Challenges faced by Social Entrepreneurs
This is an excerpt from the paper titled “A Study on the Concept, Challenges and Strategies of Social Entrepreneurship in Family Controlled Businesses”, a thesis written under the guidance of Professor Kavil Ramachandran, Executive Director of the Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business.
Susan Davis and David Bornstein in their book on Social Entrepreneurship (2010) state, “Social Entrepreneur has a complex role that involves a great deal of listening, recruiting, and persuading. It takes a curious combination of sensitivity and bullheadedness, humility and audacity, and restlessness and patience to lead a change process in the face of difference, habit, fear, resource constraints, vested interest and institutional defenses.”
Picking up from some of these themes mentioned by Susan and David, I have tried to touch upon few of the most prevalent areas of concern faced by social entrepreneurs.
Human Resources: Employing quality workforce including senior managers and junior level executioners is one of the biggest challenges faced by a social entrepreneur. The underlying hardship in retaining and recruiting quality resources lies in the fact that the social entrepreneurs are rarely able to pay market rates or stock options to these key hires. Young talented individuals mostly get attractive pay packages from corporate that very few decide to take a pay cut to join a Social enterprise. Large multi lateral organizations and Social Enterprises such as the Gates Foundations compensate employees competitively and are organized in an MNC like manner but such organizations are very few. The other common alternative is to look out for the many avenues to get passionate volunteers to carry out the operations and while this has incalculable benefits, relying majorly on volunteers who are not accountable to the organization may lead to dilution of the overall dedication and talent of the workforce.
Measuring Impact: The evaluation of impact is neither immediate nor objective, how does one differentiate between the increments in the reading score of an underprivileged student who is provided quality education by a social enterprise versus the sparkle in the eyes of another young child, with similar circumstances, as she reads her first sentence.
Very often, the social improvements and the benefits provided to the underprivileged sections of the society are not very tangible, quantifiable or measurable. Even when improvements can be measured, it is often difficult to attribute them to a specific intervention. Are the reduced cases of a certain disease in an area due to a near by NGO providing medical care, effect of vaccines by local hospitals, or just better cleanliness or health conditions? It is hard to determine whether a social entrepreneur is creating enough social value to justify the resources utilized to create that value. Even the profitability of a social enterprise is not proof of its efficiency or effectiveness in achieving its social mission. It is clear that the Impact created by a social venture and its financial gains is entirely uncorrelated. The degree of relation would depend on the emphasis the organization choses to pay to each factor along with the external circumstances that pay a deciding role. There are some other esoteric measures to gauge performance of social ventures, such as counting the number of lives touched, number of trees saved, or percent of emissions reduced (Heidi neck, 2009), also terms to measure impact such as double bottom line, triple bottom line, blended value, Total wealth (Social and Economic wealth combined), and social return on investment have gained popularity over the recent years.
A signage hung on Albert Einstein’s door that read: “Not everything that counts can be counted and not everything that can be counted counts” is apt to describe the daunting task of measuring impact in the social sector.
Funding: For the ventures which don’t have a self-sustaining revenue stream, funding and investments continue to be one of the biggest challenges. Even after crossing the early hurdle of getting the initial investment or grant funding for the idea, procuring growth capital can be a constraint in accomplishing success. Social Entrepreneurs are mostly financed by foundations, philanthropists, or governments whose typical aids are modest in size and relatively short term. However, a business that doesn’t promise profits within five to seven years will not attract even modest amounts of conventional investment, even if the intention behind the idea is noble or the product very important. To procure government funds, numerous hurdles have to be crossed such as lengthy procedures, bureaucracy and often the mandate to reorganize to fit the standard guidelines. Fund raising is not only time consuming and expensive, but also social organizations are not always rewarded for good performance in the form of increased funding. Social Marketplace doesn’t reward a social entrepreneur as readily as the commercial market place does for commercial entrepreneurs. Lastly, with the presence of numerous social organizations, fierce competition exists amongst each other for human and financial capital among other necessary resources.
Resistance and delay in bringing about change: Social Entrepreneurs sometimes need to change people’s thinking and behaviors to make a social impact. Since changing how people behave in the society is very challenging, the benefits take considerable time to materialize. In addition, people do not readily believe in new things until they have had a long experience of them. Reforms at a large scale also require conventional systems to change, which has been extraordinarily difficult. The people doing alright in the old conditions have a luke warm reaction to move on to the new and uncertain system. Many defend the status quo while a few others who stand to benefit from the idea, reject it if they feel overtly imposed upon or baffled by the transformation. Another important factor is that the prevalent corrupt practices have sapped the trust out of most transactions; hence it gets all the more hard to gain trust and acceptance for the proposed change. It often requires a passage of time before true impact is evident; as a result the social ventures are sometimes prematurely called ineffective.
Implementation Hurdles: Many noble ideas for social impact sound promising in the beginning and get off to a good start but get watered down in the implementation. There could be several reasons for implementation failure such as inability to grow and maintain the quality, hardships of being able to afford experienced people, waning motivation, external hurdles such as political upheaval or stock market plunge or a natural disaster, insufficient financial and human resources, and apathy and opposition from various sources. The idea needs to continuously evolve and adapt to the circumstances, failing which success becomes difficult to maintain. The undying passion, motivation and “Never Say Die” attitude of the Social Entrepreneur is critical to the implementation of the social venture. Ashoka predicts the future of an idea by its focus on the person behind the idea. It evaluates this by asking “If the realization of the idea the most important thing in the world for this person, or close?”
Misalignment of Goals: For social entrepreneurs the social mission is explicit and central. This obviously affects how social entrepreneurs perceive and assess opportunities. Mission-related impact becomes the central criterion, not wealth creation. (Dees, 1998)
However, it could be different in the case of certain for-profit social ventures which are funded by external donors or Impact Investment organizations who seek financial goals plus social impact. Here, the Investors may expect a return on their investments after a certain time frame. The aid donor or investor may also impose their own development ideas on the social entrepreneur. Pulled into the pressure for rapid growth and the increasing demand for the product or services may push the social entrepreneur away from the social mission. It is possible that the pressure to be profitable under time constraints adversely impacts the key underlying goal of creating a social impact.
Lack of Market discipline: Discipline of the market applies less to the social entrepreneurs. Several incompetent and unsuccessful social entrepreneurs can continue way longer than their commercial counterparts as results take time to show. Excessive focus on the social mission may sometime derail the social entrepreneur from the key success generating pillars of any institution, such as accountability, high performance and the punitive discipline that is expected from any commercial venture. Some argue that for social entrepreneurs there is a greater appetite among the capital providers for a margin of error and a greater forgiveness factor since performance is difficult to measure.
Other External factors:
Government and Laws: The Laws and attitudes of the government should be favorable for social entrepreneurship. For Instance, In France, private social service associations were banned until 1901.
Often the permits, licenses and other support required to run a social enterprise doesn’t get granted readily by governments which have the task to balance conflicting interests of millions of citizens including the powerful elite, while under the scrutiny and pressure to deliver short term results. A social venture which runs counter to the interests of well-organized and powerful individuals and institutions may not be given the support to thrive or may have to face enough bureaucratic hurdles to kill the idea before a fair shot is given.
Mistrust: Social Entrepreneurs are often questioned of their intentions, misunderstood by their families and friends, largely ignored by the media, the business sector and the government, and mistrusted on the intention behind taking the untrodden path to provide social good rather than a conventional career. Some have to deal with religious fundamentalists and other activists who do not necessarily agree with their social mission and agendas.
Scalability: Scalability is another big issue with social ventures. Here, we are talking about both the scale of Impact and organizational scale. Many social ventures fail to consider how to effect change beyond their immediate need. The demand for social entrepreneurial programs and services usually far exceeds the capacity. Initial success in some bits and parts may generate requests to replicate and scale the system in some form. The challenge to scale up may affect how successful a social enterprise is perceived.