Social enterprises refer to organisations that apply commercial strategies to maximize the improvements in environmental and human well-being. These organisations, unlike other companies, do not focus on profit maximization for their shareholders. These organisations fall into two categories: for-profit and non-profit. The assumption that dedication will eventually make the enterprise financially valuable influences objectives of these enterprises. The term "social enterprise" has contested and mixed heritage because of its philanthropic origin in the United States and cooperative origin in the EU, UK, and Asia. In the US, activities of social enterprises are linked to offering charity by trade instead of offering charity while trading. The past decade witnessed an increased usage of the term "social purpose organisations" that directly raise finances for charitable projects. In this regard, this paper objectively discusses primary elements, processes, and challenges encountered by the management of Cafedirect, which is a social enterprise.
Cafedirect is an alternative trading organisation based in the United Kingdom. It is the major fair trade drinks brand. Various organisations, including Tradingcraft, Oxfam, Twin Trading, and Equal Exchange Trading founded Cafedirect in 1991. Establishment of the organisation was a response to the worldwide decline in the prices for coffee in 1989. It transformed fair trade world through the introduction of its first mainstream brand of coffee. Above all, Cafedirect’s brand of coffee was the first brand to have the fair trade mark in the United Kingdom. This brand was also a fair trade commodity to be sold in supermarkets. According to Aula & Siira (2010), the organisation is the only coffee and tea brand that has acquired ethical recognition of the Ethical Company Organisation. Based on statistical research, operations of Cafedirect affect the lives of about 1.8 million individuals across the globe in a positive way (Doherty & Thompson, 2006). The organisation has put in more than 4 million pounds of its acquired profits into the business since 2006. In total, it has paid more than 12 million pounds to communities and business of its grower partners (Granville & Dine, 2012). The mission of the company is to build and transform lives of communities via conducting sustainable and inspirational business. The organisation concentrates on affecting the communities in developing nations both socially and economically.
Elements and Processes of the Cafedirect
The company works with and purchases its products from producer organisations in developing economies in Central America, Caribbean, Africa, Latin America, and Indian Sub-continent (Haig, 2011). It also operates its individual and exclusive Gold Standard trading policy that penetrates beyond the elementary principles spelled out by the Fair trade Labelling Organisation. Cafedirect was the first and only fair trade organisation to operate this scheme. Similar to other fair traders, Cafedirect presently pays averagely three times the international prices to its grower partners (Haig, 2011).
The impact of fair trade on Cafedirect is reflected by the fact that the company has to pay bonus premiums to producers providing coffee for growing of gourmet sectors and organic gourmet. According to Paton (2003), such premiums translate to additional costs for the management of the organisation. The premiums also indicate additional costs incurred by farmers producing this type of coffee that is better than other types of coffee.
Adoption of the Gold Standard policy also made the management incorporate business partnership programmes. These programmes are called Producer Support and Development programmes (PS&D) (Perrini, 2006). PS&D programmes provide market information, advice, support, and management training or any other elements necessary for developing business of the organisation.
Cafedirect also offers a pre-finance of up to 60 per cent of the value of tea or coffee in order to provide stability to producers (Wymer & Samu, 2003). The pre-finance provides producers with a working capital at a reasonable price. Within the past year, Cafedirect has offered a pre-finance of about 1.6 million dollars annually to its coffee producers (Wymer & Samu, 2003). Provision of pre-finances adds another financial burden to the management of the company.
Organisational Structure and Design of Cafédirect
The organisation has four founder shareholders that come from alternative trade sector. Shareholders were brought together by the primary objective to develop a groundbreaking fair trade brand in order to revolutionize the coffee and tea market. The four founder shareholders, as mentioned above, include Twin Trading, Oxfam, Equal Exchange, and Traidcraft. Every founding shareholder offered the initial finance and owns 25 thousand of ordinary shares priced at 1 pound. Each shareholder owns one quarter of the company.
A board of eight members manages the company. The board comprises of one nominee from every founding shareholder, managing director, and three independent non-executive directors. Since early 2002, three producer representatives, one from tea and two from coffee, have been attending strategic board meeting twice per year in order to assist company's future development. In addition, the bi-annual conference of producers also assists in shaping the direction and development of the company.
Dimensions of Organisational Culture at Cafedirect
According to Perrini (2006), organisational culture refers to the joint behaviour of people forming the organisation and the implications people attach to their actions. Organisational culture includes values, norms, visions, systems, working language, symbols, beliefs, and habits of the organisation. Culture of the organisation influences the manner in which people and groups in the organisation interact with each other, stakeholders, and clients. Key to this research is Perrini’s (2006) definition of organisational culture as a collection of shared mental suppositions, which guide actions and interpretations of the organisation. Organisational culture defines the most suitable behaviour for various circumstances. Cafedirect, as a social enterprise, has its own dimensions of organisational culture.
The first dimension of culture at Cafedirect relates to open communication (Doherty & Thompson, 2006). Organisations that openly communicate both externally and internally have a culture of openness. As such, they fight against any behind-closed-doors decisions and secrecy. Cafedirect’s value for open communication is significant since it instils loyalty and increases productivity among employees and coffee producers (Haig, 2011). Open communication with producers ensures that they are paid fairly according to their produce. This is different from the open communication practice of private companies. Many of these companies partially practice this dimension of culture because they tend to prohibit external communication. This is because competitors might acquire detrimental information that can be used later against them. As such, many private organisations have put in place restrictions to govern external flow of information (Doherty & Thompson, 2006).
Social responsibility is another dimension of culture at the Cafedirect (Aula & Siira, 2010). The management of Cafedirect ensures that social responsibility is a part of the organisation by channelling charitable efforts perceptible by employees and producers. Cafedirect encourages its stakeholders to take part in the improvement of the community. In addition, the organisation has left the doors open for its employees, who have a project they would want the company to be involved in. Cafedirect, being a social enterprise, must maintain a strong culture of social responsibility.
Effects of Organisational Culture on the Management
Every organisation, no matter how small or big, has an organisational culture. An organisation can easily develop a culture without help of the management. Organisations can create their own culture through the deployment of a system of performance standards and values. The role of the management in the organisation relies on how the management wants to interact with employees and their level of authority.
Organisational culture at Cafédirect has constrained the management to act as a disciplinarian. According to Paton (2003), organisational culture might compel the management to take the role of correcting the behaviour of employees. In this role, the management of Cafedirect might issue written or verbal warnings to employees who are not functioning according to the mission or operational standards of the organisation. Managers in disciplinarian responsibilities have problems establishing interpersonal relationships with other stakeholders of the organisation. Consequently, managers taking this role build relaxed relations with the subordinates. This is because employees view the management as an authoritative body and not as co-workers (Perrini, 2006).
Another constraint placed by the organisational culture at Cafedirect on the management is interaction with employees. Organisations practicing disseminated leadership culture, which requires every employee to participate in business strategy of a company, compel managers to take roles, which are indistinguishable from subordinates. According to Haig (2011), small businesses having a small number of workers can easily accomplish this. The culture of disseminated leadership enables the management to build perfect working relations with employees while overseeing employee performance.
Acting as a role model is another constraint placed on the management by Cafedirect’s organisational culture. Irrespective of the organisational culture, the management must act as a role model for employees in order for them to follow. For instance, organisations wishing for teamwork must have managers with the capability of directly working with workers and encourage team-work atmosphere. Because organisational culture might change from time to time, this will require the management to be versatile. The faster the management of a company can determine the perfect model of organisational desired culture, the quicker the workers will adopt it.
Challenges Imposed by External Environment on the Management
According to Paton (2003), various uncontrollable elements in the external environment can interfere with performance of the management. The external environment comprises of factors affecting the business from the outside of organisational boundaries. Consequently, the organisation has no control over external factors. These factors include labour force, political-legal, social, competition, customers, and technology (Aula & Siira, 2010).
Political stability imposes one of the major challenges to operations of Cafedirect internationally. This is because it offers a suitable environment for doing business. Responsible and responsive governments attract foreign and local investors. Organisations operating in politically stable economies are assured that their properties and investments are safe. As such, they will be willing to invest large amounts of capital for very long periods. Cafedirect operates internationally and encounters both political stable and unstable economies. Of course, management’s role in these economies differs in terms of decision-making. Some governments tend to restrain their activities to safeguarding the nation from external and internal threats. Such governments implement very few regulations to limit the actions of Cafedirect. Sometimes Cafedirect’s management might find itself making decisions to pull out their business from certain countries because of many constraints. As such, the management will have to adapt to conducting operation in the new environment (Haig, 2011).
Economic environment also imposes challenges on the management of Cafedirect. This environment implies the aspects of the economic system in which Cafedirect operates. It comprises of economic policies, patterns of economic growth, measures, and motivations provided by the government for economic growth. Cafedirect, like any other international organisation, depends on economic surplus for prosperity. With the larger surplus, Cafedirect can acquire more resources necessary for growth. According to Granville & Dine (2012), the economy of a country is a primary environmental element influencing the role of management. For instance, in booming economies, the management usually finds it hard to employ more workers. On the contrary, during an economic downturn, many applicants are available.
Technology imposes a challenge to the management of Cafedirect. Technological environment comprises of the level of knowledge development. The demand for innovations arises from changes in factors of the environment. New skills are necessary to meet technological demands. Improvements in technology have made some equipment and skills obsolete. This requires both employees and managers to regularly upgrade their knowledge on new technologies.
Competition is not only a challenge to Cafedirect, but also to other organisations operating internationally. Cafedirect must not only compete in making profits but also in other sectors. For instance, it must have skilled and competent employees, who are frequently in short supply. The best and easy solution is to raise the wages, though this will result in competition when several rivals need employees with similar skills. Managers need to provide other benefits and better working conditions in order to overcome this challenge of competition.
Sources of Power in Organisation
There are five sources of power in an organisation: legitimate power, expert power, referent power, coercive power, and reward power. Legitimate or positional power is derived from the position held by an individual in the hierarchy of the organisation. In order to exercise legitimate power effectively one needs to have earned it genuinely. An example of positional power in Cafedirect is the one held by organisation’s CEO. Expert power comes from possessing certain expertise in a given area of operation. People with certain expertise are deemed valuable by the organisation due to their problem-solving skills. Such people in Cafedirect perform crucial responsibilities and are indispensable. Referent power originates from interpersonal relations one creates with other employees in the organisation. People gain reference power when other people respect and like them. In most cases, referent power originates from charisma. Charismatic people influence others through respect, admiration, and trust. Coercive power originates from the ability of an individual to influence others through punishments, threats, or sanctions. For example, subordinates might struggle against all odds to meet deadlines in order to avoid manager’s disciplinary actions. Reward power originates from the capability of an individual to influence management motivations in an organisation. Such incentives include promotions, positive appraisals, and salary increments. People, who cultivate reward power usually effect other workers’ actions.
Ways of Using Power in an Organisation
Managers can achieve the best results by using their power for the benefit of the employees (Granville & Dine, 2012). There are five ways of using power in organisations: reach, recognize, respirate, ricochet, and reproduce. The "reach" way of using power refers to the situation when the manager needs to recognize that he or she does not have all solutions (Aula & Siira, 2010). The idea of an employee is strengthened when combined with ideas from other employees. Power that reaches out motivates employees and makes their ideas valued. The "recognize" way of using power refers to the situation where the manager utilizes his power and recognizes employees' participation and contribution. Raising employees’ awareness on what others are doing tend to remind them that they are a significant part of achieving success. This deployment of power encourages passion for quality. When using power in the "respirate" way, the manager should bring more life to employees when organisational goals appear to be fading. The manager uses his power to revive capabilities of his or her employees. When using the power in a ricochet way, the manager acknowledges employees’ contributions more than his own contribution. A good manager uses ricochet to encourage the hearts of employees. The "reproduce" way of using power refers to a situation when managers use their authority to provide an opportunity to assist employees in gaining insights and capabilities. An effective manager has no concerns or hesitancy about the fact that employees’ knowledge might exceed his own. They use power proactively to encourage employees to improve their skills and knowledge.
Micro-politics in Organisations
Micro-politics refer to processes taking place within organisations as groups, departments, and individuals compete to access limited and valued symbolic and material resources. Micro-politics occur in organisations between younger and older employees and between men and women. According to Haig (2011), they frequently take place over material resources such as floor space, budgets, and salary increments. However, every resource has to have a symbolic value attached to it.
For every business organisation, and Cafedirect is not an exception, micro-politics are unavoidable. The rivalry between employees might either contribute to an efficient organisational performance or destabilize productive cooperation. According to Doherty & Thompson (2006), micro-politics are unavoidable at Cafedirect due to three significant reasons. The first reason is that humans are "strategic animals". This implies that competition is a usual part of human condition. The second reason originates from the manner in which Cafedirect is set up. Division of labour at Cafedirect encourages employees to serve the interests of the group in which they belong instead of the organisation. The third reason why micro-politics are inevitable is the high level of uncertainty and ambiguity, which runs across all organisational contexts. The management relies on employees in their working circumstance. The ability of the management to accomplish the above responsibility is influenced by politics to a great extent. Uncertainty becomes evident when understanding of an event is unclear. This results in various interpretations from employees (Haig, 2011).
Guideline for Making Decisions in Social Enterprise
Decisions made by the management are crucial in defining where the management standards in relation to serious issues. When managers in social enterprises, such as the Cafedirect, have to make a decision, many attempt to make ethical decision. As such, managers at Cafedirect consider some guidelines related to ethical decision-making. The first factor considered when managers make decisions at Cafedirect is integrity. Decision makers need to feel autonomous when making decisions. If managers do not feel free to make choices themselves because of outside pressures, they are most likely to make unethical decisions. This can possibly make a manager behave unethically. Decision makers i. e. managers at Cafedirect, need to recognize external forces, and then be guided by their integrity.
Another guideline for making decisions in social enterprises is consideration of impacts. When making choices, the management needs to consider the effect that the choice will have on others. Consequently, the management can increase possibilities of making ethical choices when the needs of affected individuals are met by considering the lasting effect of the decision. Ensuring fairness is another guideline for making decisions. Managers should avoid biases that influence their decisions.
Goleman’s Six Leadership Styles
The six styles include pacesetting, authoritative, affiliative, coaching, coercive, and democratic leadership. In pacesetting leadership, the manager is a role-model in self-direction and excellence. Aula & Siira (2010) summed up this style of leader as “Do as I do.” This form of leadership is effective when employees are skilled and motivated and the manager requires immediate results. In authoritative leadership, the manager at Cafedirect can mobilize employees towards shared vision and concentrates on the end objectives. In this form of leadership, the leader leaves the means for achieving the objective to every individual. This leadership can be summarized as “come with me.” In affiliative leadership, the manager creates emotional bonds, which bring a feeling of belonging and bonding to the organisation. This form of leadership works efficiently on stressed employees. Managers using the coaching leader style shape employees for future needs. It is usually summarized as “Try this.” Coaching is effective when managers want to assist employees to build personal strengths. In coercive leadership, the manager tends to demand quick submission. Coercive leadership is also known as the "Do what I tell you". It is effective during a crisis such takeover attempt or company turnaround (Haig, 2011). In democratic leadership, the manager seeks consensus via participation and contribution of employees. It is effective when managers want employees to own a plan, objective, or decision.
Challenges Faced by Cafedirect when Operating In Different Economic Environment
The first problem faced by Cafedirect is management of complex supply chains. It is considerably difficult for the management to gather all relevant information from suppliers. Auditing of performance of suppliers also becomes a burden when operating in different economic environment. It is also a problem to work with stragglers in order to safeguard the organisation from reputational and operational risks. Managers at Cafedirect deal with this challenge by changing how the organisation focuses on sustainability. Paton (2003) once pointed out that sustainability is cultural change and is frequently ignored as one of the biggest challenges when creating a sustainable organisation.
Another problem encountered by Cafedirect is management of diversified groups of people. Diversity refers to differences in sex, age, religion, culture, and race. A workforce with demographic differences forms a diverse workforce. It is important for organisations, including Cafedirect, to comprehend management of these differences. Diversity is a popular problem in any workplace. In some organisations, employees are misunderstood or discriminated due to different reasons. One solution to this problem is the adoption of diversity programs. Cafedirect is under regulatory directive to be non-discriminatory in any form.
Utilization of scarce resources is a major challenge for Cafedirect. Resources are never enough in any organisation. This results in conflicts, especially when groups or individuals have to use a resource concurrently. Consequently, the management has to make tough decisions about which production processes to allocated resources to first. Scheduling can be a solution to this problem. This is because it will ensure equal allocation of resources to production process.
The paper has discussed the inner working environment of Cafedirect. Cafedirect was the first and only Fairtrade organisation to operate such scheme. The impact of the Fairtrade on Cafedirect is that the company has to pay bonus premiums to producers providing coffee for the growing of gourmet sectors and organic gourmet. The organisation has four founder shareholders that come from alternative trade sector. Social responsibility and open communication are some of the aspects of organisational culture adopted by Cafedirect. There are five sources of power in an organisation: legitimate power, expert power, referent power, coercive power, and reward power. For every business organisation, and Cafedirect is not an exception, micro-politics are unavoidable. The six styles include pacesetting, authoritative, affiliative, coaching, coercive, and democratic leadership.