In reality, treating a social enterprise different than any other business is a self-destructive approach. As Dean Karlan and Jacob Appel point out in their book More Than Good Intentions, development solutions need to sell. This happens when a great program or service works and the poor choose to sign up for them. In other words, we have to convince the poor to buy in. Otherwise, “letting proven-effective program fail due to lack of interest is a wicked waste.”
The inability to access funding has also been a contributing factor to the failure of social enterprises and barrier to growth. The underlying problem is similar to the one outlined earlier. Social enterprises have unsuccessfully convinced supporters to buy into their mission.
A few recent studies provide insight to tackling this problem and all point back to the need for social enterprises to engage in effective business practices.
In the study by Deloitte UK entitled Soft outcomes require hardcore delivery released earlier this year, they make an argument that social enterprises have opportunity to improve their chances at funding by making their commercial delivery more “hardcore”.
The areas of improvement are:
1) Engaging with growth, cost management, and marketing
Since many social entrepreneurs originate from the third sector, it is important for them to adopt the mindset and terminology of the commercial sector. They can convince investors of the sustainability of their investment by engaging in topics like cost reduction and competitiveness.
2) Clear business plan and articulation of business models
Social entrepreneurs need to “speak the same language” as external partners by being able to explain the product or service succinctly, who the customers and beneficiaries are, how the business will be financially sustainable, and identify growth opportunities.
3) Building and demonstrating business skills and management capability
Investors place significant importance on the quality of the leadership and management capabilities of the business. The founder may not be able to meet this criteria but it is important that the social enterprise is capable of demonstrating this strength.
In addition, a document released in October 2011 by New Philanthropy Capital – Principles of Good Impact Reporting – set out some principles on how social enterprises can better shape how they are perceived.
Specifically, there are six principles that define what they should address and communicate about their impact:
1) Clear purpose
- What needs or problems are we trying to address?
- Why are we here? What is our mission? Why us rather than anyone else?
- What is our vision? What change are we trying to bring about?
- What do we want our impact to be, and over what timescale?
- What do our key stakeholders want us to achieve?
2) Defined objectives
- What do we aim to achieve? What are our measurable short and long-term objectives?
- How do these objectives help us achieve our vision?
3) Coherent activities
- What are we doing to achieve our objectives? What are our activities, outputs and expenditure?
- Are our activities part of a coherent plan?
- How do these activities achieve our objectives? What is our ‘theory of change’ – our plan showing how our activities lead to change?
4) Demonstrated results
- What are we achieving and how does this compare with our objectives?
- To what extent are we contributing to our overall goals?
- How do we know what we are achieving?
- Do we have appropriate evidence of these results?
6) Lessons learned
- What are we learning about our work?
- What are the unintended consequences of our work (positive or negative)?
- How are we communicating what we are learning? Are we sharing knowledge, publishing results and collaborating with other organisations?
- How are we using what we have learned to improve what we do? Are we revising our strategies, programmes, activities or operations?
To read the full reports, visit http://www.deloitte.com/assets/Dcom-UnitedKingdom/Local%20Assets/Documents/About%20Deloitte/uk_social_innovation_soft_outcomes.pdf and http://www.philanthropycapital.org/downloads/pdf/Good_impact_reporting_consultation.pdf.
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