DOES SOCIAL ENTERPRISE PROVIDE AN ANSWER?

by Roger Tweedy, Wellington City Council

Roger has had a long involvement with the community voluntary sector with years in community enterprise space which initially arose out of recession of the late 80's. He keeps abreast of the issues internationally and has attended several overseas conferences around social enterprise and social entrepreneurship. Feedback encouraged on vpeople[at]xtra.co.nz.

In uncertain times many community organisations are looking for alternatives as other funding streams dry up.

One option is around finding new markets for our services and an aspect of this can be called 'social enterprise'. (An article defining what is and what isn't social enterprise is for another time.)

Internationally, social enterprises are trendy and often with good reason. They can give clients jobs, jobs training and even markets for their products. In addition, social enterprise can generate surplus cash and thereby secure a reliable funding stream for non-profit programmes.

Before you head off in this direction, an article the latest Social Innovation Review out of Harvard University provides some helpful advice. Just as the often quoted figures around the number of small businesses that fail, the writers question that, "The vast majority of non-profits lack the infrastructure and expertise to launch successful businesses. Is your organisation in the minority that is ready for revenue? "

It gives the following useful checklist to work through with your staff and board before setting out on this possibility.

MAYBE / NO
You want to launch an enterprise because..... / You've managed your nonprofit programmes so well that it's time to expand them / You like to be on the cutting edge, and all the cool organisations are launching social enterprises
You understand the benefits and opportunity costs of social enterprise / A potential funder may give you a grant if you start a business
Your commitment to your mission..... / Is laser-like and focused / Is wavering and distractible
Your culture..... / Is entrepreneurial and gives staff freedom to solve problems / Is bureaucratic and discourages initiative and problem solving
Believes that social enterprise can address market issues / Distrusts business and market incentives
Your board and staff..... / Have business experience / Lack business experience
Base their decisions on data and analysis / Base their decisions on instinct
Your operations...... / Tend to function smoothly / Are often out of control
Reflect a long-term strategy / Leave management and staff too overwhelmed to plan ahead
Your monitoring and evaluation systems..... / Generate timely, accurate and thorough information / Generate information that tends to be too little, too late
Could expand to include new enterprises / Are already overtaxed
Your business ideas..... / Align with your mission / Do not align with your mission
Complement your existing programmes / Do not complement existing programmes
Meet a market need / Do not meet a market need
Are likely to generate surplus cash / Are unlikely to generate surplus cash

© Stanford Social Innovation Review, Winter 2009

Since the demise of the Community Employment Group there is little assistance available to help organisations considering entering this area. Many of the public 'business advisory services' are precluded by their funders from assisting NGO's (something NZCOSS maybe should be taking up with government) and the commercial providers, e.g. accountants, often lack knowledge of the special nature of the community and voluntary sector.

As an example, one of the background papers presented by an international consultant to the recent Jobs Summit noted when discussing the lack of credit available in the world markets, "the lazy balance sheets of many of the international NGO's." His assertion was based on the business model of debt/equity ratio's suggestion that the NGO could afford to 'risk' more of their money. (Tui Billboard - This approach has certainly worked for business.)

The fundamental difference between the two types of enterprise -- certainly at the level many of us work -- is we cannot spend until we receive it. Many community and voluntary service organisations I have known over the years have ceased to exist because they overlooked this difference. For-profits, in contrast, generally make their money by going into debt to others.

Looking to the checklist, the one in my view that is most important is 'mission alignment'. The road to success is littered with organisations, blinded by opportunities outside their fundamental purpose. Often, I used as an example the wonderful YMCA shop that ran successfully in Lower Hutt for many years. The shop was a successful enterprise but just as importantly it carried out the YMCA mission of empowering young people - a real win-win.

Other reasons for entering into social enterprise can include: social enterprise as community building (I saw a great example in Canada where a whole area of a small town was transformed -- human service redesign including testing of new models of delivery and as a tool to include disadvantaged people in the real economy. There was an interesting paper on the latter at the ANZTSR Conference in November, "Social Inclusion through Social Enterprise (see Jo Barraket's paper on

All mission alignment reasons are not necessarily for the primary objective of making money. Social enterprise may well offer some options for your organisation. Be wary that 'all that glitters is not gold' and do your homework.

Happy enterprising!