Can social enterprises deliver better results?

Earlier this year, richest men in the world numbers two and three developed a Giving Pledge that implored billionaires the world over to give at least half of their earnings to charity. Of the forty that are complying, richest man in the world #1 is noticeably absent. Mexican magnate Carlos Slim responded to the call of the Pledge by saying he would rather invest in projects that generated jobs than give to charitable campaigns against poverty, claiming, “Trillions of dollars have been given to charities in the last 50 years and they don’t solve anything.” A controversial statement, but worthy of our pause.

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There are several impactful and important charities, but taken as a whole, the nonprofit sector is structured to underachieve (for this article, I’ll use charities and nonprofits interchangeably). So far, a lot of the appeal of social enterprise within Canada’s nonprofit sector – and outside the circle of the already converted – has centred on its potential to address scarcity in funding. The problem is, this attitude asserts that the traditional approach to making change is optimal, just under-resourced. I think there’s a bigger case we can make that enterprising actually positions an organization to deliver social value better; that should become the core of the case for social enterprise. Based on my experience working with and alongside dozens of small and medium nonprofits, here’s a look at why enterprises (of all models) might deliver better results:

Delivering Impact

Most small and medium nonprofits (those comprising the vast majority across Canada) create campaigns and projects – periods of concentrated effort that are supposed to solve a problem. Most campaigns are rather short, usually six months to two years, during which time the leadership spends half of the time trying to extend their funding security. The goal of a campaign is to deliver value in a focused area and time. At the end of each campaign, most nonprofits are mandated to have spent all the resources they have, and sometimes to return any extra. Unable to build a financial foundation, nonprofits don’t even start to think about scaling their efforts beyond this neighbourhood or that town. That means that if a nonprofit is implementing something that works, that experiment (and all its benefits) tends to stay within a small geographic or demographic area. In other words, nonprofits normally don’t respond to a need on a wide scale.

Normally, enterprise success works through repetition, not campaigns. The rationale for businesses is to deliver a unit of value (good/service), as many times as possible. Each delivery takes them through the same cycle of procuring resources, creating the unit of value, and delivering it. And, importantly, each cycle should end in the business collecting more resources (money) than it had at the start of that cycle. That extra earning can be put toward growing operations, hiring new talent, or protecting the business during tough times. This is done over and over again, until its units of value are widely distributed, affecting the lives of hundreds, thousands or millions of people. The underlying notion is that the way to project impact unto the world is through repeatedly churning out units of value, bit by bit, as fast, wide and long as possible. Repetition makes businesses experts in their particular process of delivering value.

Planning and Adapting

On grant applications, campaigns are articulated by workplans. But workplans aren’t really helpful since just about everyone acknowledges that in executing the plans, circumstances always force groups to adjust or change. With many funders, groups are limited in how much they can respond to changing circumstances, or newly discovered needs. Sure they can react to newfound needs…with the next project. Funders have the lion’s share of say in how services are delivered. So nonprofits try to spin square programs into round funding mandates.

In business, the company’s leadership is expected to adjust to newfound customer needs, even if that means getting involved in new industries. A business plan is all well and good at the start, but if a business doesn’t adjust to newfound needs as soon as possible, it’s considered to be ignoring market opportunities, and isn’t doing its job. Leaders get fired for being slow to adapt. The customer – the “end beneficiary” – has the lion’s share of influence over how they are served.

Innovation

It’s a buzzword we often equate with new approaches. Instead, I believe the majority of innovation is to be found in repeating to the point of expertise, thereby recognizing small opportunities to make things more efficient or higher quality. Tweaks.

In speaking with many people in the social sector, the draw of social enterprise has more to do with budget gaps than with a proactive shift in thinking about how change should be made. But it should be the other way round. We have some way to go in making the right case for social enterprise.

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Assaf Weisz is executive director of the Young Social Entrepreneurs of Canada – the nation’s hub for young social entrepreneurs – and a supporter of their social enterprises.