Wednesday, May 9, 2007

Digging into Social Enterprise: The Mud Beneath the Yellow Brick Road

Social enterprise. The term once seemed like a secret password, a phrase so full of promise and untapped opportunity that all other forms of revenue generation paled in comparison. For years, these two gold-plated words popped up in every place from the board room to the break room.

"We are getting out of the begging business!"

Of course, like many fundraisers, I've since lost my illusions about the infinite promise of SE's undiscovered land of opportunity. Somewhere between the cloudless sky of our forecasts of "predictable, recurring and unrestricted revenues" and the cold, debt-laden financial reality presented in any honest business plan for a for-profit startup, I came to face the crushing reality:

"There is no yellow brick road to sustainability."

And yet, the term social enterprise still bristles with potential for me. Perhaps, in my heart of hearts, I still believe that there is a better way of doing business than our current model of feast and famine.

The Chronicle of Philanthropy recently ran an interesting article entitled Social Entrepreneurs Challenged to Become 'Economic Entrepreneurs'.

The article makes two very powerful claims:

  • Non-profits need to adopt the principles of business in their attempt to 'go to scale', but they will likely not do so because there is a sentiment in the sector that "it wouldn't be nice to compete."
  • Non-profits do NOT need to adopt the vocabulary of business in their attempt to sway donors, because "we should do nothing to diminish that pure gift by trying to analogize it to a business investment."
There is a great deal embedded within these statements. They address what is the fundamental flaw at the heart of our business model: although we are in every way a business, we suffer under the weight of an unpredictable and almost inexplicable economic model. The situation is complicated by the back-firing of the best of our philanthropic natures... we tolerate under-performance of employees because they are "good people," we do not compete aggressively with under-performing peer organizations because "we're in this boat together," etc.

(On a related note... every one reading this blog should buy Jim Collins' excellent book, Good to Great and the Social Sectors... click on the picture of the book on the sidebar of the blog. A portion of any book sales will benefit CDM.)

I believe that SE has become such a popular topic despite its obvious flaws because it is the closest we have yet come to publicly declaring our secret resentment of the philanthropic system: lack of access to efficient, sustainable capital is the crippling disability of the social services sector.

Please share your thoughts!