Organisational Legitimacy: The Case of the Australian Red Cross

Charitable organisations such as the Australian Red Cross (ARC) rely on public goodwill for financial support. To ensure continued access to resources these organisations need to be perceived by the community as being legitimate, and seen as undertaking legitimate activities. Charitable organisations have faced ongoing criticisms about the way publicly donated funds are used (Kahler and Sargeant, 2002), and reduced donations (Margolis, 2001). The situation has worsened with potential donors being confronted with competing needs in difficult financial times (Omura and Forster, 2014). This is concerning, as donations are commonly their primary source of income. Bennett and Gabriel (2003) found that image and reputation strongly influence donor behaviour, and that charitable organisations must therefore develop and maintain a legitimate image and reputation to survive. Managing organisational legitimacy is thus critical for charitable organisations (Sutton, Cordery and Baskerville, 2007).

This study explores challenges faced by the ARC from the perspective of legitimacy theory. Dowling & Pfeffer (1975) argue that organisations are considered legitimate to the extent that their activities are consistent with the goals of society. If a legitimacy challenge or event occurs that results in a gap between society’s expectations and the organisation’s image, the organisation will need to act to manage its legitimacy setting. On this basis, legitimacy theory has been used to explain organisational behaviour (O’Donovan, 2002). However, the application of legitimacy theory in the literature has been criticised for being narrow in scope, and not capturing the full range of legitimating techniques available to organisations (Hybels 1995; Suchman, 1995). This research addresses this gap by demonstrating a broader application of legitimacy theory, studying multiple legitimacy challenges (events) faced by the organisation, and observing a range of legitimating techniques used by the ARC over an extended period of time.

A longitudinal case study of publicly available disclosures by the ARC for the period 1945 to 2014 was undertaken. The ARC is one of Australia’s longest running large charitable organisations. It was registered in Australia in 1914 as an arm of the British Red Cross, and has grown considerably over time to have revenue of more than $1 billion in 2014 (ARC, 2014). A qualitative content analysis of the ARC’s media articles and annual reports was performed to identify and examine legitimating events affecting the organisation and legitimating techniques utilised by the organisation, and assess the success of the techniques adopted.

In the context of legitimacy management, legitimacy events observed were collated into three themes. Theme 1 comprises legitimacy events faced by the ARC in relation to the ensuring the organisation has a clearly defined and supported role in society. Theme 2 relates to specific criticisms of the ARC and general criticisms of charitable organisations. Theme 3 relates to ongoing issues and concerns about the management of the organisation’s Blood Transfusion Service (BTS). Communication based and structural and procedural based legitimating techniques were observed for each theme. Assertive and emotive narrative legitimating techniques were observed across all themes. Other narrative techniques observed varied in nature and frequency across the three themes. Increasing use of pictorial legitimating techniques including photographs, graphs and tables was noted. Indicators of successful management of legitimacy events were observed, and the importance of structural and procedure techniques in organisational legitimacy management highlighted.

The study confirms and extends past research, demonstrating the use of a toolbox of legitimating techniques over time, and the selection of different techniques depending upon the legitimacy setting faced. It contributes to the literature by developing a list of legitimating techniques that charitable organisations might utilise to manage legitimacy more effectively in times of crisis. It also highlights the importance of accountability, transparency and good governance structures for charitable organisations. This research also confirms the ongoing and interactive nature of organisational legitimacy management. Future research could extend this research to different organisational types and settings.