A conceptual model for governance of private universities as social enterprises

India requires successful and sustainable private universities to meet its Higher Education goals. This study proposes a framework covering dimensions for achieving success and sustainability of a private university governed as a social enterprise.

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A CONCEPTUAL MODEL FOR GOVERNANCE OF PRIVATE UNIVERSITIES AS SOCIAL ENTERPRISES

Devang Joshi

Research Scholar, Faculty of Management Studies (FMS),Indukaka Ipcowala Institute of Management, Constituent of Charotar University of Science and Technology (CHARUSAT), Gujarat, India

Dr V G Patel

Former Director, Entrepreneurship Development Institute of India, Ahmedabad, Gujarat, India

ABSTRACT

The concept of Social Enterprises has emerged and evolved in last two decades Their emergence has gained momentum as the void in services which are not catered by Government and Business sectors have increased worldwide Social entrepreneurs, the enterprising individuals, are filling this void through Social enterprises While bringing out the phenomenon of emergence and need of private universities the paper evidences a private university as a Social enterprise The changing expectations from Society are the spur to draw the rationale of governing a private university as a social enterprise

India requires successful and sustainable private universities to meet its Higher Education goals This study proposes a framework covering dimensions for achieving success and sustainability of a private university governed as a social enterprise

Analysis of the proposed framework for managing a private university as Social Enterprise is undertaken Challenges of managing University as a Social enterprise are also presented

Key words: Social enterprises, Private University, Governance, Legitimacy, Stakeholders,

accountability, ethics and values

Cite this Article: Devang Joshi and Dr V G Patel, A Conceptual Model for Governance of Private

Universities as Social Enterprises International Journal of Management, 7(7), 2016, pp 98–113

http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=7&IType=7

1 INTRODUCTION

The higher education sector in India and across the world is witnessing major changes More contribution

is expected from Universities towards their fundamental role of societal transformation The role of Governments in regulating and financing the universities is getting redefined To what extent Government should fund universities and should the universities be funded at all; are some of the questions indicative of this changed role Stupendous development of Information and Communication Technologies has affected all the aspects of life and higher education is no exception These changes have precipitated into considering governance and management of universities with a fresh perspective (Bleiklie&Kogan2007)

This consideration sets the canvas for this paper Privatisation in higher education sector adds a different colour to this canvas

Being aware of its budgetary limitations, Government has allowed entry of private players to establish universities to meet need of Society India, in 2015, had a Gross enrolment rate (GER) in Higher Education

of 24.8 % (British Council - India, 2015).Through its 12th Five year plan India envisages to achieve GER

of 30 % This capacity expansion cannot be met unless Private universities develop in the country There is ample knowledge available on different management models for achieving success of a University These models focus more on the core processes of University covering teaching and research A research gap prevails on management approaches leading to success of a private university maintaining its basic purpose

of societal development This articleen compasses study of a Private University as a Social enterprise and sustainability It attempts to answer several questions like what is the need of Private University, should a private university prioritise profit making over social mission, what is the role of Social entrepreneurs who manage the private university to success, does ethical practice affects the success and sustainability, and what are the operational aspects to be focussed for sustainability

Social enterprise research has been marked with narratives on need, typologies and governance approaches The paper starts with introducing concept and facets of social enterprises as relevant to this study It’s followed by perspective on Private university scenario prevalent in India Taking several studies into consideration a rationale for governing private university as a social enterprise is developed The defining facets of Social enterprise are mapped to analogous facets in a Private university Through study

of research undertaken in the area of Social enterprises, the dimensions of success paradigm of a Social enterprise are sculpted Based on that, a framework is suggested for achieving success of a private university as a social enterprise Challenges faced by Private Universities are also discussed to elucidate about institutional environment required for private universities to flourish Towards the end, conclusion and suggestions for further research are presented

2 SOCIAL ENTERPRISE CONCEPT AND FACETS

The emergence of organizations who have primary motive of social service and who generate income for their sustenance has gained momentum in last two decades Such organizations have come to be termed as Social Enterprise (Satar & John, 2006) Social enterprises have developed in the realms of the “third sector” other than the government sector and the business sector

Although Governments are mandated to look after welfare of the population they are encumbered with conflicts of interests, sluggish bureaucracy and policy paralyses; while the Business sector is benefiting only its investors and customers These limitations of both the sectors have resulted in many vulnerable sections of society who are left out from the welfare of the State or who are incapable of buying services from Business sector These sections are in need of basic services like food, shelter, clothing, education, healthcare and employment The third sector organizations have emerged to serve the needs of these sections of people The Social Enterprises are the organisations falling in this category

A Social enterprise can be understood as an organisation addressing social problems through innovations and self-sustaining operations It uses business strategies for generation of income leading to their self-sustainability (Greene, 2012) A social enterprise undertakes economic activities to generate income to sustain its social mission

3 SOCIAL ENTERPRISE: PROBING THE FACETS

Varied definitions and interpretations of a social enterprise are deliberated in literature These are embracing different facets like legal structure, their founders and their focus (Wronka, 2013)

The concept adapted for the purpose of this study and based on available definitions is:

Social enterprise sare private organizations initiated byan individual or a groupof people with an aim to cater to social needs that were not, in their judgement, adequately provided by government or businesses

These organizations under take commercial activities for income generation to sustain their primary objectives (Martin & Osberg, 2007)

This conceptualization captures two prominent facets of a social enterprise These facets are Social facet and Economic Facet

3.1 Social Facet

Social facet of a Social Enterprise in its essence comprises identification of a social need and satisfaction

of that need by efforts of Social entrepreneurs who establish a Social enterprise

3.1.1 Need and Beneficiaries

Addressing a social need is the primary reason for coming into existence for Social enterprises This need

is reflected through beneficiaries who benefit from the activities of a Social enterprise These beneficiaries may or may not be customers of the business activity carried out by a Social enterprise

3.1.2 Social Entrepreneurs

Social Enterprises are established by an individual or a group of people who have an urge to address a social need (Bornstein, 2007) These people are enterprising and altruistic in nature and are termed as Social entrepreneurs (Martin & Osberg,2007).Explaining Social Entrepreneurs, Dees (2001) notes that Social Entrepreneurs are entrepreneurs with a social mission For them mission accomplishment is central criterion and wealth creation is just a means to that end

3.2 Economic Facet

Contrasting with not-for-profit organizations, social enterprises do not solely depend on donations and grants for their income They generate their own income through offering goods and/or services (Doherty

et al, 2009).Their financial sustainability is dependent on deciding the income generating activities to be undertaken and efficiency thereof Professional management practices leading to efficiency are the important dimensions of the Economic facet of a Social Enterprise All financial resources are generated and employed by a Social Enterprise towards achievement of its social mission Focus on economic facet

of a social enterprise ensures its self-sustainability leading to successful achievement of its social goal The facets of a Social enterprise are illustrated in figure 1:

Figure 1 Key Facets of a Social Enterprise

Social Facet

Social Mission to cater a social need

Social Entrepreneurs with urge to serve society

Economic Facet

Income generation for self - sustainability

All economic activities aligned with social goals

4 PRIVATE UNIVERSITIES: INDIAN PERSPECTIVE

Presently, India is considered as the second largest country in higher education system after China in terms

of number of students enrolled in Higher Education(British Council - India, 2015).The National Knowledge Commission (NKC) of India in its report of year 2007 had recommended establishment of

1500 universities by 2015 to achieve Higher education goals of Country At present, up to July 2016, only

761 universities are existent in India.(Wikipedia, 2016)This is barely half of the goal recommended by NKC This shortfall indicates that the State and Central governments are lagging behind in fulfilling the need of Society This may be because of budget constraints or misplaced priorities or both Because of unsatisfied social needs and facilitating government policies, private universities have emerged in society Emergence of Private Universities is a phenomenon happening not only in India but it is happening across the globe A World Bank report published in March 2008 (Fielden, 2008) – ‘Global Trends in University Governance’ states that:

“The higher education strategy of many countries recognizes that without a thriving private sector the national targets for participation in higher education would be simply unachievable Not only is the cost of expansion beyond the budgetary possibilities of the state, but in many cases the existing institutions are vulnerable to respond adequately the changing needs of the market; private providers can move faster and sometimes more effectively to fill gaps in supply of higher education.”

The report not only indicates the phenomenon of emergence of Private universities, it also underpins its requirements for development of Society

In India, the private universities are typically established by a registered Trust or a Society and obtain legal status through State legislature or Parliament (UGC, 2003) A not-for-Profit Company registered under Section 25 of Company’s act 1956 is also allowed to establish a private university

The present regulations and laws do not allow Universities to generate profit for personal benefits of its founders and promoters Any surpluses generated have to be ploughed back fully for the development of the university

5 RATIONALE FOR GOVERNING PRIVATE UNIVERSITIES AS SOCIAL

ENTERPRISE

Universities across the globe are established with a mission of societal development They can have significant social impact through contributions in scientific, cultural, economic and political development However, till last many decades, Universities were governed and managed with the approaches falling

in the realms of Organisational theories These approaches are characterised by inside-out lenses where an organisation functions as per its own perceived needs rather than considering outside needs of Society The universities acted in ivory towers underlining their freedom to follow their academic and research pursuits with little or no attention to the needs of the society The governments funded universities and obliterated their dependency on society for funding There was no ‘’pressure’’ on universities to work with sole objective of satisfaction of societal needs

This observation is more clearly emphasised through a World Bank Report on Governance and Management Arrangement around the Globe 2009 (Saint, 2009) as under:

The dominant model (of University Governance) was characterised as a “republic of scholars’’ in which academic freedom and the pursuit of knowledge were the overriding values The institutional Mission was to preserve knowledge, add to accumulated understanding and transmit this intellectual inheritance to the next generation Any attempt to introduce accountability for performance was routinely rejected as an attack on academic freedom

This trend of University Governance has been changing since last couple of decades The Society has come to expect more from Universities The Governments have come forward with reforms giving Universities academic flexibility and at the same time expecting accountability towards society

The same World Bank report (Saint, 2009) indicates this by stating:

Overreaching Government Control and public call for reform resulted in the approach to institutional governance and management in higher education, which may be termed as the ‘Autonomy with accountability’’ model (Neave and Vught, 1994) On the one hand it seeks to provide institutions with freedom and flexibility and on the other hand, it strives to ensure that institutions are good stewards of public fund, provide quality education in return for public support and produce graduates, research and services that are relevant to the needs of society and the economy

Bleikie & Kogan (2007) explain this occurrence stating that ‘Organisational and decision making structures of Universities are organized around two central ideas about governance Any university may be seen either as a ‘republic of scholars’ or as a ‘stakeholders’ organisation’ Both the approaches lead to different outcomes ‘Republic of Scholars’ approach prioritises academic freedom and institutional autonomy Whilst, the ‘Stakeholders’ Organisation’ approach primarily considers interests of all the stakeholders

The analysis of published theories and practices points towards the ‘Stakeholders’ Organisation’ approach alternatively reflected as ‘Autonomy with Accountability’ approach for the Governance of present day University The existing Government universities are found incapable of responding towards changing expectations of Society conforming this approach (Singh, 2011).Whereas, this approach becomes aninevitability for the governance of Private Universities as they directly depend upon Society for their funds and sustainability With this come explicit and implicit expectationsfrom different stakeholders of society for delivering as per their need This is the rationale leading to the approach of governing private universities as a Social Enterprise

6 PRIVATE UNIVERSITY CHARACTERISING A SOCIAL ENTERPRISE

Indicating commensalism in a social enterprises, the social missions and economical activities are mutually beneficial.(Gonin, Besharov & Smith, 2013) A private University resonates this hybrid character of a Social Enterprise Figure 2represents facet-based mapping of a Private University reflecting the characteristics of a Social enterprise It indicates that the conception of a Private University and its activities echoes the characteristics of a Social enterprise The rationale of governing a private university as

a Social Enterprise is validated by this analysis

Figure 2 Facet-based mapping of Private University as a social enterprise

7 SUCCESS PARADIGM FOR PRIVATE UNIVERSITY AS A SOCIAL

ENTERPRISE

The creation of social value and lasting social impact are indicators of the success of a Social enterprise (Dawans & Alter, 2009) Both the facets of a Social enterprise, when synergized, bring its sustainability These are inextricably interlinked making it inevitable to deal them with integrated approach(Rykaszewski,

Ma & Shen, 2013).Thus, the selection of economic activities aligned with the social mission becomes essentiality (Fritsch, Rossi, & Hebb, 2013)

Figure 3 Conceptual Framework for Governance of Private University as Social Enterprise

Through extensive studies of cited literature on Governance of Social Enterprises leading to its success,

a framework is proposed defining success paradigm of a Private University governed as a Social enterprise The framework incorporates Governance and Operational aspects as determinants of success The proposed framework does take into cognisance the existing core processes of Teaching-Learning, Research & Development and Extensions Activities In fact, the aspects proposed in the framework are permeating within these core processes Abiding by the scope of this study, these core processes are not discussed

7.1 Governance for Legitimacy

Governance is the most important dimension of success paradigm of a Social Enterprise It has the fundamental responsibility of establishing legitimacy of the Social Enterprise Organisations which are perceived to be legitimate increase their survival capabilities, thus minimising the risk of organisational demise (Baum & Oliver, 1991; Dart 2004)

7.1.1 Legitimacy

Suchman (1995) defines legitimacy as generalised perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and

definitions How legitimate internal and external stakeholders perceive an organisation influences its activities and survival (Seanor & Meaton, 2008)

The determinants of legitimacy of a Social enterprise are Ethics &Values it adopts and Accountability

it manifests leading to stakeholder satisfaction (Smith & Woods, 2015; Mason, Kirkbridge & Bryde, 2007) Social enterprises are perceived legitimate based on their mission, social value creation and stakeholder satisfaction (Mason, 2010).The Governance of a Social Enterprise has to address these to build legitimacy contributing to success of a Social Enterprise The linkages of legitimacy and its determinants can be understood from figure 4

Figure 4 Legitimacy Linkages

Creating a positive social impact and satisfaction of all its stakeholders builds the legitimacy of the University The Governance of a Private University, by establishing its legitimacy, safeguards perpetual survival of the University

Legitimacy is established by the Boards by ensuring that social objectives are fulfilled when entrepreneurial actions are undertaken (Mason, 2010).Giving priority to income generation over attaining social goals is a way for wilting of a university In India, Education is considered as a pious activity The change of focus from Social goal of Education to economical goal of profit-making is taken sceptically by Society Unethical practices and compromised Accountability undermines the legitimacy of a University ultimately affecting its future sustainability

7.1.2 Values and Ethics

The word ‘Social’ in social enterprise raises expectations from stakeholders for moral and ethical conduct from their Boards, Management and employees (Chell et al 2016).The “price” of misconduct is higher in the non-profit sector than it is in the profit sector (De Kam, 2003) A social enterprise is not only expected

to focus on business values but also on social, moral and ethical values as well (Argandoña, 2007)

An organisation fosters strong ethical culture when top management leads with integrity and employees display commitment to ethical values Bornstein (2004), while characterising a social entrepreneur mentions “strong ethical fibre” as one of the essentials Ethical conduct of social

entrepreneurs leading a social enterprise and values like honesty and integrity reflected in operations of a Social Enterprise bring legitimacy to the Social Enterprise

To sustain and nurture its brand image and reputation, a private University requires to have high quality students and high quality teachers The ethics and values in its operations are important considerations for these two sections of population when they chose a University Public-interfacing operations of a University like admissions, staff selection, purchases, charging of fees, and legal & regulatory compliances exude the ethics and values of a University Internal operations like evaluation & assessments, promotions, and HR practices also reflect the ethics and values of a University

Credentials and conduct of people in the management and employment and that of students and alumni contribute towards the reputation of a University as an ethical organisation The values of honesty, integrity and transparency are the important contributors to build social image and legitimacy of a University

7.1.3 Accountability

Dual goals make accountability conception of a Social Enterprise different from other organisations (Wang, 2009).Its accountability is conceived not only for spending money properly but also creating positive social impact Kearns (1996) also emphasises that accountability is “the obligation of public and non-profit organisations to serve a higher authority – the public trust – which is the ultimate source of their mandate, their authority and their legitimacy”

Aligning all their activities towards the basic purpose of serving society becomes imperative for private Universities as reflection of accountability Core activities like Programmes offered, Teaching –Learning systems and Research undertaken are to align with the mission Ancillary activities like managing residences, transport services, food services, security services, stationary supplies and others are to be undertaken imbibing this spirit Perceptible positive impact on its stakeholders like Students, Parents, academia, Government industry, and surrounding community contribute to the Accountability of a University

Compliance of prevalent laws, diligent and honest accounting, and achievement of highest standards of performance are the immediate measures exhibiting accountability of the university towards society

Assessment through external agencies: The accountability of a university is made noticeable through

assessment by independent external agencies Regular academic and administrative assessment of a University, internally as well externally, is an exercise towards ensuring accountability of the university There are national accreditation authorities who assess the capability of a university towards fulfilment of its social mission Outcomes from such assessments are indicative of the achievement of the social goals of the university

7.1.4 Stakeholders’ Satisfaction

Meeting expectations of Stakeholders contribute to Accountability going beyond compliance of laws and regulation (Kearns,1996) Freeman defines stakeholders as ‘any group or individual who can affect or is affected by the achievement of the organisation’s objectives’(Freeman, 2010)

Whereas for-profit organisations focus only on customers and owners, a Social enterprise has to focus on all the stakeholders The term stakeholder in its first usage in 1963 at the Stanford Research Institute was explained as ‘those groups without whose support the organisation would cease to exist’ This is essentially true in case of a Social enterprise as its existence depends on support of its stakeholders (Ko, 2012).Relationships with Stakeholders also facilitates access to capital (Mair and Marti 2006)

Jongbloed, Enders & Salerno (2008) bring out that legitimacy of a higher education institute in a society is increasingly being determined by the level and quality of its commitment to its stakeholders Identifying the stakeholders and meeting their needs give competitive advantage to universities(Dobni&Luffman, 2003)

A private university draws its support from Society due to support of various stakeholders like students, parents, alumni, employees, industry, academia, government, regulating bodies, associations, financial institutions, donors, volunteers, media and general public(Mainerdes, Alves &Raposo,2010).A University is accountable to these stakeholders through its actions and governance

7.2 Operational Aspects

The leaders of a social enterprise should look into the operational aspects of Social Enterprise by considering its mission and stakeholders being served (Chell, 2007).Operational aspects of a social enterprise which are differentiated because of its dual mission are Finance Management, Human Resource Management and Marketing Management Adoption of New Managerialism governance mode incorporating market principles towards these aspects along with consideration of social goals leads towards success of economic activities and sustainability of Social Enterprise (Braun, 1999; Lynch, 2014)

7.2.1 Finance Management

Economic activity of a Social Enterprise is an indispensable component of its success paradigm making finance management very important operational aspect The aim of financial management is economic wealth creation leading to social value creation

Social Enterprise generate their major income from commercial activities though other sources like grants and donations may be available The expectations of the stakeholders and social mission focus are factored in when Social Enterprise determine pricing of their products and services This leads to generation of less surpluses that it would have been if full economic costing is affected (VanSandt, Sud, & Marme, 2009)

Legitimacy considerations affect the perceptions of operational expenses For an instance, an expense like ‘’Hospitality’’ is looked at differently by different stakeholders A manager may consider it an essential expense for customer satisfaction whereas a donor or a volunteer may consider it unnecessary Stable financial situation is the prerequisite for success of a Private University It’s an important task of Governing Board of not letting Finance dominate but making it a platform for achieving social goal (Shattock, 2010)

The objective of finance management in a traditional for-profit business is profit maximization and wealth maximization of its owners Contrasting to this, for a private university the sound Finance management incorporates:

• Minimisation of the cost of education to the students

• Provision of sufficient resources for operations and growth of the university

• Risk mitigation by avoiding overdependence on one resource

The major source of finance for a private university is student fees Fluctuating societal demands, competition and government regulations heavily influence the student fees that can be charged Overdependence on student fees, thus, increases the risk of a private university Increasing other sources of income like endowments, donations, consultancy and sale of intellectual property provide hedging against the risk This also reduces the cost of education to the students

Raising finance for fuelling its expansion poses a challenging situation for a University Availing debts becomes difficult as it doesn’t generate cash flows like a for-profit organisation and Government regulations further restrict it Philanthropic donations remain one source which has a limited supply owing

to competition

7.2.2 Human Resource Management

The existence of dual logic of social mission and commercial activities make human resource management more difficult in a Social Enterprise (Satar & John, 2016) Starting from Governing Board, it is a challenge

for a social enterprise to have people who have right combination of social orientation and commercial activity skills.(Mason, Kirkbride & Bryde, 2007) This requires the governing board to have a blend of people with inclination for social service, business management and entrepreneurial skills

The human resource of a university comprise of students, staff and the management All the three organs are to be quite aware of duality of the goal of the university i.e social mission and income generation for self-sustainability Their harmonisation leads towards achievement of these two goals The management of the university plays the lead role in harmonising all the human resources towards the achievement of the university goals

7.2.3 Marketing Management

Marketing Management of a social enterprise is a confluence of social marketing and commercial marketing bringing in its challenges Whereas Social marketing is about promoting a cause, idea or a mission; Commercial marketing aims at promotion of goods or services Social enterprises use varied marketing communications to create organisational impression contributing to its legitimacy (Teasdale 2010)

Organisational impression management involves actions executed to influence others’ view an organization (Bolino et al., 2008) It is particularly important where the value of product offered is not perceived solely in financial terms (Nicholls, 2009)

Impression management also influences marketing actions for goods/services of a Social Enterprise

An Orphanage selling stationery items made by orphan children will advertise using a different vocabulary than a for-profit organisation Also, it is likely to choose different distribution channels and use different pricing models

A private university functions in a competitive scenario The important objectives of marketing management – customer creation, customer satisfaction, increasing market share and building brand image – are also applicable to it (Enders, 2013; Gross & Godwin; 2005; Hanover Research, 2014).These, as applicable to a university is elaborated in Table 1

Table 1 Applicability of marketing objectives for a private university

Customer creation Introduction of new academic programmes as per demand and

requirements of society

Customer satisfaction

Delivery of best education and other services like consultancy, transfer of technology, R&D

Providing best working environment to its employees Working for benefit of society including surrounding community leading to Stakeholder satisfaction

Increasing Market

Share

Exploring new regions/States/Countries for getting students Engagement with Industry and Government for services like Consultancy, Technology Transfer and more

Establishing multiple Campuses

Building brand image

Using various communication channels like media, events and word-of-mouth to spread information about university

Active engagement with Stakeholders Ethical practices and law compliances indicating Accountability