Charity Retailing in the United Kingdom: A Managerial Capabilities Perspective

Charity Retailing in the United Kingdom:A Managerial Capabilities Perspectiveby Gordon Liu and Wai-Wai Ko

Nonprofit organizations are venturing into commercial activities due to the intense competitionfor the limited government funds and declining availability of donor funds for third-sectororganizations that address social problems. Charity retailing, a popular choice of commercialactivity for nonprofit organization, has filled vacant premises in the high streets of the small townsand suburbs of large cities in the United Kingdom. Successful charity retail operation requiresdistinctive capabilities necessary to manage organizations’ resources in commercial environment.Using 60 in-depth elite interviews, we introduce the concept of managerial capabilities for charityretailing. Research propositions and management implications are discussed.

Charity Retailing andProfessionalization

In this paper, we investigate managerialcapabilities in the rising popularity of charityretailing operations under the wider agenda ofnonprofit organizations’ strategic movements inthe competitive marketplace. Charity retailinghas become an accepted retail format, whichtypically fills vacant premises in the high streetsof small towns and the suburbs of large cities inthe United Kingdom (Horne 2000; Parsons2004a). It represents the most direct way fornonprofit organizations to engage in commer-cial trading activities. According to the CharityRetail Association (United Kingdom),1 a charityretail store that raises funds through usingretailing activities to support charitable workcan only be set up by a registered charity(Charity Retail Association 2010). A typical

charity retail store is staffed by at least one paidmanager accompanied by many volunteers,selling mainly the secondhand goods togetherwith a small percentage of new, bought-ingoods (Broadbridge and Parsons 2003; Parsons2004a,b). The original operating model forcharity retailing emphasizes collecting surplusgoods from upper-class homes and directingtheir disposal through retail outlets to “lesswell-off” or “submerged” households (Booth1890; Horne and Maddrell 2002). As the charityretailing segment has developed, this originalmodel has evolved into a more complex busi-ness practice. For example, Oxfam created itsown “Ethical Collection” product range, cover-ing from food and drink to jewelery, such asnecklaces and earrings, to home and gardenaccessories by sourcing them through theirsuppliers who comply with Oxfam’s ethicalpurchasing policy (Oxfam 2011). The British

Gordon Liu is senior lecturer in entrepreneurship at the Bournemouth University, The Business School.Wai-Wai Ko is lecturer in strategic entrepreneurship at the Brunel Business School, Brunel University.1The Association of Charity Shops changed its name to the Charity Retail Association following consul-

tation with its members in 2010.Address correspondence to: Gordon Liu, The Business School, Bournemouth University, Christchurch

House, Talbot Campus, Fern Barrow, Poole, Dorset BH12 5BB, UK. E-mail: [email protected].

Journal of Small Business Management 2014 52(3), pp. 390–406

doi: 10.1111/jsbm.12040

JOURNAL OF SMALL BUSINESS MANAGEMENT390

mailto:[email protected]

Red Cross introduced a range of specialistshops, such as charity bookshops, bridalcharity shops, vintage clothing boutiques,designer charity shops, and so on (British RedCross 2011). The British Heart Foundationcreates online retailing selling from donatedgoods (through its eBay store), its own giftproduct lines (i.e., a wedding range) and musicdownloads (through Fairsharemusic) (BritishHeart Foundation 2011). To cope with thesechanges, charity retailers adopt a for-profit-likemanagement strategy, known as “professional-ization,” to transform the practice of charityretailing (Broadbridge and Parsons 2003;Gregson, Brooks, and Crewe 2000).

The act of professionalization reflects on awide range of charity retailing activities, includ-ing store image enforcement, shop standardiza-tion, sales targeting, and so on (Parsons andBroadbridge 2004). Notable contributions tothe literature on charity retailing professional-ization with regard to the managementapproach include the research by Parsons(2004b), which found that the senior manage-ment team has adopted many managementmetrics (i.e., budgets) in order to maximizeprofits. Horne (1998) suggested that charityshops should develop a business strategy thatfocuses more on branding, securing consumerloyalty, and establishing joint ventures withother organizations, which will enable them toface the increasingly competitive market envi-ronment. Alexander, Cryer, and Wood (2008)suggested that charity shops’ locationaldecision-making should be based on three cri-teria: supply chain (merchandise donator), theworkforce factor (especially the volunteers’availability), and customer demand. Othersfocus on human resource management con-cerns, such as Broadbridge and Parsons(2003), who found that the key indicators ofprofessionalization included introducing headoffice management, establishing standardizedpolicies, and recruiting paid, highly skilledprofessionals.

Although these contributions are valuable,no one, to our knowledge, has discussed theconcept of managerial capability in the charityretailing sector. More specifically, the issue ofwhether and how charity retailers can movetoward professionalization by adopting certainsets of management principles remains poorlyunderstood. In this paper, we attempt toanswer this question by investigating thefactors of managerial capability in the charity

retail sector. We first describe our researchmethod, then compare and contrast the viewsthat emerged from the 60 field interviews withsector practitioners. We discuss the concept ofthe managerial capabilities of the charity retail-ing sector and develop a series of researchpropositions to underpin our findings. In theanalysis, we adopt Adner and Helfat’s (2003)three managerial attributes as the core themesof managerial capability and compare thesewith our empirical data in order to develop afield-based view of the managerial capabilityfactors for charity retailing. Finally, we con-clude with a discussion that alerts managers tothe important issues related to managerialcapability.

Research MethodThe field research consisted of in-depth

“elite” interviews (Blumberg, Cooper, andSchindler 2005), with 60 representatives from16 British nonprofits who have engaged in theoperation of charity shops throughout theUnited Kingdom. The interview method fordata gathering enables the informant to elabo-rate on his/her beliefs, priorities, activities, andlife circumstances in their own words(McCracken 1998). Elite interviews focus ongathering information from the key decision-makers in a field, enabling the researcher tounderstand how the decisions are made withinthe organization (Berry 2002; Blumberg,Cooper, and Schindler 2005; Goldstein 2002).Of the 60 individuals interviewed, 15 heldgeneral administration-related positions, 9 heldcharity shop management-related positions, 12held external relation management-relatedpositions, 11 held marketing/communication-related positions, 7 held human resourcemanagement-related positions, and 6 held com-mercial affairs-related positions.

The interviews began with a conversationabout the informants’ background, such astheir role and job duties within the organiza-tion. The interviews then proceeded to focuson open-ended questions about the manage-ment, strategy, and marketing issues related tothe current operation and future perspective ofthe nonprofit organization and its affiliatedcharity retailing operation. Regarding the issuesin which the managers had been involved, theauthors asked the interviewees to describe theirexperience of dealing with those issues, whichreflects on Adner and Helfat’s (2003) themesof managerial capability: managerial human

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capital, managerial social capital, and manage-rial cognition. For managerial human capital,the questions focus on how to assess the skillsand experience of the staff, and how to allocateand assign tasks to them. For managerial socialcapital, the questions focus on how the man-agers access and manage information throughtheir social ties. Therefore, the questionsinclude how to manage the social relationshipin order to access the external resources that anorganization needs in order to operate. Formanagerial cognition, we ask questions such aswhat the decision-making process is withregard to retailing-related issues and whichfactors affect this decision-making, in order toappraise the managers’ beliefs and mentalmodels when making strategic decisions. Sincethe interview design is semi-structured, thesesample questions only provide ideas about thecontent of the questions that we asked duringthe interviews. Some modification is necessaryin order to tailor them to the candidate’s roleand the issues that he/she is involved with inrelation to operating charity retailing. It is also,sometimes, necessary to explain and clarifysome of the questions by using examples, aswell as coming up with additional questions toobtain a deeper understanding of the situation.

The potential interviewees are identifiedfrom the membership list of the Charity RetailAssociation. Letters are sent to these nonprofitorganizations (or their associated retail opera-tions). In many cases, an organization that iswilling to participate in this research will directthese requests to one of their offices that arelocated close to our base. A total of 80 formalinterview invitation letters were sent out bypost, explaining the academic purpose of thisstudy. The sample reflects a diverse set ofcharity shops and positions, and it is wellsuited to obtaining a rich set of ideas andinsights. The purpose of the formal interviewinvitation letter was to reassure the respon-dents about the academic nature of the projectand its research objectives. Anonymity wasoffered to and requested by most of the par-ticipants. All of the interviews are digitallyrecorded and vary in duration from between 45and 90 minutes. The interviews were subse-quently transcribed and analyzed using what isessentially an inductive approach. Miles andHuberman (1999) defined qualitative dataanalysis as consisting of three concurrent flowsof activity: data reduction, data display, andconclusion drawing. Data reduction is the

process of selecting, simplifying, abstracting,and transforming the data that appear in thetranscriptions and field notes. In this study, westarted with a set of general questions andallowed the theory and findings to emerge fromthe data. We began by highlighting key pas-sages in the transcripts. We then proceededwith the open coding by assigning these quotesto categories, with labels summarizing the keycharacteristics of their contents. Though a largenumber of new insights emerged from thestudy, we focus on the key areas that we wishto explore and those with the greatest potentialfor stimulating future research. Once thesegeneral themes had been identified, we soughtout “negative” cases that did not support our“emerging” understanding of knowledgeexchange and/or our theoretical frameworkand tried to produce explanations for them(Titscher et al. 2000). NVIVO software wasused throughout the analysis process, adoptingthe guidelines produced by Welsh (2002). Thethemes discussed in the paper reflect thegeneral categories identified in this part ofthe study. Given the space limitation, weprovide brief summaries of the interview datacollected under many of the themes. We elabo-rate on the findings in the next section.

Managerial Capability forCharity Retailing

The resource-based view examines the rela-tionship between the organization’s resourcesand its performance (Barney 1991). The centralpremise is that an organization’s sustainablecompetitive advantage in the marketplacedepends on its valuable, rare, inimitable, andnonsubstitutable resources (Peteraf 1993; Ray,Barney, and Muhanna 2004). Grant (1991) pro-vided a further implication that an organiza-tion’s competitive advantage is not onlydetermined by its ownership or access right tothese resources, but also depends on its man-agement’s competence in organizing theseresources to produce superior performance.Without proper management, the resourcesalone are unlikely to produce a competitiveadvantage for the organization (Sirmon and Hitt2003). Thus, the ability to perform the “propermanagement” of an organization’s resources, inthis paper, refers to managerial capabilities.The organization that possesses managerialcapabilities is able to evaluate, reconfigure, andleverage its resources to take advantage ofthem in the marketplace (Boeker and Wiltbank


2005; Graves and Thomas 2006; Liao, Kickul,and Ma 2009). The essence of managerial capa-bility builds on the competence of managers tomake critical decisions in the different stages ofthe organization’s life cycle (Newbert 2005).Figure 1 shows the field practitioners’ views ofthe factors related to managerial capabilities,which are in line with Adner and Helfat’s(2003) three managerial attributes.

Theme 1: ManagerialHuman Capital

In Adner and Helfat’s (2003) paper, themanagerial human capital attribute refers to themanagers’ skill and experience in managingthe given tasks. Under this wider theme, theinterviewees in our research suggest that thereare two factors that can be used to assess thisattribute: (1) managing paid and voluntary staffand (2) developing organization-specificcharity retailing skills. Sample quotes are pre-sented in Table 1.

Managing Paid and Voluntary StaffThe ability to recruit and retain qualified staff

assesses the manager’s capability to maintain anadequate number of staff with the necessaryskills set. Evidence of professionalization in the

nonprofit sector is usually associated with ahigher percentage of paid professional staff inthe organization (Ridder and McCandless 2010).Parsons (2002) supported this view and men-tioned that paid professional managers bringwith them professional skills, knowledge, andexperience to the charity retailing sector. Interms of recruiting candidates who possessthese qualities, all of our informants acknowl-edge that their organizations are moving in thisdirection; however, it is easier said than done.According to retail experts, “retailing” is not justabout opening stores in vacant premises, butalso involves undertaking a vast number ofspecialized and sophisticated tasks, such assupply chain management, marketing, and soon (Ailawadi and Keller 2004; Brown et al.2005). Thus, it is difficult for typical nonprofitmanagers who lack knowledge about retailingclearly to identify the skills required for runninga successful retail operation. The obstacles donot end here. Even though the managers cansuccessfully identify the types of skills that arenecessary, the organization still experiences dif-ficulty in recruiting valuable staff. Ban,Drahnak-Faller, and Towers (2003) indicatedthat the nonprofit sector is facing difficultchallenges in hiring and retaining top-quality

Figure 1Managerial Capabilities for Charity Retailer

Adopted and Extended from Adner and Helfat (2003).

Managerial capabilities

Managerialhuman capital

Managerial social capital

Managerial cognition

Managing paid and voluntary staffs

Developing organization-specific charity retailing skills

Building within and cross-sector network contacts

Establishing professionalism culture within organizations

Extracting resources and information from network relationship

Implementing market orientation in the management decision-making process

Managerial Attributes

Factors

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Table 1Managerial Human Capital

Factors Sample Quotations

Managing paid and voluntarystaffs

• “I think that the hardest task is to know what kinds of skills arenecessary to run a successful retail operation. Most of us [thesenior management team] do not have a retail background.”(Marketing Manager)

• “I think it is a two way stream. [. . .] From our end, we cannotafford to pay candidates a comparable salary that they can getfrom a commercial retailer. From their end, they don’t see that thisjob can lead to great financial reward or opportunities to advancetheir career.” (Human Resource Development Manager)

• “A typical charity retail shop in the UK is run by one paid shopmanager and several volunteers.” (Nonprofit General Manager)

• “It is nothing special really . . . [. . .] We advertise the post andlook for a candidate who can tick all of the boxes in this post.[. . .]. We then ask them to follow the job description and managethem accordingly [. . .].” (Human Resource Manager)

• “If you let me pick, paid staff are much easier to manage thanvoluntary staff. Their turnover rate is lower and it is much easier[for the senior management team] to implement changes.” (RetailOperation Manager)

Developing organization-specificcharity retailing skills

• “One of the key selection criteria that we use for store managers ishis/her fashion sense.” (Head of Retail Operation)

• “We want at least one of our floor staff [in a charity retail store] tohave some sort of background in electronics.” (Commercial AffairsManager)

• “[. . .] Showing the [working] environment and explaining to themabout the nature of the job is always on the agenda. [. . .] mostimportantly, we want them to know that, if they have done a goodjob there [charity retailing], we can provide more social programsfor the public. [. . .] people are usually more motivated this way.”(External Affairs Manager)

• “[. . .] We do that very simply by offering a concise three monthinduction in the shop, where they will spend time alone with theirown training plan and that will be checked every month by theirline manager who will confirm they have reached all of thenecessary levels, and we do that with every manager before weconfirm them in their employment after three months. [. . .] If wehave install any new system [distribution management], they arerequired to complete a new training course before we are satisfiedthat they can do all that we want them to do.” (Retail GeneralManager)

• “In my organization, all the staff received the same level oftraining and go through the same program [training anddevelopment]. [. . .] There is no difference between the full-timeand voluntary staff.” (Managing Director)

• “The training cost is huge, considering the size of ourorganization. [. . .] As much as I want to train all of our staff, Ihave to make a difficult decision. [. . .]. However, if you look at itthis way, most of the voluntary staff has already brought withthem a set of skills.” (Human Resource Executive)

• “Most people who volunteer in our shop have already had manyyears of retail experience. I don’t think that there is much we canteach them. [. . .] In addition, only a few of them will stay with usfor a long time.” (Charity Shop Manager)


professional staff members. Their reasons echothe comments made by the informants, thatorganizations usually have limited resources toprovide professional staff with growth opportu-nities, job enrichment, and financial rewards.

Although the notion of professionalizationgives an incentive for charity retailers to hirepaid staff, however, voluntary staff still repre-sents the lion’s share of the charity retailingworkforce (Parsons and Broadbridge 2004).Thus, effective staff management in the charityretailing sector requires the ability to deal withboth a paid and a voluntary workforce. Forthe paid staff, all of the interviewees suggestthat this is straightforward and similar to for-profit organizations. However, the manage-ment of voluntary staff becomes morecomplicated. Although most of our informantsagree that paid staff are much easier tomanage than voluntary staff, however, theycannot deny, as many researchers also agree,that voluntary staff have long been seen as thesource of competitive advantage for nonprofitorganizations (Farmer and Fedor 2001; Handyand Brudney 2007). They allow nonprofitorganizations to reduce the average cost perunit of workforce to below the market priceand enjoy some intellectual contribution fromthe volunteers.

To manage voluntary staff, our informantssuggested several important tactics. First, thecharity retailers must build a volunteer data-base, which lists all of the details of each indi-vidual volunteer and their suitability fordifferent jobs. The informants agreed that thekey to solving the high turnover problem of thevoluntary workforce is to have a detailed planfor finding their replacements. This detailedvolunteer database would allow the charityretail manager quickly to identify and contactalternative candidates. Second, it is also recom-mended to take extra care of loyal (long-term)volunteers and assigning them to positions thatare more responsible, since these are the oneswho are less likely to leave the store at short orno notice. Finally, regular social gatherings arecritical in enhancing the volunteers’ loyalty. Allof the informants agree that charity retailers aresocial organizations, where people get togetherto pursue common social objectives. As aresult, social bonding among the members isvery important in keeping the organizationtogether. The social gatherings are also a greatplace for the senior management team todiscuss the recent policy shifts in the organiza-

tion. Voluntary staff appears to be more accept-ing of a new policy implementation in theorganization if they have been informed aboutit regularly. Generally, the charity retailers thatcan unlock the potential of their voluntary staffappear to be the frontrunners in operatingcharity retail stores.

Developing Organization-Specific CharityRetailing Skills

Collective knowledge refers “to the ways inwhich knowledge is distributed and sharedamong members of the organization. It is theaccumulated knowledge of the organizationstored in it rules, procedures, routines, andshared norms which guide the problemssolving activities and patterns of interactionamong its member” (Lam 2000, p. 69). Thistype of knowledge can also be described as“firm specific skills.” All of the intervieweesclaimed that their organizations have alreadyidentified the general skills sets of their staff.This has become standard practice for charityretailers. In order to get ahead of the competi-tion, many of the interviewees reveal that theirorganizations have started to look for staff whohave specific skills that are relevant to theirretail operations. For example, if a particularcharity retailer decides to carry white goods(i.e., household electronic merchandise), thestore staff need to handle customers’ queriesabout the given items. From Barney andWright’s (1998) perspective, these specific skillscan provide a sustainable competitive advan-tage for the organization. The reason for this isthat general skills are transferable across avariety of firms and all competitors have thepotential to acquire staff with general skills. Onthe other hand, specific skills provide valueonly to a particular organization and cannot beeasily duplicated by the competitors. Ourresearch suggests that charity retailers are start-ing to look for potential candidates who havespecific skills that are relevant to the productsoffered in their retail outlets.

We also found that the act of communicatingthe organization’s social value appears toenhance the performance of the staff withregard to the organization’s commercial prac-tice. This result is similar for organizations inthe for-profit world, where having a purposefuland well-communicated mission can have posi-tive effects on the staff’s attitude as well asoverall organizational performance (Bart,Bontis, and Taggar 2001; Germain and Cooper

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1990). This mission–performance linkage alsoapplies to the nonprofit sector. Besides includ-ing the social mission communication in thestaff development plan, the majority of theinterviewees also echoed the importance of sys-tematically providing training in organization-specific skills. A clear measurement of the levelof skill is established by this system to assessthe progress of the training and development.New training programs will be introduced toensure that the staff is properly preparedaccording to the changes made within the orga-nization. For voluntary staff, we found thatthere are only a few charity retailers whoprovide the same level of training and devel-opment scheme to them compared with paidprofessional staff. Their arguments are in linewith Bussell and Forbes’ (2002) findings on thevolunteer market, that many nonprofit organi-zations consider voluntary staff as very impor-tant to their organization, but few of them arewilling to spend further budget on developingtheir skills due to financial constraints. AsAndreasen and Kotler (2003) argued, voluntarystaff’s ability to execute a given task is one ofthe keys to nonprofit organizations’ success,and we argue that charity retailers that providemore and better training programs for the vol-untary workforce will have a clear advantage inthe marketplace.

Theme 2: ManagerialSocial Capital

The managerial social capital attributerelates to the managers’ capability of accessinginformation through their social ties (Adner andHelfat 2003). Drawing on the findings, weargue that this capability can be assessed by themanagers’ ability to (1) build within and cross-sector network contacts and (2) extractresources and information from network rela-tionships. Sample quotes are presented inTable 2.

Building Within and Cross-SectorNetwork Contacts

The advantage for organizations in havingstaff who have a lot of network contacts isenormous. First, it allows organizations toaccess more resources (Gelatkanycz andHambrick 1997; McGovern 2006). For example,Paik and Navarre-Jackson (2011) found that thenumber of associational ties that nonprofitorganizations have positively influences thenumber of volunteers that nonprofit organiza-

tions attract. Second, it also allows organiza-tions to collect a diversity of information foradvancing the executive decision-making andorganizational responsiveness (Burt 1992;Nahapiet and Ghoshal 1998). Both Larson’s(1991) research on external informationexchange and Dyer and Nobeoka’s (2000)study on international information exchangesuggest that these information exchanges allowthe organization to make better executive deci-sions. First, the charity retail executives attemptto recognize the nature of the social contactsthat are possessed by the current staff. Thesecond way to obtain the advantage of havingnetwork contacts is to recruit new staffs whohave many network contacts. Charity retailersconsider that job applicants who have manynetwork contacts are desirable candidates forpotential recruitment. A key insight is that theinformant believes that this kind of staff canbring in their private sector connections to theorganization. This is reinforced by Austin’s(2000) work, which describes how institutionalpartnerships are created, nurtured, andextended. This is because network contactsprovide some incentives for the managers ofother organizations to choose a particularcharity retailer as their working partner.

The social network provides an informalenvironment for its members (i.e., the organi-zation) to exchange their knowledge. Our find-ings suggest that charity retail managers whoare able to address trust issues possess exper-tise in networking and communication, experi-ence of working in cross organizationalcooperative tasks, and knowledge of designingexchange platforms for the exchange. Theinformant states that charity retailing hasbecome more competitive in recent years,given the rising number of charity retail storesin the United Kingdom. Statistics published bythe Charity Retail Association in 2009 estimatethat there are over 7500 charity retailers in theUnited Kingdom, compared with an estimated3200 in 1990 and 6000 in 2000 (Charity RetailAssociation 2010). It is beneficial for themanager to interact with the members of thenetwork community by gaining the necessaryknowledge and expertise to improve its opera-tional competence. The social network enablesits member to access important knowledge thatwill benefit the business operation (Inkpen andTsang 2005; Nahapiet and Ghoshal 1998). Thesenior management team of a charity retailerviews the managers’ communication and


Table 2Managerial Social Capital


Building within andcross-sector networkcontacts

• “Since I took over this job a few years ago, the first thing that I have done is totake notice of the contacts that our staff [both paid professional and voluntary staff]have [. . .]. It ends up working very well for us in acquiring potential sponsorsfrom the private sector.” (Business Development Manager)

• “It is important to know what you have already [social contacts from existing staff].[. . .] It strikes me that so many times we found that our staffs have very valuablecontacts that we can use. It would have made a lot of things [i.e., fundraising]easier if we had known it earlier.” (Nonprofit CEO)

• “Having this [a lot of network contacts] will definitely help them to push theirapplication further. [. . .] Keep in mind, we are also looking for other qualities inthe candidates.” (Public Affairs Executive)

• “One of the key aspects that we are looking for is whether the applicant has a lotof connections with the private sector [. . .]. They can either help to bring us tothem or bring them to us.” (Personnel Manager)

• “The model of charity [retailing] operations has changed; we cannot just sit hereand wait for donations. [. . .] We need to go out to talk to people to learn newthings [. . .]. It is important for person in my position to have good networking andcommunication skills.” (External Relations Director)

• “My colleague [individual works in another retail chain] told me how to set up andmanage an eBay account [. . .]. I can now sell the goods in our warehouse, whichwill probably be sold for recycle at a lower price, due to the limited display spacein our store.” (Charity Retailing Manager)

• “[. . .] It is all down to the individual’s [manager’s] own communication skills to getinvolved in social events and to learn something new about this industry [. . .].[. . .]. I can tell you that this is the essential element when we consider a candidatefor job promotion.” (Marketing and Communication Manager)

• “We are not a big name high street shop [charity retail store]. People will not cometo us automatically. So, we need to take the initiative and go and talk to them[. . .]. So, it is critical for people on the job [managers] to network and meet newfriends, and to get them to trust you.” (Retail Director)

Extracting resources andinformation fromnetwork relationship

• “We had been patched by an individual from XXX [a U.K.-based company] aboutthe opportunity to work together to develop a product that could be sold in ourstore [retail store]. [. . .] we are lucky to have a staff member who previous workedfor another charity, which had made a similar deal, to help us to pull it off. Sincethen, I am always making sure that our commercial project team leader has someexperience in the past of working with a company.” (Commercial Executive)

• “It started with a marketing research request from a local college and thenexpanded into a big project about improving our charity’s marketing strategy. Thereason why we are involved in it is because of a newly appointed fundraisingmanager who had previous experience of this. [. . .] I wish that someone in ourorganization had had this kind of experience before, since we turned down manysimilar requests [. . .].” (General Manager)

• “Since we have started trading [charity retail store], we organize annual gatheringsevery two or three months. We try to invite people [managers] together to sharetheir thoughts about the business. [. . .] I personally found that it is very useful. Wecan also learn some things from it. [. . .]. For example, the idea of sharing apick-up and delivery service among a few of us who also sell small furniture inour stores came from this meeting.” (Retail Administrator)

• “I have organized this type of event [exchange platform] for many years. [. . .].Other than organizing the space, food, and drinks for this meeting, you also needto find out their [the invitees’] expertise, experience, what they like, theirwillingness to share and so on. [. . .]. I can tell you that is not an easy task.”(External Relation Director)

• “[. . .] Organizing space and arrange time are already a tough job, but finding outwho we should invite and what we should talk about are more difficult.”(Marketing Manager)

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networking skills as critical to the success ofboth the managers’ individual career in theorganization and the organization as a whole.

Extracting Resources and Informationfrom Network Relationships

Cross-organization cooperation tasks usuallyinvolve at least two organizations, which canbe either within sector or cross sector, workingtogether to achieve a common goal. Although aformal cross-organization cooperation task iscarried out through a strategic alliance, whichis when a group of organizations voluntarilyenter into a short- or long-term relationship fora particular end and a series of projects that willinvolve some type of benefit exchange (Das2002; Tolstoy 2009), however, many of thecross-organization cooperation tasks are infor-mal in nature. For example, see Inkpen andTsang’s (2005) description of an industrial dis-trict where universities provide technical andresearch support for a project that the organi-zations undertook in the district. Our inter-viewees suggest that the managers’ experienceof working on both formal and informal crossorganization cooperative tasks provides anadvantage on the charity retailers’ road to pro-fessionalization. They point out the importanceof having a person in charge, who has previousexperience of working on cross organizationcooperative tasks. As research conducted byStuart and Abetti (1990) suggests, past manage-ment experience (such as how to do things) isthe most significant variable with regard to aventure’s success, as the ways for nonprofitorganizations to adopt trading activities such ascharity retailing are similar when starting a newventure. Given that engaging in cross organiza-tion cooperative tasks is critical for charityretailers’ success, it is essential for managers tohave past experience of this kind of task.

The informants also reveal that the formula-tion of a platform for exchanging informationand resources can benefit the charity retailingbusiness. This is because such a platformallows charity retailers to learn from each otherfor the purpose of improving their operationaleffectiveness and gathering resources toincrease the scale of the benefits that are deliv-ered to their customers. Although the exchangeplatform enhances the exchange among theparticipating parties, it relies on the skills ofindividual managers to organize such plat-forms. We found that organizing a successfulexchange platform is not just about sending out

invitations and waiting for the responses. Man-agers who have the expertise and experience toorganize such exchange platforms can enhancethe results of the information and resourcesexchange. Therefore, charity retailers whopossess this kind of management knowledgeshould have an advantage in the businessenvironment.

Theme 3: ManagerialCognition

The last managerial attribute in Adner andHelfat’s (2003) model is managerial cognition,which appraises the managers’ beliefs andmental models for making strategic decisions.The charity retailer provides a platform for non-profit organizations to engage in this market-oriented transformation of embracing themarket values and methods, whereby theirmanagers endorse the discourse and practicesof the business world to advance the materialwell-being of their recipients. Our findingssuggest that the managerial capability can bereflected by two factors: (1) establishing pro-fessionalism culture within the organizationand (2) implementing a market orientation inthe management decision-making process.Sample quotes are presented in Table 3.

Establishing Professionalism Culturewithin Organizations

Organizational culture is a rationale fordescribing the psychology, attitudes, experi-ences, beliefs, and values of an organization.The right attributes can contribute toward theorganization’s competitive advantage (Barney1986). The question arises as to how managersin the charity retailing sector can nurture theright attributes in the organizational culture.Our results suggest that charity retailers needboth to establish a balance between the com-mercial and social mission and to disseminatethe businesslike nature of the operation withinand between departments. The way to establisha balance between these two missions is toprovide a clear picture to the staff working incharity retailing about why the nonprofit orga-nization engages in retailing activities. We referto this approach as the “cause and effect”approach, which emphasizes the fulfillment ofthe commercial mission as the way to achievethe social mission. In this setting, a charityretail manager emphasizes the importance ofthe social objective and the fact that adopting a


Table 3Managerial Cognition


Establishing professionalism culturewithin organizations

• “I am always reminding my people that the purpose of charity shops is to raisemoney for our charity. [. . .] We can only help so many people if we raise enoughfunds here. [. . .].” (Store Manager)

• “We want our staff [staff of the charity retail store] to see that we [the charity retailstore] are a huge fundraising arm for the charity. [. . .] Now I mean the ‘profit’ is theretail word we all use but I think we try and use the word ‘fundraising’ rather thanthe word ‘profit,’ because it sits better with the organization that we are seen as a‘fundraiser’ rather than a profit making organization. [. . .].” (MarketingCommunication Manager)

• “We are neither a nonprofit organization nor are we a company. [. . .] I think the bestexpression for us now is social enterprise. [. . .] We are completely self-sustained andnot dependent on donations or government grants. [. . .].” (General Manager of RetailOperation)

• “It took us five years to transfer our organization from a purely nonprofit to a socialenterprise. That involves a lot of work, not just taking on retail operations. I think itis the best model for us. [. . .].” (Head of Commercial Affairs)

• “We must make our staff realize that we are running a retail store, despite the profitsbeing use for charitable purposes. [. . .]. Therefore, we are running and managing thislike our typical high street neighbors [for-profit retail stores].” (Charity Shop Manager)

• “We have improved it and we have made it profitable. [. . .] What happens is we wantall our people thinking that we are running a for-profit retail store and these profitsare for helping disadvantaged people in our society. [. . .]. I must say that, inevitably,some shops have had to close because they [the staff] cannot accept this view. It isnot part of our policy to operate shops that are not profitable.” (Head of BusinessDevelopment)

Implementing market orientation inthe management decision-makingprocess

• “I have asked our store managers to send out staff to other charity shops in theirareas to check out the price that other stores charge for similar products. [. . .] Theyhave to report this information to us, so we can quickly adjust our price in the area.In the beginning, some people think this is a waste of time, and I have to convincethem that is important with regard to our competitive advantage.” (CommercialFundraising Manager)

• “With other charity shops, we do survey our competitors on a routine basis and weare looking at any particular strategy that they have got in regard to what they areselling and how they are selling it; we also look at their pricing and log those, andwe do that on a local basis. So, each of our shops will look at their local competitors.[. . .] I have made this an important case when I accepted this position.” (Head ofAdministration)

• “Customer surveys have become standard practice. I want to know what thecustomers think. [. . .].” (General Administrator)

• “I have introduced a warehouse system. [. . .] Although it is not as sophisticated asthe commercial high street stores, however, it allows us to manage the inventory inour store. [. . .] I think this system works best when we also have a good marketingteam to consistently find out the trend in the market. [. . .] Before I came to thisorganization, the people here always though this is a good idea but no one knewhow to do it.” (Marketing Director)

• “We constantly collect evidence on how successful our practices are: a) because it isimportant that we are giving our service users the best service; and b) for us toreceive certain statutory funding, we have to adhere to certain key performanceindicators to measure our results.” (Charity Retail CEO)

• “[. . .]. For example, I have been asked to report all kinds of data to the head office.It is not only just about how many goods we sell, but also about other kinds of stuff,such as customer satisfaction survey and so on. [. . .].” (Head of Charity Retailing)

• “We usually start by collecting evidence on business performance in differentbranches. [. . .]. We then decide what will be the most appropriate standard to use tomeasure our retail performance. I think you should talk to our retail director. This isall his idea.” (Head of Charity Retail Operation)

• “We would adopt a more detailed approach to the pricing structure that we have andeverybody else’s [our competitors’] pricing structure, the range of merchandise wehave got and the range of merchandise they have got, what space we are giving toparticular commodities [. . .]. Then we would look at discount shops in the area tosee if there was anything particular might be affecting our business. [. . .].” (Head ofRetail Division)

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more businesslike approach in the retailingoperation can help organizations to achievethis social objective. Alternatively, we alsoidentify another approach that charity retailersuse to establish this balance. We refer to this asthe “identity transfer” approach, whereby themanager emphasizes communication, since“the charity retailer is a business enterprise thataims to create social value” rather than “thecharity retailer is a nonprofit organization thatundertakes trading operations.” Contrary to the“cause and effect” approach, the “identify trans-fer” approach stresses that the social mission isembedded in the wider scope of commercialpractice. The manager attempts to create andcommunicate the social entrepreneurial type ofidentity (Miller and Wesley II 2010) within theorganization. In general, both approachesappear to allow charity retailers to establish abalance between their social and commercialmissions.

The second way to develop a professional-ism culture is through disseminating the busi-nesslike nature of the operation within andbetween departments. The informant pointsout that a charity retail store is still a retail storeand so must generate revenue for its associatednonprofit organizations. The managers’ tasksand responsibilities here are to make their staffrealize this. Although charity retailers remaindedicated to their organization’s mission, somefound it increasingly difficult to remain focusedon their social goals when the funds dried up.Charity retailing provides an alternative way fornonprofit organizations to raise additionalfunds for charitable purposes. To do this wellrequires a fundamental mind shift to considercharity retailing as a profit-making activity thatcan be used to generate revenue for the non-profit organization. The respondents reveal thatmanagerial competence in disseminating thismessage throughout the organization plays acritical role in the success of charity retailoperations. Goodall’s (2000) work on organiza-tional culture for charity shops indicates thatthe professionalism culture of charity retailingstands between the commercialism and volun-tarism extremes. We found that, although avoluntarism organizational culture serves wellwithin a nonprofit organization, however, itcannot be fully applied to retailing operationswith a commercial nature. Charity retailing isabout inheriting competence from the business-like commercial retailing model in combinationwith the voluntarism culture traits of nonprofit

organizations to develop a professionalismculture, as Goodall (2000) argued.

Implementing Market Orientation in theManagement Decision-Making Process

To recognize and take advantage of themore competitive retail environment, charityretailers over the years have learned to adoptbusiness values and techniques to manage theirshops (Broadbridge and Parsons 2003; Horne1998). This allows the managers to make eco-nomic business decisions to compete in thehigh street retailing environment. The respon-dents suggest that a good charity retail managernot only has the ability to make an appropriatedecision in any given situation, but is also ableto install a market-oriented value systemthroughout the organization to shape any stra-tegic decisions and outcomes about the organi-zation. Scholars suggest that nonprofitorganizations with a higher degree of marketorientation are able to utilize market-basedresources, reduce dependency on the limitedrevenue sources, and become more business-like (Macedo and Pinho 2006; Shoham et al.2006). The notable conceptual model of marketorientation includes Kotler’s (1988) three pillarsapproach, Narver and Slater’s (1990) behaviorcomponents, and Kohli and Jaworski’s (1990)market orientation constructs. Although differ-ent measurements of market orientation havebeen introduced by many field experts, thecentral initiative behind this concept remainsconsistent; that is, how the organization rapidlyresponds to changes in the competitive marketenvironment (Golann 2006; Schindehutte,Morris, and Kocak 2008). The informantssuggest that their actions in scouting their com-petition allow them quickly to respond to thechanges in the market environment. Moreimportantly, it is not just a tactic for a particularcharity retail store. It is an organization-widevalue system for how to look at the competi-tion. The sign of market orientation alsoreflects the charity retailers’ consumer strategy.We found that the charity retailer attemptsregularly to seek consumer feedback and iswilling to change its operational strategy inorder to respond to these opinions. In relationto the earlier comments on competitionresearch, charity retailers have set up proce-dures to track the changes that are taking placein the marketplace—a true act of market orien-tation behavior. These procedures have influ-enced the way in which business decisions are


made as well as the management philosophy atevery level of the organization.

According to the comments made by theinterviewees, the element that contributes tothe development of market-oriented cogitationis to develop a market-oriented performancemeasurement method. We found that charityretailers have two approaches to developing ameasurement standard. The internal approachallows charity retailers to look for the bestpractice business units with the organizationand encourage other business units to learnfrom it. In other words, the standard of mea-surement is set internally. The externalapproach allows the charity retailer to searchfor the best industry practice for the purpose ofbenchmarking and modernizing the businessoperation (Prahalad and Hamel 1994). Thebasic concept of this idea is to gather businessintelligence from others and imitate their supe-rior business practice, which usually leads tobetter performance for the focal organization.

Implications and ConclusionThe goal of this research was to enhance our

understanding of managerial capabilities fromthe practitioners’ perspective. We investigatedour research questions by interviewing 60managers/decision-makers from the U.K.charity retail sector. In terms of managerialhuman capital, we found that the charity retail-ers face complicated challenges when manag-ing both paid and voluntary staff. Although thegeneral practices of human resource manage-ment, such as job descriptions and promotion,serve as a basic guideline for supervising paidstaff, however, many charity retailers find itdifficult to recruit and retain qualified staff dueto the nature of the industry, which oftencannot offer competitive compensation and acareer building environment in comparison tothe private sector. On the other hand, the vol-untary staff, who can be seen as a source ofcompetitive advantage for nonprofit organiza-tions (Farmer and Fedor 2001), often have ahigh turnover rate and cannot usually beexpected to fulfill the full work demand and jobcommitment needed for a given task. More-over, we also found that, under the currentdevelopment of the charity retail sector, mostof the organizations are able to identify thegeneral skills that are necessary to perform thetasks in this industry. Only a few of themattempt to look for and develop organizationspecific skills that would provide a competitive

edge (Barney and Wright 1998). In the charityretailing setting, the organization specific skillscan relate to the skills to perform special ser-vices related to the retailer’s particular productline. A charity retailer that has the ability todesign an organizational policy and managerialsystem to solve these challenges will appear tohave an advantage when employing managerialhuman capital over the other players in thecharity retailer sector. Our findings call intoquestion whether charity retailers have themanagerial capability to manage human capital.This suggests:

Proposition 1: In terms of managerialhuman capital, charity retailers thathave a greater capability to (1) managepaid and voluntary staff and (2) developorganization-specific charity retailingskills will outperform those that do not.

In terms of managerial social capital, wefound that charity retailers have an awarenessof the potential benefits that may arise from theexistence of social network relationships. Thekey question that arises here is how charityretailers make the most of these. The answerconsists of two parts. The first part of theanswer is about building within and cross-sector network contacts. From the interviewdata, we detect three steps that are critical withregard to performing relationship buildingactivities. The first step is to recognize thenetwork contacts that are possessed by thecurrent staff. This involves exploring the poten-tial network contacts that the organizationalready possesses through its existing staff,which have not yet been made known or fullyutilized by them. The second step is to recruitstaff who have many additional network con-tacts, in order further to extend the charityretailer’s network connections into unchartedterritory by hiring individuals who possessthese contacts. The third step is to performnetworking and communication activities. Thisact enables charity retailers to not onlystrengthen their existing network work relation-ships but also construct additional relationshipsdirectly, without hiring additional staff. Thesecond part of the answer is to extract resourcesand information from the network relationship.To do so, the findings suggest that the manage-ment team requires knowledge about workingon cross organization cooperative tasks anddesigning an exchange platform for resource

LIU AND KO 401

and information exchange. Both actions make itpossible for charity retailers to maximize thebenefits received from the network relation-ship. Thus, we argue that a charity retailer thathas the capability to execute these activities willbe a better performer regarding managerialsocial capital in the charity retailer sector. Ingeneral, we can predict:

Proposition 2: In terms of managerialsocial capital*, charity retailers that havea greater capability to (1) build withinand cross sector network contacts and(2) extract resources and informationfrom the network relationship will out-perform those that do not.

In terms of managerial cognition, the keytasks are to install the market-oriented mana-gerial beliefs and values into the charity retail-er’s decision-making system while maintainingthe nonprofit organization’s social attributes inthe daily operations. As a result, it is critical forthe management team to find a balancebetween the charity retailer’s commercial andsocial mission. To install the market orientationin the business, the manager needs to be ableto communicate and explain the concept ofmarketization to the staff and create a business-like atmosphere within the organization. Froma practical perspective, other than disseminat-ing the messages, the manager also needs tohave the skills to implement the market orien-tation at every level of the business operation,as well as design the measurement system toassess the performance with regard to marketorientation. To link with Vazquez, Alvarez, andSantos’s (2002) work, the adoption of marketorientation also allows nonprofit organizationsto provide better social services than otherorganizations. In other words, a manager whois able to install this orientation can enhancethe charity retailer’s both social and commercialorientation. Thus, a charity retailer who is ableto exercise all of the above aspects of businesspractice will be a better performer in terms ofmanagerial cognition in the charity retailersector. The preceding discussion suggests:

Proposition 3: In terms of managerialcognition, charity retailers that have a

greater capability to (1) establish a pro-fessionalism culture within the organi-zations and (2) implement marketorientation in the management decision-making process will outperform thosethat do not.

We have also detected a linkage betweenmanagerial human capital, managerial socialcapital, and managerial cognitive ability in thecharity retail sector, as Adner and Helfat (2003)proposed. To link managerial human capitaland managerial social capital, the manager’sknowledge of recruitment and staff develop-ment can result in better access to networkresources and information. This is because,when the charity retailer is able to hiresomeone who has potential network contacts,this may enable the organization to make betterconnections in the social environment. A bettertraining program on networking and commu-nication can improve the staff’s capability tobuild social relationships for the charityretailer. On the other hand, more access to thenetwork resources and information allows thecharity retailer to develop organization-specificskills and acquire better potential candidatesfor the leadership positions. To link managerialsocial capital and managerial cognition, greateraccess to network resources and informationcan speed up the charity retailer’s transforma-tion into a more market-oriented entity. This isbecause the resources and information receivedfrom the social exchange can influence thestaff’s attitude toward this increasingly com-petitive industry and create the urge to change.Conversely, a charity retailer that has market-oriented beliefs and values will have a ten-dency to demand more information in themarketplace, and social networks provide oneof the sources of this kind of information (Knoxand Gruar 2007). To link managerial cognitiveand managerial human capital, a charity retailerthat has a high degree of market orientation isable to detect the needs in the marketplace anddevelop the recruitment and skills developmentprogram accordingly. This is because themanager is more familiar with the market con-dition and what it takes to compete in thebusiness environment. On the other hand,hiring and providing the right training to the

*Correction added on 11 February 2014 after first online publication: Text has been corrected from “humancapital” to “social capital”.


staff can trigger the market-oriented decision-making process, as well as develop a profes-sionalism culture within the organization.

Finally, this research also offers the implica-tions about the differences in the managerialcapabilities between charity retailers andfor-profit organizations (i.e., commercial retail-ers). From the managerial human capitalperspective, unlike for-profit organizations,charity retailers face the challenge of managingvoluntary staff. Although voluntary staff dobring a cost advantage to charity retailers(Farmer and Fedor 2001), however, the volun-tary nature of their involvement in the charitywork makes them difficult to manage. Further-more, due to the high turnover of voluntarystaff, many charity retailers are reluctant toinvest resources in their training programs. As aresult, the charity retailer needs to adopt adifferent management philosophy than that ofa for-profit organization. For example, charityretailer managers need to pay more attention tomanaging the replacement of absent staff bybuilding a voluntary staff database. Moreover,retention strategies such as the regular socialgatherings and communicating about the orga-nization’s social mission to motivate voluntarystaff initially to become involved in charitywork not only allows charity retailers to retainvaluable volunteers but also encourages themto invest more resources in their volunteertraining programs. From the managerial socialcapital perspective, the key difference betweenthe charity retailer and the for-profit organiza-tion is that the former needs to develop cross-sector network relationships. As the businessmodel becomes more complex, we found thatthe managers of the charity retailers inevitablyneed to establish relationships with theirprivate sector contacts who speak differentbusiness languages and have different perspec-tives on certain issues (i.e., profitability). Inorder to extract resources from the increasinglyimportant cross-sector relationship, the charityretail management team needs to develop dif-ferent sets of communication and collaborationskills and capabilities when meeting networkcontacts from different sectors. From the mana-gerial cognitive perspective, the major differ-ence between for-profit and charity retailermanagers is that the latter often faces the chal-lenge of balancing commercial and social inten-tions. For-profit managers often do not need tostruggle to make strategic business decisionsregarding profit growth objectives and persuad-

ing their employees to adopt the same mana-gerial logic. Despite the already challengingtasks of establishing a professionalism cultureand market-orientation beliefs from scratch,charity retail managers also need to ensure thattheir organizations are still “nonprofit” ratherthan “commercial” entities. This may involvecharity retailer managers constantly question-ing every step that their organizations taketoward professionalization regarding whetherthese steps are insufficient or going too faraway from seeking to balance the organiza-tion’s commercial and social goals.

In general, our findings extend Adner andHelfat’s (2003) model of managerial capabilityand provide propositions that have direct mana-gerial implications. The research clearly outlinesthe factors (see Figure 1) that can be used tomeasure each of the managerial attributes fromAdner and Helfat’s (2003) model, which subse-quently contributes to the formation of thecharity retailers’ managerial capability. Accord-ing to the informants’ comments, a charityretailer that possesses these factors will have aclear advantage in the marketplace. Therefore,the operators of charity retailing can use thesefactors that we identified in this research as achecklist to identify the organization’s strengthsand weaknesses and make the necessarychanges. We also recognize that there is a limi-tation to our study. For example, our researchdoes not produce any quantitative measure-ments for each factor, and we recognize that theact of managing voluntary and paid staff makesan important contribution to the performance ofmanagerial human capital. However, our datasets cannot provide a precise quantitative scaleto demonstrate exactly how important this is.Future research might investigate the weight ofeach factor for all managerial attributes. Despiteits limitations, our research contributes to ourunderstanding of the field practitioners’ viewof managerial capability in the charity retailsector.

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Documents

Charity Retailing in the United Kingdom: A Managerial Capabilities Perspective