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Erb Institute Graduates Publish Book on Hybrid Organizations

10/26/2009 --

Master's project in sustainability evolves into guide offering new business models for environmental leadership.

ANN ARBOR, Mich. — What started as a master's project by five dual-degree students in the Erb Institute for Global Sustainable Enterprise is now a book titled Hybrid Organizations: New Business Models for Environmental Leadership (Greenleaf). The authors are all alumni of Ross and the School of Natural Resources and Environment.

The concept of hybrid organizations is not new, says Emily Reyna, MBA/MS '09. But there is a lack of research and literature on how these companies work. She and her co-authors were eager to shed light on the past, present, and future of organizations they define as market-oriented, mission-centered, and focused on the common good.

"We knew there was a lot of information out there on corporations with socially or environmentally responsible arms, but we were more interested in companies actually founded on an environmental mission," says Reyna. "We all believe in capitalism and markets being efficient, but we also have an inherent respect for nature and want to conserve our resources. The hybrid organizations we studied use capitalism as a mechanism to address these environmental challenges."

Reyna's co-authors include Brewster Boyd, Nina Henning, and Matthew Welch (all MBA/MS '09) and Daniel Wang (MBA/MS '08). As their master's project evolved, faculty adviser Andy Hoffman envisioned a broad application for the information beyond academia. Hoffman is a widely published author on the topic of sustainability and encouraged the students to pursue their own publishing deal.

"Most master's projects are more client-focused," says Reyna. "But Andy was really excited about our project because it was academic and could be shared with a larger audience. After reading the final version of the project, he thought it contained ideas and case studies that business practitioners could use, as well as those who are involved with or are trying to start hybrid organizations."

The authors initially collected data from 47 companies that fit their description of a hybrid organization. They chose only for-profit, privately held companies and put no restriction on size or age of the firm. They reviewed business models, strategies, finances, organizational structures, processes, metrics, and innovations of hybrid organizations. Then the team selected five companies for in-depth case studies: SUN OVENS International, Guayakí, Eden Foods Inc., Maggie's Functional Organics, and PAX Scientific Inc.

"We found that there's not one specific thing that makes a hybrid organization," says Wang. "It's a combination of many things that creates the business model. They're led by a transformational leader, they try to incorporate sustainability into their mission, and they track environmental performance. They can't just be a company with one 'green' product. It has to be more holistic."

Throughout their research, the team was continually impressed with the ability of management inside hybrid organizations to infuse their company cultures with a mission while developing personal relationships with suppliers, customers, and shareholders.

"Within these organizations, there's an amazing level of commitment by the employees to do the right thing," says Wang. "This notion to do more than just meet the bottom line is inspiring."

But make no mistake: These do-gooder companies are still market-oriented. One of the criteria for a company's participation in the study was that they are legally registered as business entities and offer products or services in the marketplace at competitive prices (rather than below cost as nonprofits often do).

"The companies we wanted to study had to be very in tune with their mission but also want to be profitable," says Reyna. "They had to be able to achieve both."

One of the hardest things for hybrid organizations is balancing the pressure to stay true to their vision while continuing to scale and grow, says Wang. "Most of the companies we studied tended to be smaller, younger, and nimbler, but as they grow, they're going to have to be more aware of the impact they're having on the environment, as well as competitive pressure," he says. "Other businesses may not have the same challenge of trying to stay true to a non-financial mission while they're trying to grow."

In the book, the authors conclude that hybrids offer an effective organizational model for contributing to global environmental issues. The writers argue that, "while there may be limits to the speed of growth or scaling for these organizations, they may be more effective and self-sustaining than traditional organizations in meeting humanity's common challenges."

The authors credit faculty adviser Hoffman, Ross faculty, and the Erb Institute staff for guiding them through the publication process. Hoffman is the associate director of the Erb Institute and the Holcim (U.S.) Professor of Sustainable Enterprise at the University of Michigan. He also is an associate professor of management & organizations and professor of natural resources.

"Andy sent us a list of publishing companies and walked us through contract negotiations," says Reyna. "But he also made sure our methodology was sound. He read drafts of the book and gave feedback."

"This book couldn't have happened without the support of the Erb Institute," agrees Wang. "The fact that we were able to turn an academic project into a book is a testament to the support we received from both Ross and the School of Natural Resources."

When the authors graduated and entered the workforce, they realized that hybrid organizations are a very attractive option for people in their generation.

"Students who are graduating now want to work for companies that are doing something good and have a mission beyond just maximizing profits," says Reyna. "We are riding another wave of the green revolution. People are realizing that we have limited resources and want to work for companies that are cognizant of that."

And those companies, the authors argue, are the most likely organizations to work toward a solution to climate change.

"Climate change is certainly influenced by human activity -- by the things we use and the things we choose to do," says Wang. "The only ways to mitigate climate change are striving for behavioral change, which is extremely slow, implementing governmental regulations, which is extremely challenging, or pushing for innovation from business. All of them are necessary, but I think pushing for innovation from business is the fastest and one of the most effective ways to do it."

—Leah Sipher-Mann



For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847, bernied@umich.edu