Governance and accounting practices in hybrid organizations: Insights from a sixteenth-century charity in Venice

Institutional complexity

Neo-institutional theory was established as a set of concepts and theories regarding environmental effects on organizations leading to isomorphism (Powell and DiMaggio, 1991). Subsequently, scholars began to note that macro-environmental pressures do not shape organizational behaviour in similar ways: the situation is more complex because institutional environments are more fragmented and contested (Lounsbury, 2008). Friedland and Alford (1991) maintained that within isomorphic pressures, institutional logics moderate organizational decisions and actions. Institutional logics are socially constructed, historical patterns of cultural symbols and material practices (interests, values and beliefs) by which individuals provide meaning to their daily activity and organizational tasks (Thornton et al., 2012; Thornton and Ocasio, 2008). Thus, the socio-cultural context shapes institutions that generate various interests, values and practice models (institutional logics) and regulate organizational behaviour in different ways (Lounsbury, 2008). Society is constituted by such multiple institutional orders, which explains organizational practice variation and heterogeneity, rather than isomorphism; different organizations respond differently to the environment because they espouse a different logic (Lounsbury, 2001). Greenwood et al. (2010, 2011); termed this phenomenon ‘institutional complexity’, for instance, organizations are challenged by the alignment of their structures and practices with incompatible behavioural logics.

Research investigating institutional complexity has mostly portrayed multiple logics as competing for field dominance and examined logics’ struggles and resistance, especially in contexts of institutional change in which one logic replaces another. For example, Reay and Hinings (2005) studied the contested passage from a medical logic to a business-like logic in the managerialization of healthcare in Alberta. Boxenbaum and Battilana (2005) explored the transposition of a new diversity management practice from the United States to some Danish firms by examining what enabled the progressive dominance of the new institutional logic tied to the new practice to impose itself. However, in some settings, different and even incompatible logics coexist in a complex way, and are not necessarily in competition for field dominance.

Hybrid organizations

Several studies investigating institutional complexity have addressed hybrid organizations as contexts of high complexity (Greenwood et al., 2011; Pache and Santos, 2013; Perkmann et al., 2018). The term ‘hybrid organizations’ encompasses a wide range of organizational phenomena that operate in the intermediate realm between private businesses and public and nonprofit services (Battilana and Dorado, 2010; Dees, 1998), for instance, organizations that perform social tasks and are often publicly owned, but privately run (Kickert, 2001). These organizations are called ‘hybrids’ because they incorporate different institutional logics by combining varying mixes of governance, which are usually associated with the State, the market and civil society. These organizations are simultaneously shaped by all possible underlying values (e.g. quality of service, competitiveness, efficiency, and community engagement) and simultaneously rely on various resources (public financing, commercial revenues, volunteering and donations) and different governing modes (Evers, 2005; Mair et al., 2015). There is a growing interest in hybrid organizations in management studies because these organizations are considered an increasingly pervasive phenomenon in contemporary society. Scholars explain this trend considering the modern turn towards social values in our contemporary business world (Austin et al., 2006; Battilana et al., 2012; Haigh and Hoffman, 2012) and the retreat of the welfare state since the 1980s (Christensen and Lægreid, 2011; Evers, 2005; Jägers and Lapsley, 2003; Pollitt et al., 2007). These changes seem to have contributed to the move towards hybrid organizations in social service provision and social entrepreneurship. These atypical organizational forms continue to attract scholars’ attention because hybrids exhibit inherent challenges and tensions in their complex governance, organization and decision-making processes (Evers, 2005; Helmig et al., 2004; Jay, 2013; Kickert, 2001).

Hybrid organizations’ responses to institutional complexity

There are differing positions regarding how hybrids cope with the issue of multiple logics. Most researchers have focused their attention on how organizations can restructure in terms of governance and organizational form (Battilana and Lee, 2014; Perkmann et al., 2018; Santos et al., 2015; Ysa, 2007); other scholars have explored the hybridization in individuals’ professional identity (Kurunmäki, 2004; McGivern et al., 2015) or individuals’ responses to managing competing logics in everyday work (Smets et al., 2015).

Overall, there are three main types of documented responses of hybrid organizations to institutional complexity. First, decoupling occurs when organizations or individuals perform continuous negotiations or reach compromises among different logics, but the different practices they adopt are merely ceremonial: their underlying beliefs are left unchanged (Greenwood et al., 2011). Second, organizations solve complexity by compartmentalizing logics in different units or processes (e.g. Dunn and Jones, 2010; Lounsbury, 2007). Third, Pache and Santos (2013) show that instead of adopting the strategies of decoupling or compartmentalizing, hybrid organizations selectively adopt and combine elements drawn from different institutional logics. This selective coupling appears to be a safer strategy than decoupling, because it does not increase the risk of faking compliance (Pache and Santos, 2013). Furthermore, there are claims that these complex organizations are not influenced by ‘macro’-dominant logics in their day-to-day activities; these organizations rather develop their own highly idiosyncratic procedural logics. Quattrone (2015) questions the belief that organizations (and individuals) act by conforming to external ordering principles, in other words, to one or more readily available dominant logics. Instead, he argues that organizations act based on a ‘procedural logic’, which is a specific mix of rhetorical practices and routines. Accordingly, while hybridity may not be shaped by the rivalry among logics or the selective adoption of ‘ready to use’ legitimated practices, it is shaped by an endogenous dynamism that leaves individuals and organizations to imagine the modes of action in the context in which they operate.

Role of governance and accounting

Governance and accounting practices emerge as a fundamental element in the debate regarding hybrid organizations in several ways (Hyndman and McDonnell, 2009). Evers (2005) makes a conclusive generic claim about the ‘need of forms of governance and control to work through the typical tensions of hybrid organizations’. Kickert (2001) also states that performance measurement, cost control, accountability and budgeting are indispensable mechanisms for ensuring quasi-autonomy in hybrid organizations. Antonelli et al. (2017) describe the role played by accounting in a capitalist and utopian socialist hybrid. Shaoul et al. (2012) argue that more and different reporting is needed in public–private partnerships (for instance, in addition to more narrative reporting and accessibility to the public) for them to be responsive to multiple influences and demands.

By focusing on charities, some studies have explored the role of accounting in different types of charitable institutions in the past. For example, Orelli et al. (2013) studied the role of accounting and internal control practices in a credit institution in the fifteenth and sixteenth centuries, namely, the Monte di Pietà in Bologna, and showed how accounting played a central role in the management of this complex charity. Manetti et al. (2017) documented the specific systems of accountability adopted in the fifteenth century by a charity organization, namely, the Confraternita della Misericordia, to ensure transparency in the management of offerings and donations for a plague emergency. Servalli (2013) reconstructed the case of Misericordia Maggiore (MIA), which was the largest charitable institution in the city of Bergamo under the sixteenth- and seventeenth-century domination of the Republic of Venice. She showed that the more MIA grew and engaged with poverty alleviation in Bergamo, the more specialist control and bookkeeping practices (even mastering the double-entry bookkeeping system) were developed. MIA’s activity was double-faceted through its sophisticated accounting practices. This charity simultaneously performed welfare functions and a strict control of its territory and people. Consequently, governance and accounting may play paramount roles in shaping how hybrid organizations cope with the institutional complexity they typically face.

All in all, then, how hybrid organizations manage to enact simultaneously different values and respond to different demands posed by their field is a topic of discussion in the contemporary literature. Our purpose is to trace the elements that might help explain how a historical charitable entity managed to cope with its multiple logics and discuss the importance of governance and accounting practices in weaving together the multiple and increasingly complex demands stemming from its inherent institutional complexity.

The case of SGSR

We focus on the case of SGSR by reconstructing its establishment and development in the sixteenth-century Republic of Venice (one of the Italian States at the time). SGSR was one of the six Scuole Grandi, namely, the main charitable institutions of the Republic of Venice. SGSR was likely to be the richest and most powerful charity in the sixteenth century (Pullan, 1982) and was the only one to survive the following decline of the Republic of Venice. Like the other Scuole Grandi, SGSR was privately managed, but publicly regulated; it had a devotional nature, but it was independent from the ecclesiastical administration, and it had a noncommercial orientation although it relied on business funds of citizens of the Republic of Venice. The earliest documented evidence of SGSR’s establishment dates to 1478, which corresponds to one of the recurring pestilences that afflicted the city. A decade later, the Republic of Venice approved the institution of a new confraternity ² and officially recognized it as a Scuola Grande.

In this article, we analyze SGSR’s governance and accounting system as it developed from its establishment through to the sixteenth century. We selected the sixteenth century as our focal time span for two main reasons. First, this time span allowed us to capture the role of governance and accounting practices from the beginning of SGSR’s activity through its rapid development. Second, the sixteenth century marked a crucial transition for the Scuole Grandi in general; during this period, the Scuole Grandi took on a more structured social role by providing housing and social assistance to the needy population. They became progressively more integrated with the State (Pullan, 1982), developing a more hybrid form.

Sources

We accessed extraordinarily rich archives: we sourced two main sets of documentation composed by hundreds of pieces each at the SGSR’s archives and the State Archive of Venice (Sardi and Zanon, 2007).

One of the authors spent several months in the archives scrutinizing primary sources, such as Registri delle Parti (the minutes of the executive board meetings), balance sheets and other accounting and administrative documents available for the period under consideration. In addition, to support our findings, we analyzed secondary sources, such as Tonon’s (1999, 2003, 2013) meticulous reconstruction of several facets of the charity administration during the first decades of SGSR, Pullan’s (1982) work on the social policy of the Venetian Republic in the sixteenth century (Pullan, 1982) and Ballarin’s (1997) work on the different ways in which SGSR was financed.

Operationalization

We use the extant definition of hybrid organizations as those organizational settings that combine different institutional logics (Battilana and Dorado, 2010; Pache and Santos, 2013). To account for the hybrid nature of SGSR and capture the role of governance and accounting, we had to detect the influence of specific logics. According to Thornton et al. (2012: 54), all logics can be operationalized, coded and compared along with their ‘elemental categories or building blocks’, such as their respective sources of legitimacy, authority or identity and their bases of attention, norms or strategy. Therefore, in our case, to detect the different logics, we identified the different sets of interests (bases of attention), relationships with key actors ³ (sources of legitimacy) and demands (bases of norms) posed by these actors. Hence, for the purpose of our analysis, a logic was defined as the presence of specific interests mobilized by specific actors and entailing specific demands.

Analytical procedure

In the first part of our analysis, we investigated all primary and secondary sources and inductively traced all pieces of evidence related to the hybrid nature of SGSR. We identified at least three logics (devotional, private and public logics) that embodied different interests (spiritual, material and social interests) and entailed relationships with different types of stakeholders (the Church, the charity members, the State and the civil society).

In the second part of our analysis, we transcribed and coded all pieces of evidence related to aspects of SGSR’s governance and accounting practices with emphasis on how these aspects developed following SGSR’s establishment and whether and how they responded to the growingly diverse demands posed by SGSR multiple interests and stakeholders.

In the following findings sections, we report evidence related to the SGSR increasingly hybrid nature and the development of governance and accounting practices in the sixteenth century. Finally, we connect the practices with the hybrid nature, showing how the specific governance and accounting arrangements worked as SGSR’s administrative response to weave together the coexisting logics that constituted its hybrid nature.

Devotional logic: spiritual interests and relationships with the Church

The Scuole Grandi were lay devotional associations that developed in Venice in the thirteenth century. These institutions were large, powerful confraternities that performed charitable roles. The members of the Scuole Grandi were called ‘brothers’ and were primarily male citizens from the bourgeoisie. Nobles could join SGSR, but were exempted from administrative offices. Similarly, priests were excluded from the governing boards but could perform other functions (such as celebrating mass and funeral services and participating in processions). Each Scuola (pl. Scuole) had its own patron saint, and it held meetings in a church or in another location, engaged with religious services and collective prayer. Its aim was to assist the poor and suffering people. In general, the rise of this type of organization was related to the process of reform of the Catholic Church. The Catholic Church aspired to reconnect with the laity, granting it an active role and new responsibilities inside the community, thereby, preventing the dissemination of heretical doctrines (Pullan, 1982). Despite being independent from the ecclesiastical administration, the Scuole established relationships with convents, religious bodies and priors for the mutual exchange of favours. For example, SGSR paid its rent to the friars of the neighbouring cathedral.

Initially, SGSR was dedicated to generic devotional and liturgical activity. The ‘brothers’ were invited to participate to funerals and daily masses, which served as moments of sharing prayers, remembering dead ‘brothers’ and offering thanks to God. A crucial activity was the organization of periodic processions throughout the city to exhibit the relics of the patron Saint (Tonon, 2003). Initially, the Scuola was supported only by charitable contributions during religious services and processions (Ballarin, 1997; Tonon, 2003). Therefore, its original nature was essentially a devotional one, mobilized by spiritual interests, which were sometimes conflicting (Tonon, 1999) with the Church.

Private logic: material interests and relationships with its members

As SGSR became more established and developed, material interests and a nexus of relationships between its members and the benefactors became prominent. Thus, a new, private logic of SGSR emerged and became entangled with the original, devotional logic.

SGSR’s ‘brothers’ had to pay registration and annual fees to the confraternity (respectively called benintrade and luminarie) in exchange for the protection by the Scuola and mutual aid (Tonon, 1999). As the number of ‘brothers’ increased, the fees became a major source of income for SGSR, which subsequently started managing considerable economic resources due to its large number of members (around 500 or 600, according to Ballarin, 1997).

Since 1498, 20 years after its establishment, SGSR started the practice of investing money in the Camera d’Imprestidi or Monti, which were public non-profit pawn banks, in the form of bonds issued by the Republic of Venice. The bonds received an interest rate up to five per cent (see ASV, SGSR, seconda consegna, b. 581: Libro Parti antiche e Regole della Scuola: f. 685 and following).

In 1538, the government of the Republic of Venice established a new system of voluntary loans consisting of temporary deposits in the Zecca, the official government mint (see ASV, SGSR, seconda consegna, bb. 9–10, Registro leggi pubbliche). However, by that time, SGSR was more inclined to invest in real estate (houses, stores near Rialto suburb, or empty land near SGSR, according to Tonon, 2003) because these investments were considered more reliable than industrial or financial speculations (Pullan, 1982). Indeed, after the 1520s, rents from properties became the main source of inflows of SGSR, contributing for almost half of its total inflows in the sixteenth century (ASV, SGSR, seconda consegna, b. 387, Bilancio 1551–1685; Ballarin, 1997).

In addition, starting from the 1520s–1530s, SGSR benefitted from considerable amounts of money and properties from legacies of wealthy Venetian citizens. The officials of the Scuole were responsible for administering the benefactors’ estates, namely, landed properties, houses, financial investments, and similar, and to provide social assistance to the needy population, especially confraternity members (Pullan, 1982). During the sixteenth century, more than 60 bequests can be counted for the SGSR (ASV, SGSR, prima consegna, b. 438: Testamenti con sommario). Some bequests directly supported SGSR, for instance, the confraternity was allowed by the testators to use the money at its own discretion to meet its current expenses. For major bequests, SGSR was usually tasked with managing testators’ goods in a way that respected their intentions. For instance, following the terms of the legacy, SGSR officials could sell or rent benefactors’ properties or allocate them to the poor.

In summary, a private logic mobilized by material interests, such as speculative investments and other monetary returns for SGSR, quickly overlapped with the original devotional logic. However, this overlapping included elements pertaining to the social and welfare sphere as well.

Public logic: social interests and relationships with the State

The charitable role was a constitutive feature of SGSR. Its statute (called Mariegola) highly dwells on the importance of charity for the confraternity (Tonon, 1999). Many people living in misery needed support, but they were asked to serve SGSR and pray for the souls of their benefactors. During Easter and Christmas or periods of famine, SGSR provided flour to the poor; starting from 1535, SGSR also provided a fixed amount of money every month to the poor (ASV, SGSR, seconda consegna, b. 581; Tonon, 2003: 47–48). Another form of charity was transferring money, which means ad pias causas, to hospitals and religious institutions (ASV, SGSR, seconda consegna, b. 581: f. 741 and following). This type of transfer was partially regulated by the Republic of Venice, which listed specific institutions needing financial help. ⁴ Moreover, SGSR financed the marriages of poor young women (called donzelle) who were the daughters of poorer ‘brothers’. Starting from 1503, SGSR managed the allocation of dowries to those girls who were ‘suitable and worthy of receiving them’ (see ASV, SGSR, seconda consegna, b. 581: f. 769 and following). In the same period, SGSR was increasingly engaged with social housing projects, such as financing the building of houses for the needy population who were assigned to the houses for free or at favourable prices (Tonon, 2003). Finally, charitable donations were periodically allocated to assist prisoners (especially ‘brothers’ who were jailed because of their debts) or support military campaigns (the so-called galeotti).

Like the other Scuole Grandi, SGSR also embodied a public logic along with its devotional and private aims; in that it responded to a whole array of social needs of the civil society. This role entailed an increased scrutiny of its activities. Despite their private legal status, the social role performed by the Scuole Grandi became subject to the supervision of the Venetian judicial authority and, in particular, the ‘Council of Ten’, which was one of the major governing bodies of the Republic of Venice, responsible for state security. In 1401, the ‘Council of Ten’ acquired the right to approve any change in the Mariegola (the statute) of the Scuole Grandi. Thus, the ‘Council of Ten’ legitimated their participation in the Scuole’s internal affairs and favoured the process of alignment of the Scuole activity with the Republic interests (Fortini Brown, 1996). Initially, the control of the ‘Council of Ten’ was limited to the confraternities’ meetings and devotional processions with the goal of ensuring public order and preventing any subversive action; however, over time, the system of the Scuole also became a useful tool for fiscal purposes. Starting from 1509, the State’s practice of employing financial resources from the Scuole to support military campaigns became official through the institution of a general tax applied to all confraternities proportionated to the resources they could supply (ASV, SGSR, seconda consegna, b. 9: Registro leggi pubbliche; Pullan, 1982). The Ottoman–Venetian wars (in 1537–1540 and 1570–1573), which demanded an extensive support, exerted intense pressure on Venice’s finances. Indeed, the Scuole minutes of the executive board meetings (Registri delle Parti) contain various decrees about providing financial and human resources to the Republic of Venice.

The progressive incorporation of larger welfare functions (dowries, subsidization of hospitals or religious institutions, social housing, prisoners’ assistance and military campaigns) was paralleled by a growth in the number and variety of its activities, certainly indicating that SGSR played a relevant role in the society. SGSR mobilized many resources and needed to respond to a growing set of diverse interests (its devotional aim, its members’ or benefactors’ charitable or speculative interests and the interests of the society at large) in interrelation with diverse actors ranging from the Church, its members and the Republic of Venice.

Governance

Accounting practices

Considerable attention was paid by SGSR to keeping careful accounting records, developing professional roles in charge of bookkeeping and coordinating resource allocation both for the administration of the Scuola overall and for the quasi-autonomous administration of the Commissarìe.

Contributions to the institutional logics and hybrid organization literature

This study nurtures the debate on institutional complexity as follows. We unveil institutional complexity (i.e. the coexistence of multiple logics) in organizational practice showing how that it is not only a feature of major institutional change (Boxenbaum and Battilana, 2005; Lounsbury, 2007; Reay and Hinings, 2005) or the result of new practices’ creation or innovation (Dunn and Jones, 2010; Lounsbury, 2001), but it can be an embedded feature of organizations. Shedding light on this issue is important because there are plenty of organizations, which normally operate in an established institutional complexity (e.g. universities which deal with research, teaching, and administrative logics; hospitals which need to balance care and efficiency logics; arts organizations which operate between aesthetic and business logics). How these organizations normally deal with these tensions in their everyday practice is scarcely addressed in the literature (Perkmann et al., 2018; Smets et al., 2015).

We argue that in these settings of established institutional complexity, multiple logics are not necessarily in conflict. Previous research, which focused on institutional change, has reported evidence of struggles for dominance among logics with a strong political view of power and resistance (Greenwood and Suddaby, 2006; Townley, 1997). However, this is not the only occurrence of logics’ multiplicity. Logics can compete, but clearly, they can also ‘just’ coexist (Jay, 2013; Smets et al., 2015) enacting parallel rather than conflicting demands. Our study shows that multiple logics coexisted in SGSR (due to its stakeholders’ composition), but they were not necessarily in competition; rather, they emerged as parallel demands. For instance in SGSR, the social interest towards poverty alleviation matched the material interest of its poor members as well as coexisting with the interest for power and prestige of its rich members. We shed light on how governance and accounting systems can play a role in this management, leading to the following points.

Contrary to previous research on the organizational responses to institutional complexity, we found that organizations’ reactions do not necessarily lead to compromises (Greenwood et al., 2011) or prioritizing one logic over another (Pache and Santos, 2013). Instead, organizations develop their own administrative solutions capable of interweaving the coexisting demands. For instance, SGSR developed the Commissarìe system with its own rules for keeping accounts to ensure both internal control and external compliance. Partially in agreement with Quattrone (2015), we believe that it would be reductive conceptualizing these organizational realities in terms of tensions and struggles between competing logics. Organizations craft their own specific ways of managing such complexity, and governance and accounting play a crucial role in this process.

Through this latter consideration, we reinforce the view of previous scholars who emphasized the importance of accounting practices in managing hybrid organizations (Antonelli et al., 2017; Evers, 2005; Kickert, 2001). Through the reconstruction of SGSR’s governance and accounting systems, we show how these can be a powerful means to orchestrating institutional complexity in everyday practice.

Contributions to the charities and accounting history literature

This study provides additional in-depth insights into the administrative aspects of charitable entities. As Helmig et al. (2004) stated, underlying the distinctive nature of charities and unpacking how they work is important if we consider the declining resources available to the increasing numbers of charities and the dangers that this instance poses to their ongoing existence. In particular, the matter of charity governance has been considered a major issue as follows: charities need to demonstrate that they not only apply the highest standards of control of the resources at their disposal, but also that they use them appropriately. This is a concern for donors, for those who rely on the charitable services and for governments, which increasingly seek to supplement their public sector services with those offered by voluntary organizations (Hyndman and McDonnell, 2009).

Historical research on charities remains limited, but it is increasing (Álvarez-Dardet Espejo et al., 2006; Moggi et al., 2016; Orelli et al., 2013; Servalli, 2013). This involves organizations that were partially religious, but independent from the ecclesiastic administration and private organizations somehow dependent from public administrations. This article feeds this stream of literature, proving that historical cases on the management of hybridity provide insightful reflections on our contemporary world.

Limitations and future research

Our findings are drawn from a single case study and the available archival evidence. Therefore, they cannot be considered generalizable to the universe of charities or hybrid organizations. However, we believe that the features of SGSR’s hybrid nature summarized in Figure 1 resonate with the experience of many other entities in other settings across time and space. We also believe that our general conclusion about the parallel demands and how governance and accounting helped interweave them (as shown in Figure 1) can be reasonably applied beyond the scope of this case.

More accounting research on hybrid organizations could advance the extant knowledge on organizational and administrative responses to institutional complexity. In particular, more (historical) research may explore the common traits or practices variability in the responses offered by other hybrid organizations when developing their own procedural logic (Quattrone, 2015) and coping with the typical challenges of their inherent institutional complexity.