Juan Carr, founder of the Solidarity Network (Red Solidaria, hence RS), the institution's mission "to improve life conditions for needy individuals" could only be achieved if the Argentine society underwent a cultural transformation, setting solidarity as a core shared value. Its association with the prestigious newspaper La Nación served as a valuable tool in attaining such an objective; it was a utilitarian means used to attain an altruistic goal.
Altruism and solidarity were also significant drivers in the private sector, resulting in large part from the long-standing tradition of charity and civil commitment derived from the region's powerful Catholic background.2 For some business leaders, participation in the solution of social problems is simply a question of "doing the right thing" from an ethical standpoint. In the opinion of Manuel Ariztia, renowned Chilean businessman and owner of Empresas Ariztía, his company's responsibility to collaborate in solving community problems, regardless of any potential organizational advantage, arises from an ethical imperative that falls on the shoulders of the individuals that lead it.
In addition to this tradition, in the 1990s there emerged a new vision regarding the role of private companies in society, by a new generation of leaders who took over some of the region's most important business holdings. The traditional Argentine newspaper La Nación provides an example of such a shift, when in 1996 a change in ownership of the controlling stake led to the appointment of Julio Saguier as board chairman. Saguier was intent on committing the company to the development of a different society through a cultural change that had solidarity as its core value.
In our sample alliances, this motivation was associated with a specific company type: family-owned businesses. These are companies controlled by an individual or a family, despite the existence of a sophisticated corporate structure with management and ownership formally represented in different organs. In the case of La Nación, the newspaper is owned by a corporation (La Nación S.A.), but the Saguier family, descending from its founder, controls both its board and top management.
Organizations are motivated by a mix of altruistic and utilitarian motivations that differs from case to case.
Family-owned businesses usually highlighted altruism as the main motivation driving them to engage in cross-sector collaborations.3 According to Norma Trevino, public relations manager of H-E-B Supermarkets Mexico, "We are not doing this to increase our sales ... or our profits." Our sample cases have exhibited remarkable correlation between altruistic drives and family companies. From an ethical point of view, it is to be expected that individuals acting out of pure altruism would do so with their own resources and not those of third parties. Michael Porter points out that when social activities lack a strategic dimension, Milton Friedman's well-known criticism that philanthropy has no place in business, suddenly seems to take on more credibility.4 From an administrative point of view, when management is a mere agent for shareholders, it will likely find it hard to justify significant resource allocations resulting from decisions based primarily on altruistic motives rather than company-related needs.
Several of these companies were founded by individuals with a strong personal inclination towards philanthropy, later incorporating such ideas into their organizational vision and values. Mexico's Bimbo Group provides a clear example; this world leader in the food industry, a multinational corporation with operations in 16 countries, was founded more than five decades ago by Lorenzo Servitje, a distinguished philanthropist well-known for his social commitment.5 Despite the expansion and level of sophistication of operations achieved by the corporation over the years, its founder's vision and values remain rooted in the group's organizational identity. According to Martha Eugeniá Hernandez, Bimbo's institutional relations manager, "Over time, Don Lorenzo's personal values have permeated Bimbo's philosophy."
Collaborations may also fulfill a very practical function: to satisfy partners' organizational needs, both in the private and third sector. It is important to clarify upfront that the dichotomy between altruistic and utilitarian drivers does not carry with it any implicit value judgment, of the "good" vs. "bad" type. While it is clear that helping the community is a socially desirable value, serving an organization's legitimate needs is an equally genuine goal. Self-interest should not be confused with exploitation or opportunism, as both are very different things. One of the arguments put forward is that there is no inherent tension between altruism and enlightened self-interest; on the contrary, both can reinforce each other.
Moving on to the specific drivers at play in our sample cases, we identified two powerful utilitarian motivations: risk-management and competitive advantage creation.
A common reason for engaging in cross-sector collaboration has been to make use of it as an effective risk-management tool, whether for minimizing the occurrence of previously identified risks, or for being prepared to face their consequences, were they to occur. In the third sector, these collaborations contributed to the diversification of revenue sources and a reduction of their dependence on public funding. For the Monterrey Food Bank (Banco de Alimentos de Monterrey, hence BAM), the collaboration with H-E-B Supermarkets (HEB) served to reduce its exposure to political instability. BAM's director Blanca Castillo believed that when an OSC relies to a large extent on public funding, there is always the political risk that "when their term is over, so is the program. A new administration will step in with new programs."
Our sample cases also registered such motivation in the private sector. Cross-sector ventures served some companies to meet an objective explicitly present in their strategy. Among these cases were some companies with structural vulnerabilities built into their business models, thus forcing management to create the necessary tools to face difficult times.
In the case of Autopistas del Sol (AUSOL), a company responsible for managing one of the Greater Buenos Aires area privately managed highway networks, its business largely depended on good relationships with the communities surrounding the new highway layout. Thus, community goodwill became a crucial "operating license" for the company. In poverty-stricken and disjointed societies, as is all too frequently the case in Latin America, such a license should not be taken for granted, especially when collection of tolls appears to be a rather unpopular means of funding, as revealed from several of our interviews.6 Another example along these lines would be a company that commercialized products potentially hazardous for human health or the environment. In this scenario, it would make sense for such a company to become part of the solution, and engage in programs aimed at solving these issues, thus the interest of the beverage and packaging companies we studied in environmental recycling collaborations.
Another characteristic shared by this group of businesses was that they were all multinational corporations, a fact that helps us to understand many of their decisions. Sample cases show that subsidiaries' top executives engaged in cross-sector collaborations to respond to parent company instructions to work with the community. This is an interesting dimension of globalization that calls for further study: multinationals transfer not only their technology, but also their values and social policies. María Marta Llosa, external relations manager of Coca-Cola de Argentina, explained that "we have a worldwide mission: to become leading corporate citizens."
In several cases, this mandate was the result of traumatic experiences or scandals that required huge efforts on the part of companies to repair damaged reputations. The 1989 Exxon Valdez tanker oil spill in Alaska was a haunting benchmark not only for Exxon-Mobil but for global corporations at large, which have since become keenly aware of their exposure to this type of episode. Shell was also deeply affected by the 1995 dispute with Greenpeace over Shell's disposal of its Brent Spar off-shore oil platform, as well as its operations in Nigeria.7 These disturbing experiences forced companies to create a strategic tool for managing risks at a global level. Mariale álvarez, environmental technical coordinator of Coca-Cola de Argentina, explained just how her company underwent such a change:
For many years, the company had focused on its internal operations and paid little attention to external communications about its social activities. However, this changed in the late 1990s, partly due to external pressures. There were some confrontations with NGOs, not in Argentina. Also, there was an awareness shift in consumers and in the communities where we operated.
Contrary to competitive motives that seek to improve companies' market share, the risk management motivation mainly attempted to preserve a favorable status quo. Very often these were companies which enjoyed a position of leadership in their industries, with great public exposure. For example, Coca-Cola de Argentina and Tetra Pak Mexico both confronted similar challenges: as a result of the widespread success of their products, their disposable containers inevitably attracted the attention of government and public opinion concerned with environmental degradation, generating a weak flank that had to be covered. Both companies resorted to alliances with CSOs in order to convey the message that responsibility for discarded containers was shared by several stakeholders, not just manufacturers.
The case of Tetra Pak illustrates particularly well how this type of motivation seeks the maintenance of a favorable state of affairs. When the company perceived on the horizon the emergence of potential threats looming from public authorities and the third sector, it strove to change its vision and find a way to manage these risks. Lorena Mañón, member of the Mexico City Junior League Environmental Committee (JLCM), explained that in the early 1990s "radical environmental groups arrived [at Tetra Pak] with a trailer full of empty containers and piled them up outside the plant. This type of action opened the company's eyes to civil society." Mañón added, "It also opened their eyes to the stir that government was creating" in order to regulate the industry. Company spokesmen have confirmed that they are aware of the ever present risk of government regulation. Environmental manager Sergio Escalera stated, "The government blames the industrial sector, thus holding manufacturers responsible. The upcoming period of legislative meetings will tackle the new law on containers and packages. There are several proposals, and the last version I have heard is rather scary."
Contrary to what was the case in most other partnerships in our sample, Tetra Pak strove to restrict exposure of its efforts and prevent a close association of its brand with the "Recyclable by Nature" (Reciclable por Naturaleza) program undertaken with the JLCM, despite the project's success and prestige. The characteristics of the industry and the company itself may help us understand this decision. If their intended message was that several institutional stakeholders shared responsibility in waste disposal, then over-identification of its brand with the effort would have proven counterproductive. Of course, an alternative course of action would have been the one chosen by Shell, which from the experiences in the above-mentioned negative events, strove to assume leadership of the environmental cause in its industry, and turned it into a competitive advantage.8 However, unlike Shell, Tetra Pak had no competitive incentives to do that. At the time of entering the collaboration with the JLCM, it held an oligopolistic leading position in its industry on a global level, reaching almost 80 percent of the Mexican market. Moreover, increasing its market share would have entailed the risk of triggering Mexican anti-trust laws. Thus, the collaboration with the JLCM sought to maintain a state of affairs almost ideal for the company, with a market share high enough to dissuade potential competitors but low enough to keep the government undisturbed.
The Quest For Competitive Advantage
Cross-sector collaborations can provide a powerful leverage for optimizing the competitive positioning of an organization, both from the private and the third sectors. While risk-management is not necessarily absent in this group, what these organizations sought was to go beyond that defensive dimension and leverage their cross-sector partnerships in order to improve market positioning. The companies started off with the following question: what are the obstacles hindering corporate performance and how can cross-sector collaborations contribute to overcoming them?
The Chilean Farmacias Ahumada S.A. (FASA), Latin America's largest drugstore chain, faced a significant challenge in 1997. In the words of Jaime Sinay, general manager at the time, "the company intended to establish a closer relationship with the community. Our business carries a complex connotation. It is a fact of life that people dislike buying medicines. Furthermore, Chile offers no reimbursements for pharmaceutical expenses, so this tends to add to customers' negative disposition." To respond to this situation, FASA considered a possible collaboration with the Fundación Las Rosas (FLR), a home devoted to caring for elderly in need. According to some analysts who had been monitoring the evolution of FASA, the decision was a step in the right direction, as "promoting customers' goodwill was important to strengthen the company."
As a general rule, collaboration efforts between companies and CSOs have an inherent social dimension.
In Colombia, President Cesar Gaviría's so-called "revolcón"—his plan of economic modernization and structural adjustment, implemented in the early 1990s—exerted a significant impact on the health sector. Budgetary cutbacks forced hospitals to become much more conservative in their procurement policies. General Médica, a vendor of high-complexity medical equipment, knew that their products were competitive, but it was also aware that they could not compete on price. A demanding market would reward General Médica, but that would require educating hospitals to familiarize them with the latest technological developments in the field, so they could make adequate purchasing decisions. Only a highly educated buyer would appreciate the advantages of a sophisticated product. Therefore, from the outset the company sought involvement with the Hospital Management Center (Centro de Gestión Hospitalaria, hence CGH), a permanent forum that gathered actors from different sectors to contribute to improving the Colombian health sector. Johnson & Johnson, on the other hand, joined CGH not to educate the market about the available supply, but to learn about its demand. Its objective was "to gain insight into hospital problems in order to serve them better," in a market where service would make the difference since price disparities were rapidly vanishing due to increasing competition.
The candid involvement of companies like Johnson & Johnson and General Médica in organizations like the CGH, places them in the paradoxical situation of being partners and competitors at the same time. One way to understand this apparent contradiction is to consider their participation as a case of "coopetition," a dynamic combining cooperation and competition dimensions.9 Actors cooperate to develop the market, expanding and strengthening it, while at the same time, they compete among themselves to divide it.10 This is also an example of what Porter and Kramer call strategic philanthropy, in which a company makes a contribution (sometimes in collaboration with competitors) to a social cause related to its core business, altering the context in such a way that it produces a positive impact on its business.11
In looking at the organizational structures of companies in this group, we can identify two patterns. The first and largest subgroup is made up of multinational corporations that "export" this practice to their subsidiaries. The Danone Group provides a good example, as their corporate mission is to create economic and social value, and hence they do not perceive any incompatibility in using one dimension in favor of the other. Aminta Ocampo, public relations manager of Danone Mexico, explained how "Danone's social policy consists of what we call the 'double project': our social and economic objectives cannot be separated."
A challenge that these multinational companies usually face is obtaining local credentials; that is, overcoming the emotional distance between its brands and local consumers. By 1997, Danone Mexico had its first run-in with this problem when marketing research revealed that the general public held the company in high regard, but perceived it as somewhat detached from consumers. Ultimately, management's search for a solution led the company to collaborate with a local CSO, the Friendship Home (Casa de la Amistad, hence CdA). In Costa Rica, the television corporation Representaciones Televisivas (REPRETEL) met a similar challenge. This company, owned by Mexican businessmen, managed three of the six existing channels in Costa Rica, and by 1996, ranked second in the Costa Rican television industry, trailing only Teletica, a long-standing, locally-owned network. Rene Barboza, REPRETEL reporter, elaborates,
We needed a more popular positioning since the REPRETEL brand was frowned upon for being foreign, for its foreign capital. Besides, our competitor had skillfully used the concept of "we are Costa Rican; we think like you; Teletica Channel 7 has always been with you." People were scared because REPRETEL had bought several networks in Costa Rica, and they didn't know what those channels would do, what kind of mindset they would foster for children.
To enhance its brand, REPRETEL resorted to a partnership with the Fundación Promotora para la Vivienda (FUPROVI), an NGO devoted to the development of public housing and community strengthening programs.
It is interesting to note the absence of family-owned companies in this group. If we take into consideration the fact that the use of social ventures as a competitive tool is not entirely legitimized within the Latin American business community, it is not surprising that this reluctance may surface stronger where ownership is concentrated in a few individuals. In contrast, those multinational corporations surveyed, where ownership is diversified and anonymous, had no misgivings about the link between social policy and financial return. According to Guillermo García, public relations manager of Esso Chile, "The motivation that drives us to collaborate in community projects is quite simple: it's good for our business." Esso believed that collaborations generated a win-win situation both for the company and society. In a similar vein, the contrast between two sample cases with multiple similarities also illustrates this point: both Danone and HEB are foreign companies belonging to the food industry, which at the time of initiating cross-sector collaborations did not enjoy long-established reputations in Mexico. The main difference between the two companies lies in their ownership structure: publicly held in Danone, family-based in HEB. Accordingly, while the former explicitly leveraged the collaboration in support of its business operations, the latter chose to maintain both spheres separately.
In addition to multinational corporations, a few large local companies engaged in cross-sector collaborations driven by competitive motivations. Since they constitute real success stories in terms of their economic and social impact, it is worth discussing these experiences in greater detail. One of the companies was Indupalma S.A., a Colombian company engaged in African palm oil production and marketing. Rubén Darío Lizarralde, Indupalma's general manager, is conclusive about the fact that social investments are not triggered by altruism but by potential profitability. The notion that "social aid pays back" is a concept deeply rooted in his vision, also serving as the title of a presentation in which Lizarralde describes the company's experience, Lo Social Paga. In order to understand this vision, not widespread within the Latin American business leaders, we need to relate it to the particular context of Indupalma and Colombia.
The political unrest and social violence prevailing in Colombia in the past decades had affected the company, creating dysfunctions that, by 1991, put Indupalma on the verge of bankruptcy.12 Its management soon realized that, to remain viable, the company would need to become involved in the pacification of its environment. The depth of the crisis forced Indupalma to completely review its organizational identity. From this process, a new vision emerged; one in which Indupalma viewed itself at the center of what it called a "business community," which was to be the basis of a sustainable economic and social development model. This strategy was based on four axes, which included: (a) alliances with labor cooperatives to generate income opportunities for the regional population; (b) educational development of neighboring communities to promote individual growth and technical training associated with palm oil production; (c) development of peaceful interpersonal relations; and (d) education of committed and solidarity-conscious citizens. The first axis was implemented through alliances with labor cooperatives, while the remaining three were based on alliances with local CSOs.
The notion that "social aid pays back" is embedded in Indupalma's competitive strategy, but it also serves its risk management, since one of the company's primary objectives is to reduce the threat of armed groups affecting their operations. This kind of double motivation derived from a very particular context does not fit the general pattern described in the previous section, where we analyzed how some organizations made use of cross-sector collaborations for risk management purposes.
The second case in this sub-group is that of Natura, a leading cosmetic company in Brazil that placed social responsibility at the core of its competitive strategy. The company defined itself as a "dynamic set of relations" with its stakeholders, and viewed each of those relations as an asset. One of those assets was the strong connection with its consumers, mostly women, based on personal relationships with a direct sales force totaling 270,000 saleswomen—that the company called "associates" (colaboradoras). The "power of relationships," grounded on the emotional link with its brand, was the essence of Natura's organizational culture and competitive strategy. In the words of Phillipe Pomez, business innovation and development vice-president, "All Natura product lines must have a cause and a story to tell, so as to strengthen and consolidate the identification of our colaboradoras with the company."
In line with this rationale, Natura launched an innovative product line called Ekos. The "story to tell" behind this new line was the preservation of Brazilian natural biodiversity. "Natura intends to help the country take advantage of its biodiversity, thus transforming it into a source of social wealth. We need to turn that cause into a tangible object," explained Pedro Passos, operations president. The "tangible object" was a product line based on plant and vegetable oils traditionally used by indigenous communities in the hinterlands.13 The communities that possessed the key knowledge of how to produce, extract, and apply the components of their traditional crops lived in primitive conditions; thus, incorporating them into the company value chain would have a significant impact on their lives.14
In the last case of this sub-group, the use of a cross-sector collaboration as a competitive leverage came about through the incentives provided by an international development agency. Rainforest Expeditions (RFE) was a small Peruvian ecotourism company that detected the opportunity to open an eco-lodge in the Tambopata-Candamo Reservation area, in the Peruvian Amazonia. When the traditional funding sources turned their backs on the company, RFE appealed to the Canadian-Peruvian Fund (CPF), a technical cooperation entity that promoted innovative sustainable development projects. The CPF welcomed the proposal, but imposed one condition: instead of employing local natives, RFE would need to partner with the community and train its members in order to qualify them for a future takeover of the joint-venture.15 For our purposes here suffice it to say that when faced with the CPF proposal, the company realized that it could obtain competitive advantages from its association with the community.
This competitive drive is also relevant for the third sector. The Forest Stewardship Council (FSC) is a global CSO, until recently headquartered in Oaxaca (Mexico), which supports the sustainable management of the world's forests. In this task, the FSC faced the competition of other CSOs that were sponsored and funded by large industrial groups. To improve its competitive position, the FSC engaged in an alliance with the some of the largest retail chains in the "do-it-yourself" industry, by which the latter gave preference in their procurement to those suppliers certified as complying with FSC standards. These alliances created a strong incentive for producers to join the FSC certification scheme.16
Colombia's Hospital Management Center (CGH) is also a good example of this point. The CGH's mission was "to promote and lead health management transformation in order to contribute to overall industry development," which was carried out through advisory services to health sector organizations. Among CGH's key competitive strengths vis-à-vis professional service firms offering similar advice, were its multiple alliances with private companies, universities, and other institutions, which supplied the center with a deep knowledge of the sector hardly available to its competitors.