Diversification and Legitimisation

A complex system emerged over time, building on localized assets and on the experience of the founder (a former trade-unionist) who gathered a group of nurses looking for occupation to form the first enterprise (Chorus) of the Harmony consortium. At that time, Chorus was a care home for the elderly that hosted, within the same premises, also younger people with disabilities (mostly psychiatric). This situation was not beneficial for the elderly, nor for the psychiatric patients, who were often working-age individuals with the need to be reintegrated into the community and live an autonomous and rewarding life. This represented the main, yet unsatisfied, societal challenge and opportunity, since it was obvious that nursing homes were unsuitable for this purpose. On the other hand, publicly run day centres were not addressing the causes of marginalisation. “The public health services had a day centre where people made and unmade things. There was no meaning. Users value the sense of performing useful and concrete work” (Consortium HR manager, 2015). As a consequence, centres were poorly attended. “So, we had the idea of setting up our work integration cooperatives. Simple stuff.” (Founder and 2015 consortium’s president).

A process of diversification started, and generated further organisations, which converged towards a second-tier cooperative. Whilst elderly care was still provided, Chorus diversified into the provision of activities for psychiatric conditions and created a new organization for rehabilitation and educational services. These services were organized around the idea of workshops where people could learn a profession, commitment and respect for the work of colleagues, relatedness and belonging. As noted by a user: “I … started doing a little job, there is a laboratory near the community, assemblages are made, a very simple thing, but just to start with and a bit at a time I improved my relationships with others, the desire to confront myself with others and also work. There I got used to work again, to want to do things too…” (User, 2016).

The simple components produced in the workshops were part of a complex production system orchestrated throughout the consortium by means of an intentional design of coherent organizational structures and a constellation of inclusive practices and technologies used by all the cooperatives and their workers, ordinary and with difficulties. Consequently, beneficiaries gained (in the words of the founder) “a sense of purpose” and belonging, as well as a symbolic payment, which increased as skills and work performance grew. Specific transport arrangements (a reserved bus to pick up each patient and the development of a personal relationship with the bus driver) were encouraged. These practices were intended to form a system of monetary and mostly non-monetary incentives ensuring that beneficiaries attached meaning to their work and to relationships with other people in the workshop. This entire model built on a very specific local cultural ethos, described by the HR manager “… in the Veneto region, work is part of a person’s identity, and not having an occupation, even with a disability, is equated to a loss of dignity (“Harmony” HR manager, 2015). A worker notices “and being busy, having a salary, being autonomous, gives the persons their dignity” (ordinary worker and cooperative member, 2016).

Following the first initiative, more day centres were established, alongside housing services. At the time, users who had recovered autonomy were introduced into the job market within a network of local commercial enterprises. “But users, after a first period, came back to rehabilitation. They went into crisis, and simply quit. Then we discovered that they had quit not so much because the company did not want them, but because they had colleagues on the shop-floor that laughed at them” (Founder and 2015 President). To respond, further diversification instituted Type B cooperatives. This financial model has also been functional to the development of internal demand within the consortium. Table A provides anonymized information on activities, workers and users.

Legitimization came primarily from the socio-economic benefits evidenced by the consortium model (consistent with Su, Zho and Zhang, 2019). “I have been in the cooperative for 22 years. I saw it taking its first steps … I saw this structure growing, … and like ‘mushrooms’ new cooperatives all sprang up within these three local health districts. And it makes you understand the value there is in investing, in believing in the community, in reinvesting to return resources to the local area, because the community then learns to know you and therefore believes in your project…” (“Chorus Industria” Type B, 2016 President). The financial viability of the model strengthened legitimization also with respect to social service costs. As a number of directors emphasized, by integrating workshop activities into industrial production, the cost of users’ bursaries within Type A organizations was only in part covered by the public sector (about 50%), since another half came from each Type B organization’s earned income. For the public sector this meant reducing welfare expenditures (consistent with Chiaf & Miniaci, Reference Chiaf and Miniaci2015). Social value creation was also evidenced by the spatial regeneration induced by the consortium’s investments in rural areas.

Obtaining the legitimization of the model, however, was initially problematic among the public administration (specifically the medical community) which viewed the project with suspicion as well as with the business community (which perceived Type B cooperatives as competitors). This resonates with what said by one user. In his city of origin (where he had been cured in a mental health centre) “it was therapy and therapy and therapy. There were no alternatives. … Here, however, the system is completely different … People have helped me—I don't know how much—to get out of this critical situation …” (User, 2016). One of the most notable effects of the model was the production of a cultural change among local institutions, local businesses and the community to overcome prejudice against situations of personal vulnerability. “Workshops have been taken to local school children “against the stigma of mental illness and therefore prejudice.” (“Chorus Sociale” Type A, president 2016). Also, the founder engaged with the public administrator in the creation of new practices, which were then transformed in new administrative rules for co-programming and co-production, at a time (in the 1990s) when the national and European indication was instead to use competitive bids. “It has been a difficult journey in which each partner renounced some of its rigidities to enter a domain that was in part unknown. People were visionary. There was a dialogue among institutions; it has been a cultural journey” (Head of municipal social services, 2016). This finding reflects what has been observed also in other work integration social enterprises (i.e. Pattinson, Reference Pattinson2020).

Division of Labour

More organizations were created over time to integrate workers. The proliferation of complementary organizations increased coordination needs, and led to the creation of the consortium, a cooperative of cooperatives, which brought cooperatives of Type A and Type B under a unitary organization. Those of Type A were coordinated by “Chorus Sociale” (the social branch of the consortium) and those of Type B by “Chorus Industria” (the industrial branch of the consortium). “Chorus Industria is, let’s say, the heart of work integration… It passes on the work to the day workshops. Mincing, chopping the complex production processes into simpler processes that can be allocated to guided work centres, so that even the most seriously ill user is able to perform the job.” (“Chorus Industria” Type B hub; 2016 President). Figure 2 illustrates the structure of the consortium, the internal division of labour between Type A and Type B cooperatives, the sectors of activities, and the internal and external flows of resources.

Fig. 2

The consortium integrated work-integration system

Technological Innovations

The work-integration system described above subverts the meaning and use of repetitive work. Instead of being outsourced, repetitive work takes a central role, as acknowledged in other WISE studies (Narayanan & Terris, Reference Narayanan and Terris2020). It has been brought back to the shop floor as the main work-integration resource. Long-term collaboration with a commercial supplier providing technologies for work safety are aimed at identifying solutions to reduce the negative impacts of repetitive work. As noted: “If the mission is inclusion, everything that creates an obstacle to this is seen as harmful…. (Health and safety services supplier, 2016). This eventually lead to the patenting of solutions for work safety and occupational health.

Likewise, major industrial automations that fit the production process have been designed and patented in partnership with commercial specialised suppliers to enable disadvantaged workers to perform their tasks, whilst keeping sustainable levels of productivity, increasing the quality of services and market competitiveness for Type B organizations. In order to be economically viable, these enterprises needed to find not only market demand to sustain marginalised workers (30%) but also corresponding levels of occupation for ordinary workers (70%). Technology and its innovation embed the coherent set of principles that guide work-integration as well as economic sustainability under market pressures. This, to provide an illustration, was the idea underpinning the R&D collaboration with a Swedish specialized supplier that lead Flute (industrial laundry) to invest in a new plant that could reduce mistakes in the labelling of clothes and allow users with difficulties to be integrated, while improving service quality for clients. As noted: “With the consortium we decided to invest in technology not to cut jobs but to give opportunities to work to those who are less able … We are within the social and labour economy. This refrains us from thinking in a strictly capitalist way. We put people at the centre. That's the philosophy of the consortium” (Flute, Type B, President’s inaugural speech, 2015).

Financial Innovations

The main challenges of this model were related to financial sustainability vis à vis the 20 million Euro investments required to meet market demand for goods and for social services, while creating social value. The inclusion of a local cooperative bank in the consortium made it possible to finance growth through debt, to complement endogenously generated resources. The surplus produced by single cooperatives was entirely shared and re-invested across the consortium, beyond what is required by the regulator. Type A cooperatives, including those which are not part of the work-integration filière, are less subject to market competition since they work in co-production of services with the public administrations or because they offer services for elderly people, which are in high demand. Financially they are more stable and they shared their surplus for the growth of the work-integration Type B cooperatives. This sometimes created tensions among cooperatives which, at the time this study was undertaken, were managed and handled under the leadership of the founder. Further developments, following generational change, will require attention in this respect.

Through reinvestment, funds were also leveraged from public administrations and a local cooperative bank on specific projects. No equities have ever been used. Moreover, in 2006 the consortium instituted a Consortium Solidarity Fund. This was an internal financial asset managed collectively. Funds were raised by contributing 0.10 euro cents per hour worked across the consortium. Every year 150 thousand euros ca. were collected, and the fund were for Type B to use, to finance new projects or new enterprise development, interpreting a reciprocity principle across member cooperatives.

Physical assets were also managed collectively through one ‘scope’ organization. This is a real estate cooperative within the consortium that built and owns all the estates of the cooperatives in the consortium. This solution allowed to internalize within the consortium all of the investments in industrial buildings and reduce the risks associated with asset specificity.

Also, financial sustainability was pursued, in parallel, by ensuring long-term contracts, and also by developing strong private–public partnerships. “We have invested twenty million in public facilities…These were about activities and services that we shared with the public administrations…We invested and built what was lacking, clearly in exchange for twenty-year contracts for the management of those services. So in twenty years I amortise the investment but at the same time I invent new jobs and employment” (Founder and 2015 President).

Capability to Include Stakeholders

This involves the presence of a structure and specific processes for the inclusion of multiple actors, especially the most vulnerable. On the one hand, this prosocial organizational capability is underpinned by the cooperative business form, which is based on membership and democratic governance. It is therefore conceived to integrate in the governing bodies the needs of users and other internal stakeholders (workers and volunteers). On the other hand, interviewees observed that the integration of users requires a long process. Infact, the dominant stakeholder is the ordinary worker. In this sense stakeholder inclusion does not happen simply as a reply to the legal requirements in place for social cooperatives (consistent with Colenbrander et al., Reference Colenbrander, Argyrou, Lambooy and Blomme2017), nor it arises solely or specifically from organizational governance, with ordinary workers and volunteers as the main participants. Rather, it needs to be supported by explicitly organizing production and technology (in partnership with technology suppliers), finance (within the consortium and with the support of a local bank), supporting policies (with the local administration), and local events (with other community constituencies) for inclusion. Most evidently, the consortium has supported a novel way to conceive technological development and innovation, since innovation was not introduced to cut labour costs, but to allow workers to access job tasks. For example, in the case of Flute (automated industrial laundry) the industrial plant was entirely re-designed to ensure three outcomes: higher service quality, inclusion of vulnerable workers, and a sustainable level of labour productivity.

We have also observed that the model’s effectiveness in creating highly effective work integration and at lower costs, as well as general employment in the community are crucial sources of legitimization. These results are consistent with Thompson et al. (Reference Thompson, Purdy and Ventresca2018) who evidence that, in the context of social business, ecosystems bottom-up interactions that build on shared meaning, resources and infrastructures are more effective than top-down actions.

Capability to Learn and Innovate

Observations suggest that this strategic capability is transversal to all other capabilities, dynamic and evolutionary, since it refers to the development of a structure and a system of practices which are able to generate responses to the emerging diversity and complexity of user needs, regulatory context, and market challenges. Learning capabilities have allowed the consortium and its members to reinterpret existing problems and generate new understandings and solutions (Aldrich & Fiol, Reference Aldrich and Fiol1994). The creation of a coherent set of structures, endogenous financial tools, practices and technologies has facilitated the transferability and learning of production skills as well as of cooperative behaviours across the consortium and beyond, at territorial level, to reach other community constituencies. Using their capability to learn, the organizations of the consortium introduced modalities that were innovative and more effective than other approaches (e.g. public sector, private for-profit sector work integration). They tapped into existing local resources and then enriched them, reinforcing shared solidarity values, local social capital, human capital, financial resources, discovering and regenerating them from the outset. This happened since the early stages of this experience, when the founder could start the first elderly care organization and then the first work-integration cooperative by building on localised social capital, tapping into the nursing school for healthcare related personnel, and into a large group of early retired workers from local small and medium manufacturing firms (the so-called “maestri d’arte”) to get experts who could teach production skills to users.

Capability to Grow by Diversifying

Occupational opportunities had to be diversified. Some user attitudes and needs could be more effectively met in agriculture and service provision (cleaning and landscape/gardening services). The necessity to constantly search for renewed solutions has to do with the already mentioned changing needs and environment. The literature posits that an organization can deploy its capabilities in different domains by means of diversification. In particular, the theory of the multi-product firm is clear on the fact that profit-oriented firms aim at capturing positive externalities by diversifying under a common organizational structure (Helfat & Eisenhardt, Reference Helfat and Eisenhardt2004; Penrose, Reference Penrose1959; Sakhartov & Folta, Reference Sakhartov and Folta2014; Teece, Reference Teece1982). Instead, at Harmony, diversification is functional to meeting multiple users and needs (a gradual move from emotional rehabilitation, learning skills and later employment) and creating more jobs overall within the community. Differently from conventional for-profit enterprises, the consortium shows that the internalisation of social value, or positive externalities, through diversification is instrumental to the reduction in socio-economic exclusion and structural unemployment, and therefore to the intentional creation of more positive externalities at collective level (e.g. lower social exclusion, higher occupational rates, lower welfare costs) and benefits for users. This is consistent also with more general argument around multi-product non-profit enterprises (Oster, Reference Oster, Seaman and Young2010).

By means of diversification, OC were applied across organizations at low marginal costs by means of Type A and Type B spin-offs, as the evolution of the consortium demonstrates. The value of each new organization created within the consortium depends on the variety it adds, or on the degree of complementary diversity of the new activity with respect to existing ones. In this model, the multi-product organization is a way to enhance vulnerable stakeholder opportunities and participation in the economic system, rather than a way to extract value for profit. This requires “dynamic capabilities” (Eisenhardt & Martin, Reference Eisenhardt and Martin2000), or that established competences are not seen as fixed. Besides being used across the organizations, they also need to adapt and evolve consistently, should users’ needs, local employment needs, and market conditions change.

Summary of the Main Findings

Altogether, the model described represents a specific social innovation, that is aimed at work integration problems, supported by mutually reinforcing prosocial capabilities. The consortium provides an organizational context in which to support inclusion and the creation of work opportunities in an efficient and effective manner by developing distinctive ways of including stakeholders, learning and growing by diversification. Through these capabilities the consortium bridges intents and actual outcomes, using coordination mechanisms that focus on cooperative governance, endogenously generated capital, division of labour, prosocial use of technology that enable competitive levels of productivity. This way of organizing activities shows continuity across the consortium and over time, and makes the organization distinct from alternatives such as public administrations and for-profit solutions. It taps well into the evolutionary way of thinking for which a variation (from the public solution) leads to selection (it becomes the most efficient and effective alternative) and then to retention (since the model persists over time).

Theoretical Implications

We can finally posit that in WISEs capabilities should be defined as consistent sets of prosocial organizational routines which enable solutions to complex neglected issues (such as the integration of disadvantaged categories) and which explicitly work towards the creation of social value. PSOC are retained if, in line with the aims of WISE, they are able to produce benefits for stakeholders and for the community while providing a competitive advantage that ensures the economic sustainability of the organization. The analysis contributes to the OC literature by adapting the notion to a context different from for-profit organizations, where the same notion of competitiveness for value appropriation is bypassed by the social goal which requires that value for society is produced in excess of what organizations actually appropriate (Sacchetti & Borzaga, Reference Sacchetti, Borzaga, Sacchetti, Cristoforou and Mosca2020; Santos, Reference Santos2012; Saebi et al., Reference Saebi, Foss and Linder2019). In particular, it may be hypothesised that the greater the degree to which WISEs are able to respond to complex integration needs and business demand for services, the greater the likelihood that PSOC are present and will evolve. A corollary hypothesis may be that the greater the degree to which OC support growth and evolve, the greater the likelihood of creating more work integration opportunities and societal value.

In Tables 3 and 4 we reconnect with the first Sections and synthetically compare our findings on prosocial organizational aims and capabilities both with the results highlighted by the literature on for profit companies, and the emerging studies on socially oriented organizations.

Table 3

Organizational objectives compared

Organizational aims in for profit organizations	Organizational aims in socially oriented organizations	Findings from the consortium
Competitiveness and profit	Competitiveness and social value creation Nyssens (Reference Nyssens, Defourny, Hulgaard and Pestoff2014) Economic sustainability and eventually profit are instrumental to the production of social value (Borzaga & Tortia, Reference Borzaga, Tortia, Becchetti and Borzaga2010)	Competitiveness is aimed at making Type A coop users independent, or at “loosing the client”, that is at making users socially integrated, emotionally stable, and able to work for a salary either in a Type B coop within the consortium or outside Competitiveness in Type B coop means to organize production to serve the occupational needs of users and ordinary workers while supplying contractors with quality services and competitive prices Economic surplus is entirely reinvested to diversify and increase work-integration opportunities as well as supporting services within the consortium (housing services; type A coops for educational and work training services)

Table 4

Organizational capabilities compared

Capabilities	Organizational capabilities in for profit organizations	Organizational capabilities in socially oriented organizations	Findings from the consortium
Inclusion	Control is primarily based on ownership rights, involving shareholders mainly Inclusion is not the primary objective It can however be implemented focusing on corporate social responsibility and HR strategies (Blair & Stout, Reference Blair and Stout1999; Crane, Reference Crane2018), with different degrees of stakeholder involvement	Inclusion supports social innovation and aims It regards multiple aspects of the WISE: Its aims: work integration as a means to address marginalization issues in our economies Its internal governance and practices: inclusive and multistakeholder (Nyssens, Reference Nyssens, Defourny, Hulgaard and Pestoff2014; Sacchetti & Borzaga, Reference Sacchetti, Borzaga, Sacchetti, Cristoforou and Mosca2020; Sacchetti & Borzaga, Reference Sacchetti and Borzaga2020) Its systemic governance: co-design and co-production with the public sector (Sacchetti & Borzaga, Reference Sacchetti, Borzaga, Sacchetti, Cristoforou and Mosca2020; Brandsen & Pestoff, Reference Brandsen and Pestoff2006)	Inclusion is the primary objective. It defines multiple and interdependent aspects of the organization: Cooperative governance both at organizational and consortium level Production organization within type B coops, and the coordination of complementary operations between type A and type B cooperatives Open ordinary worker participation as cooperative members in type A and type B cooperatives Selected user membership in work-integration cooperatives of the B type Coordination of activities through teams by sector of activity Collaborative networks with suppliers and clients to develop inclusive technology Technology is developed and used to maximize consistency between the training and the work experience Technology is functional to work-integration needs and productivity, rather than being functional to productivity only A strong alignment of values and aims with the public administration, and joint service planning with local public welfare services, and co-production of services
Learning	Routines and technology are developed and used to gain competitive advantage for profit (Teece et al., Reference Teece, Pisano, Shuen, Dosi, Nelson and Winter2001) Focus on knowledge management capabilities and performance (Garri et al. Reference Garri, Spicer, Pereira, Temouri, Malik and Tarba2020) Learning and absorptive capacities support competitive advantage (Cohen and Levinthal, 1990), diversification and scaling up (Helfat & Eisenhardt, Reference Helfat and Eisenhardt2004; Penrose, Reference Penrose1959; Sakhartov & Folta, Reference Sakhartov and Folta2014; Teece, Reference Teece1982)	Focus on knowledge management capabilities and social enterprise performance (Granados et al., Reference Granados, Mohamed and Hlupic2017) Learning and absorptive capacities support competitive advantage and scaling up (Bloom & Chatterji, Reference Bloom and Chatterji2009; Bacq and Eddleston, 2018)	Learning is transversal to all activities Routines are developed and used to produce value for users and the collectivity Routines are functional to work-integration, and define the process through which the coops plan and assess an individualized path, from training to work, for each user
Diversification	Capabilities are applied in different domains by means of diversification Theory of the multi-product firm (Sakhartov & Folta, Reference Sakhartov and Folta2014)	Non-profit enterprises as multi-product organisations (Oster, Reference Oster, Seaman and Young2010)	Competences are applied to create spin-off cooperatives and grow by diversification, with the coordination of the consortium, to accommodate diverse users’ conditions, needs and work attitudes Financial integration and internal redistribution of profits within the consortium cooperatives allow for diversification and growth

Recommendations for Future Research

Research on prosocial capabilities in WISEs can advance the agenda in important ways. First, it can provide illustrations of what OC are required by non-profit organizations, how they are developed consistently with prosocial aims and gain continuity. Second, it indicates how capabilities in a non-profit environment can be oriented towards the creation of social value rather than its appropriation. Third, it indicates how capabilities may change over time as a result of external market stimuli and new societal challenges. These themes could benefit further from comparative analysis on how PSOC differ across non-profit sectors of activity, for instance health, education, and culture. Last, since our study is based on case analysis, findings cannot be generalized. Additional research that considers other cases and extended survey analysis reaching out to a wider population of WISEs could contribute towards this limitation.