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Chris Cornforth

In an era when the recent financial crisis has raised questions about the morality and sustainability of the economic system, and austerity measures have led to funding challenges for many charitable and voluntary organisations, hybrid organisational forms such as social enterprise offer a promising alternative: an ethical form of business able to address social issues and reduce the dependence on donations and government funding. However, history suggests that it can be difficult for social enterprises to maintain their social goals in the face of commercial pressures and that consequently they may succumb to mission drift. Organisational governance is important in helping to manage these competing pressures, and this chapter examines some of the main choices and challenges that social enterprises face in designing their governance structures, systems and processes. One of the challenges facing hybrid organisations, such as social enterprises, is how to combine different logics; for example, many social enterprises have to combine a commercial logic necessary for operating in the market with a ‘charitable’1 logic of pursuing a social mission (Ebrahim et al., 2014). It has been suggested that combining different logics can result in long-term instability, where one logic comes to dominate (Young et al., 2012). Indeed, traditional left-wing critiques of co-operatives and other forms of employee ownership suggested that these organisations would simply degenerate into being no different from capitalist forms of business as they succumbed to pressures from the marketplace (Mandel, 1975). This process whereby an organisation gradually loses its social mission is often called mission creep or mission drift (Minkoff and Powell, 2006; Jones, 2007). While social enterprises are not the only types of organisation to be susceptible to mission drift, they face the particular challenge of trying to manage being both a business and pursuing a social mission.