The Value in the Mission of Social Institutions

Value Creation in the Social Economy is nothing more than the consequence of the strategic options taken by organizations from the inside out, through the combination of resources and capabilities of their internal context and how it interacts with the various stakeholder conditions from the outside in, and the position assumed by it.

Tiago Abalroado

          A non-profit organization’s mission establishes the value it intends to produce for its stakeholders and society in general and constitutes a metric that is used in evaluating its performance in the past and in new courses of action in the future. Value creation emerges as a central element of organizational action, considering value as the difference between the benefits derived and the costs incurred, resulting in a higher level of benefits than what the target audience has at an initial moment.

          Any organization, whether for profit or not, creates economic value by generating additional benefits by increasing its income or decreasing expenses.

The most significant contribution of Social Economy organizations lies in creating social value, that is, in providing essential goods and services to promote community development, defending more inclusive and fair policies, and adopting appropriate behaviors to overcome social problems. The creation of economic value in the social sector is a necessary but insufficient condition for fulfilling its role; social value is a natural result here.

          The simultaneous creation of economic and social value entails more demand, rigor, and complexity for organizational processes, which is why social institutions as they need to develop their activities with a high degree of efficiency, maximizing the (economic and social) value generated if are forced to seek their sustainability by focusing on the strategic and operational levels of management.

          It is up to each organization to identify the set of vulnerabilities in society that it is best to help resolve since contact with social issues, according to a shared logic, will allow for the construction of self-sustainable solutions that are not dependent on subsidies of a public or public nature. The sustainability of an organization of a social nature is achieved through its ability to act on its actual needs according to an integrated approach that respects people and their context.

          This interdependence between organizations and society can be explored in light of the tools used in analyzing organizations’ competitive positions and developing their strategy. The value chain, explained by Porter (1985)[1], describes an organization’s activities and can be used to identify the social impact (positive and negative) of these activities. Its structure, combined with how each organization carries out its own action, reflects its history, strategy, implementation, and the underlying economy of its activities.

Figure A – The Generic Value Chain (Porter, 1985: 46)

          Figure A shows that the value chain reflects the total value the organization provides, whose foundation is value activities and margin. Value activities correspond to the various physical and technological activities that organizations perform; the margin refers to the difference between the total value and the cost inherent to carrying out value activities. Value activities can be divided into two generic typologies: primary activities, involved in the physical creation of the product, its sale, and transfer to the buyer and after-sales assistance, and support activities, which serve as the basis for the activities and themselves in providing inputs, technology, human resources, and other functions that are transversal to organizational reality.

          Regardless of the economic sector being considered, there are five generic categories of primary activities: inbound logistics, which encompasses activities associated with receiving, storing and distributing product inputs; operations, which involves activities related to the process of transforming inputs into final products; outbound logistics, which concerns the activities involved in the collection, storage and distribution of the product; marketing and sales, encompassing the activities of providing how buyers acquire the product and are induced to acquire it; and service, which includes activities related to the service provided to increase or maintain the value of the product.

          Concerning support activities, Porter (1985) describes four general categories: Purchasing, which refers to the function of acquiring inputs used along the organization’s value chain, being transversal to its various activities; Technological Development, corresponding to a range of activities that can be grouped in efforts to improve the product, involving different scientific areas, supporting numerous technologies linked to value activities and taking different forms; Human Resources, which consists of the activities inherent to the recruitment, hiring, training, development and compensation of all types of personnel; and Infrastructure, which covers a wide range of activities, such as management, planning, finance, accounting, legal support, government affairs and quality management, which, unlike other support activities, serves as the basis for the entire value chain.

          In addition to understanding the social implications of the value chain, it is imperative to develop an analysis of the social dimension of the organization’s competitive context, from the outside to the inside, which makes it possible to become aware of the connections that affect its ability to improve in a productivity prism. and strategic execution. In this sense, the transposition of the underlying logic to the analysis models of the industry formulated by Porter (1985) must be transposed to the civil society sector, especially if the impacts generated by the confluence of these organizations are considered.

          Each organization must, therefore, determine its relative position, define its trajectory of action and equate forms of articulation with the others, with a view to the pursuit of its purposes and the suppression of the social problems to which it is dedicated.

            Value Creation in the Social Economy is nothing more than the consequence of the strategic choices made by organizations from the inside out, through the combination of resources and capabilities of their internal context and how it interacts with the various stakeholder conditions from the outside in, and the position assumed by it.

[1]PORTER, M., Competitive Advantage – Creating and Sustaining Superior Performance, The Free Press, London, 1985

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