Tips for the Survival of a Social Enterprise
Social Enterprises are organisations born between a rock and a hard place. They are by nature hybrids and operate in the grey zones. But one thing that an aspiring social enterprise should clearly articulate, preferably before incorporation, is whether their customers and their beneficiaries are the same people.
Are the people who are going to be impacted by the social mission (the beneficiaries) the same as the people who will be buying the product or service that the organisation is offering (the customers)? The answer to this question will determine the structure that the social enterprise is going to have. There are three general ways of structuring an organisation: integrated operations (coupled); differentiated operations(decoupled); and “selective coupling”.
Integration is the combination of all the activities of a social enterprise and carrying them out simultaneously or in tandem. This would mean serving the beneficiaries and customers at the same time. Integration helps fighting mission drift by ensuring that all stakeholders are considered at the same time even if they are not the same people, which means there will not be any cross prioritisation. This way, the social enterprise can avoid “conflicts between serving customers and advancing the organization’s social mission”. This is not a fool-proof plan and is suited to a few types of social enterprises. Given that even those who are meant to use this form of operations (e.g. microfinance institutions) are still experiencing mission drift shows that this decision requires very careful consideration from the management of the social enterprise, to assess and analyse the activities of the organization.
Examples of organisations which benefit greatly from having integrated, or coupled, activities are microfinance institutions. These organisations have the poor people who cannot afford commercial loans (at least on the scale which is viable for banks) as their beneficiaries but also simultaneously as their customers as well since they pay for these services, just on better terms than a regular bank would offer.
In such these scenarios, the microfinance institution would need to ensure that their commercial pricing policy must be made with the customers and beneficiaries in mind. They cannot charge exorbitant interest rates that would drown the customer-beneficiary in debt but it cannot be a charity either as they must generate returns to continue financing operations. In social enterprises such as microfinance institutions, it is important that activities are integrated if they are to avoid mission drift.
Another tool which can be used in combating mission drift is to compartmentalise commercial and social mission activities in the social enterprise, in the case where the beneficiaries and the customers are not the same people. “The activities that are primarily targeted toward serving the beneficiaries and thereby achieving the social mission are separate from those that are targeted toward serving customers and thereby generating revenue”.
An example of when a social enterprise should have a decoupled, or differentiated operating structure is Mobile Schools, a Belgium-based organization. Mobile Schools travel to areas where there are many “street-connected children”, who do not attend school. Their mobile schools contain blackboards and educational games for children. Since these children cannot pay for their studies, they must finance the operations (bus, fuel, salaries) in some other way. So the organisation has a separate wing which is a consultancy. Their consultants work with corporations on how best to engage with the local societies and to avoid causing problems in the local ecosystem.
It would be wrong of Mobile Works to attempt to integrate their work seeing as they have clearly different targets. One section is aimed at people who benefit from the social mission but are unable to contribute commercially, and the others are corporate customers who do not necessarily have to care about the organisation’s social mission, concerning themselves only with the service they are being provided.
Once more, social enterprises are advised and expected to think this move through before deciding which business model to adopt. Many have the same beneficiaries and customers and compartmentalisation could give rise to more problems than it can help resolve. This brings us to the third potential solution to avoiding missing drift using the organisation design: selective coupling.
It has been determined that social and commercial activities should always be kept close together. There is usually a service trade-off but it is important the organization balances this and that it does not attempt to take the easy way out. It is difficult being a social enterprise and so requires patience and persistence from the founders of such an organization. Seeing as social enterprises are hybrid organisations in terms of orientation and goals, it is only fitting that they are also hybrid in their structure and therefore adopt a selectively coupled operational prioritisation strategy.
The literature recommends that organisation go, first and foremost, for the hybrid, or selectively coupled structure. This can be considered the generic version for social enterprises. However, depending on the particular business model and the social and commercial goals themselves, a coupled or decoupled design may be preferred. Social enterprises are therefore advised to conduct a thorough analysis of their goals before settling on one or the other and ensuring that the decision can be justified to all those involved in the work of a social enterprise in the different capacities.
One more thing that social enterprises must always keep in mind is that they should not fall for the ‘that’s how things are done in our industry’ mentality. Hybrid organisations are new and somewhat ground-breaking organisations which are blurring or even wiping out the traditional sectoral boundaries. They have a unique style, a unique ways of conducting business which means they will face unique problems which will require unique, tailored solutions. It is important that social enterprises do not shy away from this problem and selectively coupling their activities can help in actually perpetuating this image.