October 22, 2008
Questions About Social Enterprise
While the current financial crisis has hurt fund raising, it may trigger bigger problems for social enterprise, meaning nonprofit groups that adopt business tactics or for-profit operations to further their charitable goals, writes Jeff Trexler, a professor of social entrepreneurship at Pace University.
On his blog, Uncivilsociety, Mr. Trexler writes that the social enterprise “movement has yet to grasp the extent to which it is as much a product of the bubble as subprime loans and credit-default swaps—it’s not just a coincidence that do-gooders started talking business when business was good.”
“At the peak of the bubble this gave the movement a rhetorical advantage, but as the economy tanks, this same language can make the social entrepreneur seem untrustworthy, defined by profit, self-interest, and the very business practices that created the problems charity now has to solve,” he continues.
What do you think? Will the financial meltdown lead to a change in some nonprofit approaches, or at least how some charities market themselves as businesslike?
Comments
Commenting is closed for this article.
Previous: Philadelphia Charities Protest United Way
Next: What Makes a Charity's Online Video Stick?
I think Jeff raises key issues – which should be considered in context of ongoing discussions about economy/nonprofits, capital markets, philanthropy, online giving, mission investing in downtimes, etc. Lots to think about and discuss
— Lucy Bernholz Oct 22, 01:21 PM #
The movement by nonprofit groups towards doing business in a more business like way, using proven business models from the private sector, started some years back. The problem is that while many talked the talk…few actually walked the walk. Organizations who are serious about long-term survival, make take the current financial crisis as a call to actually incorporate proven business practices into their operations; including the ability to act in the more transparent environment that most certainly will exist in the future. All of this, of course, without losing sight of their mission and the people they serve.
— Paul Ideker Oct 22, 02:43 PM #
I disagree with Jeff. Making a profit isn’t inherently bad. In fact, the discipline associated with the pursuit of a profit or, at a minimum, a sustainable business model, raises the bar and makes everyone more accountable. Of course, the mission of the enterprise needs to be taken into consideration before pursuing a profit but the the idea of not-for-profits being more disciplined is a good thing.
— Chris Shea Oct 22, 02:44 PM #
Chris, just to clarify—I don’t think that making a profit is bad. In fact, I think that there is a lot of good within the social enterprise movement.
The article linked in the post quoted above calls for a re-thinking of social enterprise, not a complete repudiation.
Calling attention to a bubble does not necessarily mean that one thinks the underlying value is inherently wrong. For example, talking about a dot-com or Web 2.0 bubble doesn’t mean that I reject the internet or online social networking.
To the contrary, analyzing a bubble & other potentially harmful assumptions embedded within an organizational medium can be crucial to accomplishing a movement’s goals. This applies both at the theoretical level and in granular strategy, which is one reason why business plans include a SWOT section—not just strengths and opportunities, but weaknesses and threats.
— Jeff Trexler Oct 22, 03:07 PM #
More specifically re profit, we have to pay more attention to identity design. A nonprofit can make a profit but not be framed or defined by profit-making, an art at which any number of schools, hospitals and museums excel.
In this regard social enterprise can learn a lot from commercial advertising. The best marketers—think Dove or even McDonald’s, for example—have learned to redirect attention away from commercial exchange and shareholder enrichment.
— Jeff Trexler Oct 22, 03:40 PM #
It is an important element of today’s nonprofit to diversify their revenue base to think about broad stakeholder engagement and sustainability of the mission. Social Enterprise is one way in which positioned agencies might explore those objectives, but not without the risk that every business entrepreneur faces in start-up of a new business (regardless of a good or bad economy). We can’t take the option off the table, but we can train nonprofit leaders to be cautious and know the risks, especially as the economic environment changes.
Marketing themselves as a business is also something that can’t turn backwards. Funders and the citizen sector want to better understand the outcomes and benefit to society that is happening because of that 501c3 status. By adopting some of the language and approaches that busienss uses, a nonprofit leader can begin to communicate across sectors the value that their missions bring.
However, the intent in both these strategies is not to loose your agencies’ “soul” in the process. By staying close to your base and the reasons your agency is in existance, it will mean a nuanced approach and more intentional path than in other sectors.
— SCaldwell Oct 23, 10:43 AM #
Paul: I reject the notion that any significant number of nonprofits can be proven to ignore sound business practices or have low degrees of accountability. The simple fact that NPOs’ financial records are open to public scrutiny insures transparency. I think you’d be hard pressed to say the same of the “business” crowd that just tanked the world economy to line their own pockets by intentionally obfuscating their risks.
— Chris Casquilho Oct 23, 10:47 AM #
This is about best practices from both sides of the business isle. You might throw best practices from GOs as well, though they may be pretty hard to find. As noted in a recent Harvard Business Journal article regarding social entrepreneurship, everything comes down to a solid business plan linked to mission and core compencies in which investment is made over a steady period to achieve appropriate, measurable results (ie Goldman Sachs). The tendency is to go for the quick fix and easy answer; to substitute jargin and ideas rather than strategy and action. Currently, we hear everyone talking about ROI which spurs on the evaluation requirements imposed by investors/funders so that they can feel better. The majority of these evaluations and outcome measurements have little impact on program delivery and otcomes nor do they move us toward long term social change. What they do is makes everbody feel better and feel as though they are being accountable. This is not unlike what Wall Street and the Banking Industry just did for their investors and in the end there was no there there. Lets be real. What is needed are the best practices from all sectors moving us toward fiscal responsibility and action so that we indeed can make a measurable difference
— Maggie Osborn Oct 24, 01:04 PM #