Laurinda - Sep 19, 2006 2:08 pm (#1 Total: 34)

I have spent the past 20 years fluctuating between for-profit and not-for-profit endeavors, always on the look out for the perfect fit that answers my internal core values. "Doing well ... whislt doing good"

The facts are that as a result of the modern economic frameworks ruling the world ... economic sustainability is a must! ... if we are serious about doing good ... and to facilitate a positive impact on the social and environmental arenas.

Unfortunetelly our entire global economy is run on "promisary notes" without any real or substantive value ... and the real value is now measured against this  tool (i.e. money ... or syphers on a computer program ... how did we as mankind alowed this state of affairs to control us ... I will never understand) ... but be that as it may be ... we can't easily change this situation ... all we can do is extract what we need from it so that we continue to do good on behalf of mankind and the planet ...

Having said that, the economic tools and frameworks do control the way that we manage our lives and its impact on everything else.

Personaly I am averse to being part of the "donor, grant begging brigade .. as you often tend to loose your independence and are prevented from really fulfilling your dream and vision ... as a result the alternative is to follow the self-economic route.

Agree ... this may bring chalenges ... and for many years I was unsure how to address them all ... but fortunetelly the world is changing ... values are becoming a more important factor, technology today enables us to communicated faster ... and our networks grow ...

this in turn has enabled us to create and implement different models ... and now as a result we have opted for a blend of "profit and not for profit methodologies, we have blended all our values at the foundation level and have integrated them at the top.

Have we found the solution?

Only time will tell ... we believe that we are on the right path ...

A blending of the for-profit and for-benefit methodologies is probrably the way to go.

I know that I havent' addressed all your questions in detail ...

... will do so at a later stage.

Laurinda

 

 

george.polisner - Sep 19, 2006 2:51 pm (#2 Total: 34)


To begin our discussion, we offer the following five questions:

• Do you believe a nonprofit can run a revenue-generating initiative without compromising its social mission?

I'd like to change the question -we are a for-profit with a very strong social mission (informing and educating consumers with regard to corporate behavior -or more commonly and incorrectly -Corporate Social Responsibility). A high level of care and attention is necessary as I believe as we are for profit we are held to a higher standard of scrutiny. It is very possible.

• How should nonprofits strike the appropriate balance between social and business goals?

For us, we must guard our own viability or else there is no social mission (and no venture). We are privately funded by passionate investors that believe in our mission. This is critical as investors that are simply looking at a high ROI may as well invest in entities such as WalMart and ExxonMobil. We strongly believe that the oil-based economy, and the business practices of driving equity value through externalization of costs are enjoying their last gasp. The innovation of a free-market economy driven by intelligent demand for products and services of businesses that are balancing people, planet and profit will prevail -which will be good news for visionaries such as Jeffrey Hollender of Seventh Generation, Ray Anderson of Interface and others that are leaders of Capitalism 2.0.

• Where can nonprofit execs without MBA’s learn how to run a profitable venture? Hire MBA's and Green MBA's. Non-profit and Hybrid (for profit, strong social mission) entrepreneurs should concentrate on vision and strategy and bring the financial and operational expertise during different phases of growth. I'd love to see an incubator for Hybrid companies like alonovo.com that can help grow similar companies while allocating the cost of infrastructure, financial, legal and operational expertise across all of the entities. It would lower the transactional cost of placements too.

• How should a nonprofit measure public trust? It should first concentrate on the areas that build trust -strong governance, diverse boards, transparency and efficacy.

• What legitimizing assets does a nonprofit have to leverage in the revenue-generating arena? The most significant non profit asset tends to be their constituency. They can leverage their constituents (carefully) in relationships with select Hybrid and for profit ventures that are important to their specific community.

isele - Sep 19, 2006 3:52 pm (#3 Total: 34)
Senior Program Director - Great Bay Foundation


Hi Laurinda,

Thanks for your comprehensive perspective: I could not agree more about "the donor grant begging brigade." When people say revenue generation is a distraction, I cannot understand why they do not see chasing the grant money as an equal distraction. People spend a great deal of time researching grants that might be even slightly appropriate and then write a grant that addresses the funder's need rather than those of their own mission. So they tend to simultaneously mitigate mission focus and deplete valuable time.

I think that the trend to blend (in a very public way) mission and values into a new definition of success began when the new-to-wealth dot.com millionaires decided the accumulation of profit for the sake of profit quickly grew vacuous. It became legitimate to analyze ways in which one could blend for profit business skills with nonprofit mission values. You had successful business minds attacking social programs in ways that would help to insure long-term success. It was a catalyst and set an example for traditional nonprofit directors, who had the skills or were prepared to acquire them, to model.

We are on the edge of a new era where (for some) focus has shifted from individual self-satisfaction to the need to address larger social issues realted to the community in which the individual belongs - both local and global. Not an overwhelming number of people have made the transition, but the few who have provide a glimmer of hope.

Elizabeth

Kim Breas - Sep 19, 2006 5:25 pm (#4 Total: 34)
DoughNation Services LLC

Although I may be a minority in my point of view, I believe social enterprise extends beyond nonprofit earned-income ventures to include wholly for-profit enterprises that demonstrate commitment to social benefit - like mine, DoughNation Services LLC.

I do believe though, that nonprofits can successfully run earned income ventures without compromising their social mission.

Like Laurinda, I have always been driven by 'doing well by doing good' and that is the motto of DoughNation Services LLC - the first service in the nation to provide homeowners with tax deduction documentation and delivery for donations of quality belongings - and of the Prosperity Project.

Since 2002, DoughNation has proven the donation services business model – we have had repeat business and referrals, and have been paid as much as $2000 (in full, upfront) for our expanded Gentle Disposition service that clears the entire home through donation, recycle and disposal.

On July 17, we introduced the Prosperity Project as the first 'open source' social enterprise that expands DoughNation’s proven model into four donation service enterprises. The Prosperity Project is freely licensed to individuals and nonprofits that commit to ‘doing well by doing good’, and those who build donation enterprises with the Prosperity Project model own the businesses they build outright.

The first story appeared on HappyNews.com: http://www.happynews.com/news/7152006/The-Prosperity-Project-An-Open-Source-Social-Enterprise.htm

Coincidentally, just one month later on August 17 a major change in the charitable giving law came into effect when President Bush signed the Pension Protection Act of 2006. As of this enactment date, this Act restricts claiming tax deductions for donations of personal belongings only to items in 'good used condition or better'.

With the charitable giving law changes, donation services became an even more important new industry. Key elements of donation services include photographs of each donated item along with a itemized list of tax deduction values - documentation that is now essential for anyone wishing to claim tax deductions above $500 for donations of personal belongings.

Since introducing the Prosperity Project we have been reaching out to nonprofits engaged in social and economic justice, economic localization, community development, etc. and encouraging them to build donation enterprises locally, as well as making the Prosperity Project available to individuals who commit to ‘doing well by doing good.’

I encourage everyone reading this to learn more about the Prosperity Project at www.doughnationservices.com!

Kind regards,

Kim Breas

isele - Sep 19, 2006 6:15 pm (#5 Total: 34)
Senior Program Director - Great Bay Foundation


Hi George,

I am not convinced that for-profits are held to a higher standard. Perhaps, that is because you have not defined "standard." Are you talking about financial or social accountability? I think they are held to a higher fiduciary standard because of their responsibility to shareholders, but less for social accountability. Too many people give for-profits gratuitous bonus points for any socially directed initiatives.

I certainly hope you are right about: "We strongly believe that the oil-based economy, and the business practices of driving equity value through externalization of costs are enjoying their last gasp. The innovation of a free-market economy driven by intelligent demand for products and services of businesses that are balancing people, planet and profit will prevail..." But the pragmatic side of me says we have a long way to go. Any one else feel more optimistic about this?

Re your suggestion, "Hire MBA's and Green MBA's. Non-profit and Hybrid (for profit, strong social mission) entrepreneurs should concentrate on vision and strategy and bring the financial and operational expertise during different phases of growth."

In a perfect world this might happen, but, until we arrive there how can small nonprofits afford to hire MBA's - green or seasoned?

Re your, "The most significant non profit asset tends to be their constituency. They can leverage their constituents (carefully) in relationships with select Hybrid and for profit ventures that are important to their specific community."

I would say it is not so much the actual constituents but rather the nonprofit's relationship with its client/constituents and its success in helping them become more self-reliant.

How do others feel about this last point?

Elizabeth

Mark Lewis - Sep 19, 2006 10:05 pm (#6 Total: 34)
CEO/Executive Director; Strategic Business Intelligence Group

These are questions the Strategic Business Intelligence Group is dealing with on a regular basis here in Dallas, where the NPO sector has not a very limited social enterprise component to it at this point.  We hope to help change that.

Do you believe a nonprofit can run a revenue-generating initiative without compromising its social mission?

This is a curious question given that we're on a forum based on the idea they can do exactly that.  I repeatedly see this question being asked by many people that speak about it within the context of social entrepreneurship as opposed to NPO's more generally.  To me, the whole idea of generating revenue within the NPO or social benefit business is what SE is all about in the first place...changing the busness model.  As I see it, a 501(c)3 is simply an IRS tax designation, and that needn't effect the organizational mission unless it's allowed to.

I'm solidly in the Jerre Boschee camp of social venture entrepreneurs that believe not only CAN non profits generate their own revenue and remain true to social mission, but for NPO's to move to the next generation business model...social enterprise organizations rather than doner funded ones...they MUST generate their own revenue.  We need a clear, concise and agreed upon standard about what constitutes a social entrepreneur, and I think the NPO label is rapidly loosing it's distinction in the face of social entrepreneurship, CSR and even the rise of SRI vehicles.  

Personally I think that definition has to include the creation of self generated or internal revenue.  I'm firmly of the view that social mission aside, organizations that do not generate their own revenue, or are at least in the process of moving strategically toward that model, are not only going to find it increasingly difficult to survive in the new economy, and in fact many are already compromising their social mission by not doing so.  One only need look at the large amounts of time spent by ED's, the expense of hiring grant writers, and the way many NPO missions get morphed into what the funding agents want, to recognize that mission is compromised, or at the very least slowed down...not by your IRS tax status but by how you spend your time and who or what you are beholden to.

How should nonprofits strike the appropriate balance between social and business goals?

Boards of Directors make the decision in the NPO world, which is another reason I favor a pure SE model for social benefit businesses.  There are many ways to structure for profit businesses that create a much better connection to social mission in my opinion.

In social enterprise business models, I think this is a question that probably can't be answered in the form of a one-size-fits-all formula.  At the Townview Symposium on Social Entrepreneurship in Dallas this week, I stressed to the students at the Ynonne A. Ewell Townview Magnet Center's School of Business and Management that when you become an entrepreneur, YOU get to decide these questions...nobody else.  In other words, I think the answer to the question is rightfully, "whatever the social entrepreneur thinks is appropriate".  In the perfect world somebody mentioned earlier, one would get amazing ROI for both social benefit and financial sustainability from day one, but in realilty, I think most social venture entrepreneurs struggle with answering this question and gradually refine and sharpen their skills and build their organization's capacity, networks and vision in a process that increases the quality of impact they have over time.  Where an organization is on this timeline of movement and progress at any one time is dependent on so many factors, it's sometimes hard to decide if progress is even being made.  What counts most IMO is that the committment is in place to see social impact rooted in the business model's foundational structure as opposed to it existing in the form of a value added proposition.  Here is where I feel SE is a more assertive and engaged business model than CSR.

Where can nonprofit execs without MBA’s learn how to run a profitable venture?

I value the skills MBA's bring to the table, but I don't think it's neccessary to have an MBA to run a profitable business, nor do I think you have to hire MBA's.  For one thing, there are many busnesses where experiential knowledge is superior to academic, and second; there are huge amounts of information, advice, and strategic planning available for free on the web that weren't available until very recently.  A Google junkie with a solild network can often exceed an MBA's understanding of a problem.  Finally, MBA's can be weaved into a business network and their counsel sought when you establish those relationships.  One way to do this is through the use of what I call "microwaveable companies"...small groups of project focused people coming together temporarily around a common goal...which often results in lasting relationships.  Net Impact has a national presence for MBA's wishing to volunteer their time, and here in Dallas I've established links with other MBA heavy organizations like the Dallas Black MBA Association and others looking to bridge outside their sector through collaboration. 

How should a nonprofit measure public trust?

The question might better be asked, "WHY should a non profit measure public trust?"  If the answer is to attract doners, I fear that the changing economic model will by-pass the organizational leadership because I think that answer is to entrenched in external funding to move towards social entrepreneurship.  On the other hand, if the answer is because the organization is committed to it's mission and holds quality and client satisfaction in the highest regard...well that's just the basis for good marketing and customer service.  All busiensses, whether NPOs or for profits...are obviously interested in maximizing public trust and good will.  I think NPO's and social entrepreneurs should simply produce great products and services at fair prices that reach people where they live and serve their markets with professionalism and high ethical standards, and public trust will follow.  Of course NPOs need to be aware of certain issues related to transparency and tax reporting, etc...and in the age of the web where a potential doner or client can simply click into www.charitynavigator.org to find an organization's credibility in seconds or pull their 990 off the web, that makes complete business sense on more than one level.

What legitimizing assets does a nonprofit have to leverage in the revenue-generating arena?

Information...actually the wise application of information...is power; and in my view NPO's and social venture entrepreneurs should make an extraordinary effort to make sure they look at the big picture when networking their relationships.  What information do you hold that is strategic in value to different kinds of companies, segments of the client base, doners, the public or selected change agents?  The value of relational networks is huge as well.  Certainly the opportunity to leverage relationships with for profit businesses is there.  I'm constantly amazed at how many CEO's and board members of sizeable companies are interested in social entrepreneurs...and here in Dallas that means beginning with explaining what a social entrepreneur is, because the footprint here is so small and so new that few executives here have even heard of social entrepreneurship at all.

These are some great questions...and this forum is so valuable for learning how people from around the country or outside the US see these issues.

Mark

Jeff.Mowatt - Sep 20, 2006 1:09 am (#7 Total: 34)
P-CED


Though in the case of our organisation, P-CED, it started with a theoretical model which was pitched at President Clinton:-

http://www.p-ced.com/index2.asp

For us, and I was not part of it at the time, proof was delivered in 1999 with the commencement of activities in Siberia. Nowadays our business drives a social mission by simply directing revenue toward the social mission by agreement between those involved.

In many ways what was proposed back then can be seen in the model of a community interest company which has existed as a legal form in the UK for the past 2 years.

MBAs we don't have, I doubt if we could afford one and I'm often a little amused by the fact that none of our customers have any idea of our social purpose. This includes a publishing group with its own social fund and another, a school for MBA's at Cambridge.

I couldn't agree more with your statement about nonprofits measuring public trust. We don't have to, they buy into a product and it's up to us where the profits go.

And information access, well that's what we're about in essence, recognising that it's fundamental to establishing new enterprise, though we're more oriented toward delivering at the grassroots level.

Current activity is directed at Ukraine where we've delivered a proposal to deploy competitive revenue generating Wimax technology to fund a major childcare reform initiative. Now we're lobbying to convey to the rest of the world just how much it's needed.

http://eng.maidanua.org/node/581

Regards,

Jeff

Mark Lewis - Sep 20, 2006 10:34 am (#8 Total: 34)
CEO/Executive Director; Strategic Business Intelligence Group

Good stuff Jeff...sorry for the twisted English above...LOL...I checked out your site and found it interesting. 

I like the emphasis on bottom up management approaches and empowerment emphasis.  I've always felt the finer points of the capital market free enterprise system were neglected and these markets represent an underserved segment that so far just a few (CK Prahalad for example...) have caught on to yet.  This is a great example of a strategic data set that I think flies beneath the radar of a lot of Fortune 1000 companies when you get down to the level of mico-enterprise for example; but there's definitely a market there and what's exciting from a social venture entrepreneurs point of view is that these markets are wide open for even the smallest operations to be able to compete in.  These niche markets opened by globalization, technology and the converging and paradigm shifting emergence of women and minorities, new business models and proliferating cheap technology has left us an opportunity to empower social vision like never before. 

I think young people are key in this also.  They can move more naturally in the information age and the next wave economic shift; creative right-brain management style, design and innovation through collaboration/innovation...a phase that's rapidly gaining strength...are what they're best equipped for.  Why we aren't recognizing this in our schools right now is a mystery.  We're still training our high school graduates to compete for jobs in low paying service economy positions, which IMO is defeating us on the global market.  India's graduating 80,000 MBA's a year and by 2009 will constitute the world's largest group of English speaking people, and of course everyone knows what China's doing, so while we can't compete like we used to, we can change how we compete and still retain an extraordinary US presence in the global theater.  I don't buy the idea that the US economy is done, but we have to get much smarter, faster, more mobile and flexible in a big hurray.  We have to move across sectors, cultures and other boundaries to create the most competitive base of entrepreneurial talent in the world.

Last week I got to hear Syracuse University President Dr. Nancy Cantor speak here in Dallas and her emphasis tracks this idea closely...namely that we are facing a survival situation that offers opportunity at the same time, but we have to find the talent to drive the economy in the next generation everywhere it grows.  This means deliberately targeting underserved populations of both potential entrepreneurs as well as consumers.  That's something that I think Wall Street hasn't quite caught up to yet, but it's legitimate without doubt.  Women are creating new businesses twice as fast and minority women eight times as fast as the market as a whole, and that entrepreneurial initiative and synergy is coming out of places where social consciousness and a desire for change are things that literally define some of these communities.  We must tap into that talent, which was the thrust of Dr. Cantor's presentation.  Since her university is producing the top entrepreneurial MBA program in the US and an undergraduate program ranked right behind it, I think her words are seriously worth holding onto.

Into the middle of all this we introduce the question of whether it's a good idea for social benefits and NPO's to go into business...I think the answer is that it's never been a better time or a time where it's more appropriate and necessary.

I applaud what you're organization is doing...and it looks like we share some common reference points. 

Mark

 

Grantwriting Guru - Sep 20, 2006 10:53 am (#9 Total: 34)


Hello Elizabeth –

I am responding to the 5 questions from a different point of view. I am a successful grant writer with extensive experience with nonprofits. Prior to this I worked in profit-based venues (the Stock Market, oil and oil futures, etc). So I have seen both sides.

Maintaining financial viability is a primary responsibility of all businesses. Nonprofits can and do regularly initiate revenue-generating ventures that not only do not compromise their social missions, but in fact enhance and support these missions. Examples are umbrella companies under which you might find a mix of nonprofit and limited for profit initiatives. While the finances of each entity are never intermixed, intrinsic benefits from a profit-generating venture can accrue to consumers in the nonprofit ventures.

My long held belief is that nonprofit status should be initially ‘chartered’ for a period of 3 years, after which the nonprofit must show financial viability to be granted permanent 501C3 status. What makes Great Bay Foundation such an interesting funder is that it requires nonprofits to submit a business plan rather than simply a project budget. As a result, funding from Great Bay is perceived as being more like venture capital than a gift. Applying for a Great Bay grant feels inherently different from applying for a grant from a more traditional foundation. Great Bay applicants are required to bring something different – something more - to the table than just the best of intentions.

Social and business goals should not be separated. You cannot meet your social goals if your finances are in disarray. By the way, not all 501C3 organizations provide social or educational or even intrinsically worthy services. We shouldn’t hold an organization’s nonprofit status up as a mark of goodness or worth. I have seen nonprofits founded solely to access grant funds (which are only accessible to 501C3 organizations) for something – when in the long run a for-profit model would have made much more sense. I suspect we all know organizations like this.

As a grant writer I have dealt with numerous executives in the nonprofit arena who have little or no experience with budget development (which I continue to find astonishing). The importance of having a business plan is completely lost on them. I would say that the majority of this group has never worked in the for-profit world, and in fact a good percentage of them hold the for-profit world in disdain. Additionally, the concept of consumerism (giving people what they actually want and need, not what you believe they want or need … or worse, what you believe they should want or need) is foreign to them. Such executives and the organizations that reflect their backwards attitudes are legion. I advocate partnering non-profit executives with successful for-profit companies in mentoring relationships. As an aside - one example of the importance of understanding consumerism follows: As the healthcare delivery paradigm changes (as it now doing) from one in which consumers receive primary care in a nonprofit setting to one in which they receive primary care in a retail setting (the minute-clinics that are blossoming – and booming – in pharmacies and stores), the need to understand consumerism will be critical to the survival of many traditional nonprofit health providers.

Nonprofits should measure public trust in the same way that for-profits measure it – through customer satisfaction (customers being those you serve as well as those who serve you, like funders). Financial stability and growth are also excellent measures of public trust, though if you are a provider of something like services to the poor, the ultimate measure of your success would be to find that your organization is no longer needed.

What legitimizing assets does a nonprofit have to leverage in the revenue-generating arena? This is an interesting question, because the legitimizing assets for a nonprofit and a for-profit can actually be the same, such as the donation of services or goods free of charge. A supermarket chain might dispense free food to the local food pantry on a daily basis, dispense grants to local nonprofits through a company-based foundation, and dispense health or social service information as part of its normal public relations efforts. Consumers see the impact of this philanthropy on their communities and they choose to shop at that supermarket, thus generating more revenue for the supermarket. The food pantry, on the other hand, dispenses all of its services free of charge. The supermarket has a business model that enables it to sustain a level of profitability that in turn allows it to be philanthropic into the future. The food bank relies solely on philanthropy. The supermarket understands the concept of ‘generating revenue’ in a far different way than does the food bank, which understands it as “generating philanthropy”. To me this is the tale of the ant and the grasshopper.

isele - Sep 20, 2006 3:18 pm (#10 Total: 34)
Senior Program Director - Great Bay Foundation


Hi Mark,

I could not agree more that it is time for a “clear, concise and agreed upon standard about what constitutes a social entrepreneur,” however I think we must create a definition that bridges both the NPO and For Profit arenas. Would you like to take a stab at it?

You say that Boards of Directors make the decision in the NPO world but that does not need to be as restrictive as you infer. I know, for example, many ED’s who are members of the board and sometimes even Chairman of the Board for their NPO. Isn’t the greater distinction that NPO board members, in contrast to the For Profit board members, have no fiduciary ownership in the organizations.

In your blog entry #8, you emphasize that “young people are key.” This is a bias that needs to be put down. See for example the recent new Purpose Prize from www.civicventures.org which was designed to recognize social entrepreneurs aged 60+. They emphasize how much experience we are wasting by relegating seniors to the back burner.

Appreciate your stimulating insights,

Elizabeth

Mark Lewis - Sep 20, 2006 6:24 pm (#11 Total: 34)
CEO/Executive Director; Strategic Business Intelligence Group

Elizabeth...thanks for your comments.

First let me address the last point you made.  I don't discount the value of experience nor the critical role that older leadership plays in the future direction of NPO's and social enterprise business, and I certainly don't advocate relegating older leadership "to the back burner".  To the contrary, we need to equip this segment of the NPO leadership ladder more than ever.  The reality of the current US population shift in age demographics is not something we can ignore however.  Generation X is half the size of the now aging and soon to be retiring baby boomers.  We face the same issues here that we face in the rest of our economy; a crying need for emerging leadership for the next 30 years.  To ensure that social entrepreneurship reaches its potential we must engage young leadership with vision and train them to take the movement into the next generation.

A 2004 research study by the Annie E. Casey Foundation of over 2,200 NPO's found that over half of organizational senior leadership is planning to leave within 5 years, and the average age of these leaders is in their mid-fifties right now.

In Up Next: Generation Change and the Leadership of Non Profit Organizations, (http://www.aecf.org/publications/data/up_next.pdf) Francis Kunreatheuther, a Senior Fellow at the Hauser Center at Harvard University offers 6 recommendations for planning in the midst of leadership transition that respect the values and contributions of senior leadership while planning for inevitable change.

Second; while I agree that NPO board member's having no financial stake in the organization may produce a different value set, my comments were intended more to convey the advantages of smaller, faster and more market adaptive business models that are not encumbered with the duties of board management and the time frames constituted by such.  Individual social venture entrepreneurs connected to value similiar networks and creating capacity through shared information and resources, social networking and complimentary missions can frequently identify and target opportunities faster and more efficiently in this rapidly changing market.

Finally, regarding the definition of social entrepreneurship, I like the way it's been defined by people like Stanford's J. Gregory Dees(http://www.fuqua.duke.edu/centers/case/documents/Dees_SEdef.pdf) and Jerre Boschee from the Institute for Social Entrepreneurs (http://www.socialent.org/) who have combined to create a profile that includes innovation, creativity, recognition of opportunities presented by change, ability to manage risk, develop vision apart from capital resources and of course, creating value through earned income strategies as opposed to traditional funding mechanisms.

 

Katherine Freund - Sep 21, 2006 5:47 am (#12 Total: 34)
Founder & Executive Director,ITNAmerica

Hello Elizabeth,

 

I'd like to add a few words from the field, maybe even from the edge, where I believe innovation lives.  My chosen field is senior transportation.  My organization, ITNAmerica, is building the first national network of sustainable transportation for the aging population.  www.ITNAmerica.org

 

When I began this work, in late 1989, the term social entrepreneur had not been coined, as far as I know.  I can honestly say that it never even occurred to me to provide a transportation service for which I would NOT charge a fare.  There is dignity and independence in paying for oneself.  To me, that answers the question of whether a solution to a social problem should generate income.  Why not?  It helps to fund the solution.  Moreover, at the Independent Transportation Network, the sustainable model ITNAmerica helps communities replicate, we have used market incentives in pricing transportation services to help build a more efficient solution.  For example, seniors who plan rides in advance or share rides with others pay a lower fare.  It works like magic, with 98 percent of our rides voluntarily scheduled in advance and more than half of our members happy to share rides.  None of our seniors ever complain, because they are saving money.  So, not only have we embraced the use of revenue to help fund the social purpose service, we have eagerly embraced every lesson of the market and its elegant efficiencies that we can find.  I think of the market as a democratic source of power, and I seek ways to hitch our little wagon to that power through free consumer choice.  The market is like an endless natural resource, as available to non-profits as it is to for-profits.  The opportunities to be creative open before us, and its fun.

 

The larger questions are whether the revenue generated by providing a service, such as senior transportation, is sufficient to cover the costs, and whether there is a way to fund the mobility needs of older people who cannot afford to pay.  I learned that the cost to provide the kind of transportation services that older people need is so great, that we would only serve the very wealthy if charged the true cost of the ride.  So, we could solve the problem as a for-profit business, but we could not solve the larger social problem unless we created a business model that supplemented fares.  So the non-profit form of our business solution followed the demands of the social need.  It was pretty logical, and I didn't need an MBA to figure it out. 

 

I did need an MBA to help me build a good business plan to roll it out, and I can honestly say, I could not have achieved the necessary growth without this expert advice.  So, to answer your question about the skills of an MBA, I think they are very helpful for planning and advice, but such skills are no substitute for creative solutions, common sense, and most of all, deep and profound subject area expertise. 

 

I have never felt a conflict between social and business goals.  Indeed, they are entirely congruent for us.  Our business achieves our social purpose.  In the very early days of this endeavor, I realized that the same group of people who seem to be a population in need to sociologists are a market to business people and a constituency to policy makers.  The business programs of a well designed social purpose enterprise should fall into place with policy, research and practice like a multidimentional sculpture, whole, balanced and logical from any perspective.

 

As for public trust, I think we all earn trust by doing good work and being as honest as we know how to be.  It seems pretty simple to me. 

 

My best regards,

 

Kathy

isele - Sep 21, 2006 11:27 am (#13 Total: 34)
Senior Program Director - Great Bay Foundation

Mark,

Thanks again for your comments.

We especially appreciate links such as yours to the Hauser Center document on Leadership Change that we can post in the Learning Center on our website.

We are very familiar with Greg Dees’ and Jerre Boschee’s work in the Social Enterprise arena and feel they are often at opposite ends of the revenue generating debate: Greg Dees leaning more towards innovation and Jerre Boschee insisting on revenue generation. It would be interesting to hear what each might say in this online forum.

Elizabeth

isele - Sep 21, 2006 11:42 am (#14 Total: 34)
Senior Program Director - Great Bay Foundation


Dear Kim,

I laud your enterprise! It certainly fills a need and demonstrates a unique way in which a for profit can "Do Well By Doing Good."

Elizabeth

Laurinda - Sep 21, 2006 1:09 pm (#15 Total: 34)


 

I read all of your comments with interest …

… and will now throw into the discussion something different and even controversial.

It is clear! So much has been written and debated about the “not-for-profit”and the “for-profit” sectors and this situation is continuing “ad nauseaum” ... even here in this forum!

My question, is:

Isn’t time for us to be looking outside of our silos and old paradigms … I.e. “The for profit” … “not for profit” silos”?

… and shouldn’t we ask ourselves what it is we REALLY want?

… the on-off debates that have sprung-up in the past 2 years have been about renaming the same old silos … but very little debate has taken place on the creation of a new framework … although if one reads in between the lines that is precisely what we are all striving for!

… Yet! We continue to explain what we want, using the same old frameworks, terminologies and paradigms.!

Isn’t it time to “CHANGE”? ….

Most of us are stuck on the same sinking ferries … and we are all looking at the shore on the other side of the river. Maybe a few engineers are required to build a bridge across this river … to reach “the shore of integrated success”!

We are in the process of designing this bridge! … however! … we are in the minority.

There are still too few organisations at the forefront of this innovative process ... our organisation is but one of them, we are at the forefront and one of the leaders in this design team (Empowerment Gateway in South Africa) another is ManyOne in the USA, but we are looking for others to join in with us.

There is no doubt that being at the start of a new century we should be looking at innovation and creativity in the design.

We should be creating a new model of doing business, one that integrates at all levels; the economic, social and environmental commitments into the design and not just artificially blending current thinking or current practices.

I know people are creatures of habit ... we don’t really want to break from our comfort zones ... but at the same time, we want to motivate change using those same old paradigms while operating within own known silos and boxes.

Are we really then, achieving our goal?

We not talking about redesigning the wheel, but … about redefining the function of the wheel! …

These could lead to a number of points to ponder …

Look forward to your comments!

Laurinda

Kim Breas - Sep 21, 2006 2:07 pm (#16 Total: 34)
DoughNation Services LLC

Dear Elizabeth,

Thank you so much! 

After I founded DoughNation, I was dumbfounded to discover I had created something new - I fully expected to find others across the nation engaged in similar enterprise.  And I did not.

Early this year. after reading of yet another layoff by the auto manufacturerers (and more have been announced recently) I made the decision to turn the business model 'open source' and freely license it to any individual or organization who commits to 'doing well by doing good'. 

In a better econmic climate, I would have grown DoughNation in the usual manner and eventually franchised.  

I believe America needs new industry more than ever before.  I also believe the donation services industry is the most socially positive and economically promising industry to emerge in decades. 

That is why I made the extraordinary decision to go 'open source' and allow any individual or organization who commits to 'doing well by doing good' to build donation services enterprises using the Prosperity Project business models and to own outright the businesses they build.

In prosperity,

Kim Breas

 

 

 

Mark Lewis - Sep 21, 2006 4:34 pm (#17 Total: 34)
CEO/Executive Director; Strategic Business Intelligence Group

Elizabeth...you're right on Dees vs Boschee...LOL...hence the NPO/FPO bridge you spoke of earlier...I like to combine their thinking.  I see no reason innovation and earned income strategies can't co-exist.  In the area of innovative thinking I like what Roger Martin is doing at The U of Toronoto's Rotman School of Business.  They have an awesome program up there.

Laurinda...I couldn't agree more with your take on this.  I use the language of NPO's because here in Dallas virtually everything in the social benefit sector is NPO so you have to start somewhere.  Social enterprise IS the new model you're speaking of but few here have ever heard of SE.  We have to start thinking not in terms of NP and FP but rather in terms of questions about what we want our businesses to do.  Building new busienss models is what SBIG is designed to do.  We use SE and the associated concepts, information, innovation, etc...to leverage bridge building relationships between sectors that don't usually interconnect and bring divergent streams of thinking together to accomplish this.

This is why I suggested we need a clear definition of social entrepreneurship...because I think much of what often passes for SE is really just the same kind of business model with window dressing.  These business models are powerful, adaptive and hold crazy promise among underserved populations and neglected parts of the economy.  Thanks for your thoughts.

Sutia Kim Alter - Sep 21, 2006 9:14 pm (#18 Total: 34)
Founding Partner, Virtue Ventures, Visiting Fellow, Skoll Centre for Social Entrepreneurship at Saïd Business School, University of Oxford

Forgive me in advance for my long windedness… this is a topic near and dear to my heart.

 

I pursued an MBA in 1993 because I believed that nonprofits needed to get smarter about money and management and tools to these ends could be found in business. At the time I was running a 100% self-funded volunteer-sending organization operating in five African countries—I was running a social enterprise (but at the time we didn’t have the terminology)—and felt I was lacking financial, management, and business skills required to successfully execute our mission.

 

Ironically, I think to some extent our infatuation with business has led us astray. When I was in business school the mantra was “what business are you in?” When I was working in the private sector the mantra was “stick to the knitting.” Not so long ago, it was acceptable to operate at 100% deficit now we are talking about profit? How did the pendulum swing so far? Folks, may I remind you that the business that nonprofit organizations is in is the business of solving social problems and creating social value. The “knitting” is social change and social justice, not profit making. This is not to say that we can’t make change sustainably—for goodness sake, sustainability is part of our moral obligation to serve our clients or at least until the social problem is solved. This is not to say, that fundraising can be as distracting and mission creeping as revenue-generating ventures unrelated to mission, or that the nonprofit capital markets is not is need of reforms.  However, I adamantly believe that the social enterprise is a first and foremost a mission accomplishment strategy, followed by an organizational strengthening strategy (capacity building and entrepreneurial culture) and financial strategy.

 

A tool is just that—you can use it to build a home or to kill your neighbor. Commuting the tools of business into the social sector is a way to help us do what we do better: meaning very simply, creating greater social value and impact.  In the nearly 20 years that I have worked in the nonprofit field, I have come to believe that social impact is nonprofit practitioners’ motivation for doing their work, and obtaining money is motivating only in that money is the necessary means to finance their mission. Frankly, otherwise the passion is just not there, and if it where these people would work in the private sector.  One hundred percent of nonprofit organizations I have helped to start social enterprises chose a business opportunity the fits with their mission and benefits their clients over another more lucrative option. This brings me back to a job interview I had at 3M when I was finishing business school, the marketing manager said, “You have been saving the world, so why do you want to market Post-It Notes?”  You know what, I didn’t have an answer.

 

 

Some thoughts on Profit

The notion of profit can be grossly misleading, just ask all those shareholders of Enron stock.  I think it is also telling that in three recent surveys conducted on social enterprise performance and benefits, (CWV 2003, Bridgespan 2004, and Pew Charitable Trust 2000) in all nonprofits purported a more entrepreneurial culture, increased social performance, stronger leadership, ability to attract more funding, and improved reputation, whereas profit figures ranged between 24% - 43%, and losses ranged from 13% - 74%. How is it possible to have so much disparity?  Furthermore, the average across the surveys show that 78% of social enterprises are central to the organization’s mission, and 19% are directly related and only 3% are unrelated. 

 

Of late there is a strong bias toward funding approach; most nonprofits and stakeholders perceive social enterprise as a funding strategy, rather than as a program, organizational development or change strategy.  The majority of the literature and public forums speak to helping nonprofits start commercial ventures. This is likely more of a PR issue than a practice issue—nonprofits need funding, grants or otherwise, and the promise of earned-income is the allure that leads nonprofits down the garden path. The Social Enterprise Alliance, a national nonprofit membership organization, went as far as to change its definition of social enterprise from one that embodies both its programmatic and financial attributes, "social enterprise is any revenue-generating business, activity, or project, founded for the dual purpose of earning income and contributing to a social cause,(2002)” in favor of a definition that promotes its financial benefit, “social enterprise is any earned-income business or strategy undertaken by a nonprofit organization for the purpose of generating revenue in support of the nonprofit’s social mission (2004)”  According to Greg Dees, “This is a dangerously narrow view. It shifts attention away from the ultimate goal of any self-respecting social entrepreneur, namely social impact, and focuses it on one particular method of generating resources.” (Dees 2003) Though unrestricted revenue is a sexy proposition for practitioners, the reality is that social enterprise as a funding mechanism has not paid off for many who have hungrily followed its promise.  Today the Social Enterprise Alliance has come full cycle once again leading with mission in its new definition of social enterprise, “an organization or venture that advances its social mission through entrepreneurial, earned income strategies.”

 

Resource management not “profit” - The perception that social enterprise is about earned-income or profit is grossly misleading. No amount of profit makes up for failure on the social impact side of the equation. Any social entrepreneur who generates profits, but then fails to convert them into meaningful social impact in a cost effective way has wasted valuable resources. (Dees 2002). Social enterprise requires effective resource management, which must go beyond the narrow view that financial resources are the only resources. Typically, nonprofits most valuable resources are their people, networks or members, and intangible assets such as methodologies, content, reputation and social impact.  An institutional approach to social enterprise recognizes the financial as well as non-financial capital (human, social, environmental and physical) and imbues practitioners to productively employ and manage the assets available to them.

The problem of accounting – The wildly disparate results of the three surveys on the issue of profitability raises the question about financial management and accounting. There are also huge misnomers about the financial side of the social enterprise: profit versus program/organizational financing. REDF has done quite a bit on this subject with articles on true cost accounting and quantifying social costs. (NFF is also going quite a bit in this area). Still accounting for cost savings, increased capacity/efficiency, embedded social subsidies, hidden costs, as well as mixed up revenue flows between grants and revenue, misappropriation of expenses, failure to account for professional time paid by grants, properly track waste (material and time), and inaccurate unit costs calculations are just some of the accounting and financial management problems that plague social enterprises. No wonder the profit figures are all over the map for social enterprises. Anyway, why do we even want to make profit?  The point of social enterprise revenue is to cover social costs or in the case of the enterprise subsidize social programs, the more we earn the more social expenditures we can make—voila no profit yet bigger social impact.

 

The concept of sustainability is simplistic- The word sustainability in nonprofit vernacular often refers to “financial sustainability,” portrayed as a static nonprofit nirvana where practitioners no longer have to worry about money. If the social entrepreneurship field is truly about commuting practices, ethos and spirit from the private sector into the social sector, then we should apply the concept of sustainability as it exists in business. The private sector uses the term “going concern” which implies an active, dynamic, tap-dancing state as known as survival. Sustainability is the outcome of a holistic business model which must address organizational development and culture, financial viability, product innovation, agility and customer response, efficiency, etc. in order to achieve objectives and compete in the marketplace. For-profit business models are led by their mission and driven by their markets; they have the ability to leverage multiple resources, and plan for their exit. The same should be true for social enterprise business models.

 

Missing an opportunity to do more mission - This emphasis on funding means that opportunities are being missed to realize other benefits that social enterprise offers. Practitioners rarely embark on a social enterprise with a mind to vision or strategy. Few recognize social enterprise as a deliberate method to accomplish social mission, achieve social impact, create a stronger organizations and affect a more entrepreneurial culture. Dees states, “the only form of social entrepreneurship that is worth promoting broadly must be about establishing new and better ways to improve the world. Social entrepreneurs implement innovative programs, organizational structures, or resource strategies that increase their chances of achieving deep, broad, lasting, and cost-effective impact.”  Sadly though, innovative practitioners that have the wherewithal to implement social enterprise as a mission accomplishment and/or capacity building strategy have neither the forum nor support to educate their peers and stakeholders on their approaches.  Financial aspects of resource management are an integral part of the social enterprise paradigm, hence the issue is less of perpetuating a money myth than missing a mission opportunity.

 

In my opinion, the point of social enterprise being a sustainable program strategy is being missed.  Now to quote myself, “From a program perspective, social enterprise addresses one of the most pressing issues not-for-profit organizations face - how to achieve sustainable impact. In organizations where high compatibility between business and social mission exists, social enterprise is a natural programme fit. For example, programme activities of economic development organizations revolve around work and wealth creation, an obvious business-social interrelationship. The missions and objectives of social welfare organizations focused on employment development or welfare-to-work transitioning also mesh neatly with a social enterprise programme methodology. Agricultural organizations offer ample opportunities to marry sustainable crop cultivation programmes with social enterprises that process food and sell Fair Trade coffee and cocoa. In these cases, the social enterprises are central to the organization’s mission and function as a self-funding programme strategy, accomplishing mission goals while simultaneously increasing financial self-sufficiency.” (Alter 2006, Oxford University Press).

 

More importantly, no one is addressing using social enterprise as a strategy (business modalities) to leverage social impact—social maximization—in their organizations. To me this seems obvious since “capacity building” (organizational development) sprung from the business discipline. All this is to say that I have come to see the importance of making mission the cornerstone of social enterprise all the more urgent.

 

 

Quotes

I would like to pass on some quotes by a few people who I credit as thought leaders and architects of the field of social enterprise:

 

Rick Aubrey, Executive Director of Rubicon Programs and Schwab Foundation Social Entrepreneur of the year (2001), says of his organization’s social enterprises, “we are not in the business of baking cakes; we are in the business of transforming lives. We see business is the primary vehicle for achieving this change, but social enterprise is comprehensive and must be integrated into the whole [organizational] package. (Aubrey 2005)”

 

Melinda Tuan, Rockefeller Philanthropy Advisors Fellow and Former President of REDF stated, “At REDF we never intended social purpose enterprises to be anything but vehicles for nonprofit organizations to achieve their missions.” (Tuan 2006)

 

Lee Davis and Nicole Etchart (et al), Co-CEOs of NESsT, in their recent book Risky Business, which studies the impact of social enterprise on 45 civil society organizations state, “If the premise of social enterprise is to strengthen nonprofit organizations in order to advance social change, then it is imperative that the effect of these activities on the development and long-term sustainability of the organization be managed and measured. Such a framework will enable [nonprofits] not only to measure these impacts after they have occurred, but more importantly, to anticipate them ahead of time and design their enterprise activities accordingly in order to successfully merge the philosophies and practices of the mission and market.” Additionally, “the findings from this study also clearly pointed to the need to develop better tools for measuring performance that can allow CSO to more accurately assess—and, in turn respond to and improve upon—the various cost and benefits associated with [social enterprise].” (2003)

Beth Anderson, Lecturer and Managing Director, Duke University’s Fuqua School of Business Center for the Advancement of Social Entrepreneurship (CASE), claims, “now is the time for a research agenda that explores in depth both successes and failures and seeks to understand the practice of social enterprise not as a fundraising tool, or even as a path to ‘self-sufficiency’ or ‘sustainability,’ but rather as a strategic, organizational approach to maximizing social impact.” (2005)

 

Jed Emerson in Five Challenges of Social Purpose Enterprise Development[1] claims, “An organization’s ability to successfully manage a social purpose enterprise depends significantly on the strength of its board and staff, its ability to manage potential mission dissonance, the manner in which its enterprise activities are linked to its social programs and the effectiveness of its MIS/Operating systems.” (1999)

 

Yma Gordon, Program Officer, Economic Development Ms. Foundation for Women, says that, “social enterprise is a tool for achieving mission has come to the fore. It’s more than a revenue strategy. People are beginning to look at it as a tool of economic empowerment for the communities they serve. It’s not just another fund-raising tool—it’s a mission fulfillment tool.” (2005)

Greg Dees, Professor of Social Entrepreneurship at Duke University’s Fuqua School of Business, writes, “The only form of social entrepreneurship that is worth promoting broadly must be about establishing new and better ways to improve the world. Social entrepreneurs implement innovative programs, organizational structures, or resource strategies that increase their chances of achieving deep, broad, lasting, and cost-effective impact. (so good its worth a repeat!)

 

Attached please see an article published in SER April 2006

 

Attachments:

AlterPromo_v3.pdf (335 KB)

isele - Sep 22, 2006 7:01 pm (#19 Total: 34)
Senior Program Director - Great Bay Foundation


Kim,

Your analysis of today's Social Enterprise arena is dazzling. The scope and depth of your thoughts is impressive, as is the clarity with which you have articulated the complexities. I look forward to reading more of your work.

Many thanks,

Elizabeth

isele - Sep 22, 2006 7:08 pm (#20 Total: 34)
Senior Program Director - Great Bay Foundation


Hi Mark,

Pursuant to our earlier discussion re new leaders to be found among youth and seniors, I think you will be interested to read the Summer 2006 Stanford Social Innovation Review article, "The Leadership Deficit," by Thomas J. Tierney.

The focus of the SSIR article is a future leadership gap and it provides some useful background information : "To understand the magnitude of the leadership deficit and why it will intensify, we need to examine what shapes the supply of, and demand for, nonprofit leaders. The supply side of the story begins with the baby boom generation. Because of the boom, the pool of American men and women of prime executive age (34 to 54 years) swelled to 35 million between 1980 and 2000. But the first wave of this nearly 80 million-strong generation is now turning 60, and because the boomers did not have as many offspring as did their parents, the cohort that follows them has a lot fewer people. From 2000 to 2020, the number of people in the prime leadership age bracket of 34 to 54 will grow by only 3 million (author cites a study by the Committee for Economic Development, May 2005)."

SSIR continues, "Farsighted businesses have been preparing for this dramatic shift since the end of the 1990s, but nonprofits are only beginning to mount a response to this demographic threat. Their responses to date have not matched the scale of the problem."

Tierney, along with his colleagues at the Bridgespan Group, projects that "nonprofits will require 78,000 new senior managers in 2016 alone, up from 56,000 in 2006 and more than a fourfold increase since 1996. When the leadership needs of each of the coming 10 years are added together, the total comes to 640,000 new senior managers - a 140 percent increase in the current population of nonprofit executives." So, the question is, where will these executives come from?

The SSIR article argues that nonprofits need to explore new talent pools. "Up to now," states Tierney, "nonprofits have tended to draw their leadership from a relatively small circle of friends and acquaintances. Although personal networking is an essential element of any recruiting process, it will not produce all the leaders needed in the coming decade."

Tierney then suggests that "three significant pools of new leadership talent are already available": (1) the baby boom generation (a recent study by the MetLife Foundation and Civic Ventures found that baby boomers want to continue to work after retirement age; (2) many people at the midpoint of their professional lives (article calls these people "midlife career-changers"); and (3) young managers in training (according to the article: "In 1990 there were 17 graduate programs in nonprofit management in the U.S. Today, there are well over 90, and more than 240 programs offer courses. Source for these statistics is H. Joslyn, from the Chronicle of Philanthropy, Jan. 8, 2004).

Elizabeth

tutormentor - Sep 24, 2006 5:24 am (#21 Total: 34)
Cabrini Connections Tutor/Mentor Connection


Sutia,

You had many inspiring ideas in your message. One that made me chuckle in agreement was "The private sector uses the term “going concern” which implies an active, dynamic, tap-dancing state as known as survival."

I've led a donor-funded(non profit) organization in Chicago for 14 years and when donors ask for a report on accomplishments I always say my first accomplishment is that I'm still in business and able to continue the process of growing from good to great in the coming year. I rely on a wide range of volunteers to supplement an inconsistent flow of dollars.

When I read about the various social enterprise leaders and activities, I see innovative people finding ways to support their own vision for saving the world. The funds they raise from their enterprise support one or a few organizations that do the work they are interested in. The more successful they are, the greater their ability becomes to host forums like this, bringing others together to share ideas.

While this is good, what about the others in the world who do similar work, maybe in differnet places, and who have not found a way to create a revenue producing enterprise to sustain their vision? What would it take to expand the support generated by one entrepreneur for a single charity, to multiple charities doing the same work, or to multiple charities needed