Reflections on Social Enterprise: has it lost its way?

The role of a retired person is no longer to possess one. Simone de Beauvoir

I have been thinking about retiring but with the above quote in mind, I do not want to lose my ‘role’ in society.  I recognise that my role will change and, perhaps because of this, I have been reflecting on the changes that have happened within the social and community enterprise sector – an area I have worked in since 1988.  The essence of this ‘area’ is how organisations can trade in goods and service to maximise social and community benefit.

Mulling over the progress made by the sector in the last 30 years has got me wondering whether or not the world of social enterprise has lost its way.

Since the 1980s when I first started to work with community-owned businesses in Scotland, there have been huge and undoubtedly positive developments.  The idea of enterprises and trading businesses having a central social purpose has become much more acceptable – the proverbial person on the top of the No. 33 bus is now more aware of the term ‘social enterprise’.

Furthermore, governments now see the potential of enterprises delivering a care-bound service and are trying to support them with policies, strategies and the offer of funded contracts.  The prevailing infrastructure (sometimes called ‘eco-system’) within social enterprises is more developed than ever before, and encouragingly, more and more young people want to work within, and startup, companies that create a better and fairer society.

Many of the winds of change in the sector have been positive.  So, why am I left with a nagging negative feeling that the social enterprise ‘movement’, if that is what it is, has lost its way? There are three areas that cause concern.

Firstly, there is no widely agreed definition for a social enterprise.  Instead, there are many slightly different definitions – some are loosely defined and ‘broad church’; while others are very specific.

Without a widely acceptable and recognised definition, it is difficult to say what is a social enterprise and what is not.  This means that some private businesses can self-declare themselves as social enterprises while their trading surplus finds its way eventually into the pockets of its owners.  At the same time, there is a push to encourage organisations that are patently charitable and dependent on volunteer work to make money when there is little or no money to be made.

In my view, this lack of a clear definition has hampered the expansion of the social enterprise sector.

In Scotland, there has been an awareness of this problem and many social enterprises and support organisations have signed up to the Voluntary Code which provides a helpful definition. The Code recognises five basic criteria for social enterprise, and in a short appendix, identifies some less ‘defined’ values/behaviours/influences familiar to the social enterprise movement. Although this has helped, the Code is constantly coming under attack from those that want ‘social enterprise’ to include a wider range of companies – many of which are patently privately owned.

This tug o’ war over definitions is really a political battle – with those on the ‘right’ pushing for privatisation of services, and those on the ‘left’ wanting to retain the benefits from trading entirely for the wider social good.

Secondly, there is an issue about whether or not a social enterprise exists to primarily benefit the individual or the community.

Over the last 40 years or so, there has been a switch in thinking in society in a collective way where there is a concern for the common good, to one where the individual is paramount.  This focus on the individual is so pervasive that it is often considered it to be the norm.  It manifests itself in everything from commercial marketing with a focus on the individual needs of consumers, to psychological profiling of individual persons.

Society is now increasingly more structured these days on the individual and less on the relationships between people.

Mutuality, reciprocal working and looking out for the less fortunate has not disappeared – but it has been given less importance.  We are a society more obsessed with the Self; and less with the Group.

Thirdly, there is a danger that the social enterprise sector is losing its purpose and overall essence.  I think there are three sub-areas of concern here, namely:

  • adoption of neo-liberal economics: Funding is no longer trustingly given to organisations in the third sector.  They have to compete for it causing divisions between similar organisations which due to their often, precarious financial existence should be collaborating and working together for the common good. Added to this is an expectation that growing an organisation is the only way to survive – biggest is best.  This is often not the case as smaller, locally based organisations with strong collective bonds are often more effective as they understand, and work within, the local context.

 

  • overemphasis on management: In the 1980s there was a root and branch re-organisation of the public sector with the introduction of overt marketisation. This encouraged an emphasis on management, reflected in ambitious workers doing MBAs and learning how to manage departments and, indeed, voluntary organisations. The methods of traditional business were swallowed wholesale and not sufficiently adapted to the delivery of social needs. These days it has become entirely acceptable that numbers and finance became the currency of tracking qualitative social change.

 

  • focussing too much on ‘innovative’ technology: This is a tricky one as the technology itself is not a concern – but rather it is how it is applied. Computers have had a huge influence on how we work and how we organise what we do.  There has been, in my view, too much focus on how we deliver what we do and not enough emphasis on why we are doing it.  In effect, there is a danger that the technology dictates the delivery and our sense of caring is subsumed in overly concentrating on method.

I am not sure if I have any answers to any of these concerns about the future direction of social enterprise.

Social and community enterprises can try and keep a grip on what they do by building into their structure time for reflection.  Social Accounting and Audit (SAA) is an integral way of keeping track on what an organisation is doing, how it is doing what it does, who it works with, and most importantly why it is doing what it does.  SAA is not complex.  It is a process which reports on the approach of an organisation, its values and procedures, as well as expecting regular reporting on the positive (and negative) change that happens as a result of the organisation’s actions.

It is about being accountable – not just to a funder or to an owner, but to all the key stakeholders.  It is about helping to hold on to the essence of what they are as a social or community enterprise – and to keep focussed and not drift from their core mission.

Returning to the original quote at the start of this blog.  I think at every age we should build in time for reflection on what has worked and what has not.  The term ‘social enterprise’ is often overused, becoming more diluted and in danger of becoming a meaningless term. The social enterprise ‘movement’, behind the term, is, I think, beginning to lose its way.

But we still have time to address this… well, you do!   I am off to retire.

Alan Kay – Social Audit Network (SAN)
www.socialauditnetwork.org.uk

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Social Impact and Inequality

“As long as poverty, injustice and gross inequality persist in our
world, 
none of us can truly rest.” 
Nelson Mandela

Inequality is a difficult topic to understand and tackle but it seems to be increasing in a relative sense and surely has to be addressed by all those working for a fairer society – that includes those pushing for a wider and more effective social economy.

According to the OECD, the average income of the richest 10% of the population is about nine times that of the poorest 10% across the OECD, up from seven times 25 years ago. (OECD).

There has always been income inequality but as the world becomes more and more interconnected, the divisions between those that ‘have’ and those that ‘have-not’ is increasingly widening.  And this has a knock-on effect where the disparities in income translate into disparities in wealth – raising the question, who owns our world?

Continue reading Social Impact and Inequality

UN’s Sustainable Development Goals ….an answer to social impact reporting?

One of the ‘holy grails’ of impact reporting is a single set of universal measures that can be consistently applied, regardless of an organisations’ activities, size, community, type, and so on.

Finding the ‘holy grail’ has proved rather elusive since early forays into impact reporting by the co-operative movement that date back to the mid-19th century, although we have seen some harmonisation in recent years around the principles through which we should at least approach our reporting (most visibly and materially through the work of the national Inspiring Impact initiative[1]).

Continue reading UN’s Sustainable Development Goals ….an answer to social impact reporting?

Social accounting should be about good organisational practice, not just a tool for measuring social value…

In his recent blog for the Social Audit Network (SAN), Alan Kay sent out a rallying cry to the social economy:

‘I think that social enterprises should be looking seriously and overtly at the degree to which they contribute to social capital.  This would mean putting in place how they build trust between people and organisations; how they encourage reciprocal working and mutuality; how they state and then live up to their values; how they support a commitment to a community and a sense of belonging; and how they actively create connectedness through informal and formal social networks. Continue reading Social accounting should be about good organisational practice, not just a tool for measuring social value…

Resurrecting a positive role for the much-maligned notion of ‘social capital’

‘Social capital describes the networks together with shared norms, values and understandings that facilitate cooperation within or among groups’ (OECD, 2001)

I want to put out a call for the rehabilitation of what we understand by ‘social capital’.

Recent criticism of the essential concept of social capital has caused people to cast it aside – considering it a redundant approach.  Several influential academics on the left of the political spectrum have written books and articles criticising social capital. Their criticism became particularly virulent at a time when the World Bank formed a social capital strategy in their assistance to developing countries.

In short, the main thrust of the criticism was that the notion of social capital was being used as a substitute for not materially helping populations.  Communities were being told that…we know you are poor, downtrodden and disadvantaged but you have ‘social capital’ and you should be using that more.

Continue reading Resurrecting a positive role for the much-maligned notion of ‘social capital’

Caught in a spin – can impact unlock a contract?

I have recently had the honour of being involved in the Investment and Commissioning Panel for the Impact Management Programme (IMP). Examining a range of exciting submissions from across the country, I have read how enterprising organisations are seeking funding from the Impact for Growth strand of the IMP to raise investment for their work or write successful tenders, and in many cases to seek contracts with the Public Sector.

A healthy number of these organisations have also secured previous ‘social investment’ to help with their contract readiness.

But experience leads me to query why an ability to manage their impact will make these charities, social enterprises and ‘ventures’ more likely to secure a contract with the Public Sector?

As Adrian Hornsby wrote in an article for the same programme in October 2017:

“ventures and commissioners ‘pass like ships in the night’; and with commissioners showing hesitancy around impact, and social investors inevitably following revenues back to commissioners, the question arises as to where the essential driver for impact management can be found.”

Adrian’s article added to my questioning; what would be the motivation for managing and explaining your social impact if social investors and commissioners pass the buck back and forth between them?

Having been involved in commissioning services from voluntary, community and social enterprise (VCSE) providers for many years, I wonder if the problem for commissioners goes deeper than just a ‘hesitancy around impact’…

Perhaps it is a wilful misunderstanding caused by austerity and the need to make financial savings and efficiencies caused by pressures on the public purse?

In their desperation to raise income to replace lost government money, public agencies are courting partners who they think will bring in additional funds, and not necessarily giving social impact the proper consideration that it should be given.

Essentially, they see social impact as a means to draw in money without fully understanding what social impact means.

Furthermore, we could be heading for a situation where the Public Sector descends into simply becoming a ‘regulator’, diminishing their commissioning role completely. With the reduced strategic contracting capacity of a local and independent organisation with responsibility for public benefit, who will encourage social impact when all society’s ills have to be addressed purely by free markets?

Back in the days of plenty when I worked for Salford’s New Deal for Communities programme, we could afford to work with our providers to understand their impact and the outcomes that they were generating for us. We could even afford to provide training in the tools and techniques which are now part of the IMP.

Now we live in a vastly different world. With the increasing squeeze on public budgets, I am witnessing an appeal from the Public Sector to charities, social enterprises and ventures to bring in other money – grant funding and social investment – for services and activities which were previously fully funded by the Public Sector.  But why would people with money invest in these services – unless there is something for them in it?

In Salford, the amount of money flowing from the Council to the VCSE sector through contracts and grants has reduced by over 40% in the last 5 years. Our research shows that the middle is falling out of the sector – small community groups which rely on volunteers continue to thrive, their members driven by a shared interest in tackling unfairness, poverty and inequality in today’s society; and the larger ‘enterprises’, many of whom are national organisations or Public Sector spinouts, continue to succeed in contracting.

This leaves small and medium-sized ‘ventures’ caught in a spin between the Public Sector pushing them towards grants and ‘social investment’ as means of enhancing dwindling budgets; and social investment providers offering support for them to be ready to contract with the Public Sector.

I believe that the Public Sector doesn’t really understand that ‘social investment’ must get a return, just like any other form of borrowing, and social investors don’t really understand the state of panic in the Public Sector.

So, should this be where impact management fits in?

Public Sector commissioners want services, and they want outcomes. They want people to have better wellbeing, better lives; and ultimately, they need people not to need public services so much.

Social investors want many of the same things, but these outcomes must be measurable and accountable. They need to understand the financial and the social return, they may need to see financial growth, but ultimately the investment should be repayable in both social, and often also financial, impact one way or another.

So, a better understanding and management of the impact that a charity, social enterprise or venture is creating will help bridge the gap between the investors and commissioners.

And, I believe that it is also essential for their survival.

The NeuroMuscular Centre (NMC) in Cheshire has been part of the GSK Impact programme for several years. Over a 10-year period, NMC has kept social accounts, covering both the impact that the Centre is having for service users, their families and other stakeholders, and how it is managing the organisation in financial terms to maximise that impact.

NMC has a greater understanding of outcomes and impact; continuous dialogue with service users, funders and commissioners which takes places to prepare the social accounts; and the ability to accurately describe their impact in tenders, funding bids, and publicity. All this has helped this organisation triple its turnover and move from a position of uncertainty to one of a secure and rosy future.

By embedding social accounting and audit as a means of impact management, NMC has broadened its financial base, grown in size, and secured its position as the leading provider of services for people with neuromuscular disease in the country.

And who should pay for this impact management? I believe that if commissioners or social investors want evidence of ‘impact’ they should also have to pay for the work evidencing the impact…

In conclusion, there will always be a need for social and community organisations to take the heat out of the public purse – social accounting and impact management are probably the best ways for them to achieve this.

Social investors and Public Sector budgets will come and go, but the people who need support from charities, social enterprises, and other community-based organisations will always be there!

Ultimately, I believe that the essential driver for impact management should, therefore, be to achieve the best possible outcomes for the people (and/or the environment) that an organisation supports, and in doing so making it relevant, investible and successful for the long term.

Anne Lythgoe, Social Audit Network (SAN)
www.socialauditnetwork.org.uk 

Social impact and challenging the ‘sacred cow’ of how financial accounts are presented

Definition: ‘sacred cow’ (noun) – a belief, custom, etc. that people support and do not question or criticise: Example: They did not dare to challenge the sacred cow of parliamentary democracy (Cambridge Dictionary)

Challenging ‘sacred cows’ is a bit of a dodgy business and may get me into hot water.  But I take courage from the work of John Pearce and his life’s work which was always challenging the status quo and trying to approach economic, social and community problems in a different, innovative and often pragmatic way.

I had the privilege of working with John Pearce for most of my working life.  In many ways he was quite a complicated character – forming alliances, charming people, making enemies, challenging the norm… But always taking the side of the dispossessed, those with fewer advantages and the folk that are made to feel like pawns in, the supposedly ‘normal’, economic system.

John and the work that he did was ways ahead of his time.  I recognise that this is a cliché but it is on record that he started and developed initiatives that were only appreciated much later by the established mainstream.  Here are some examples:

  • in the 1970/80s, he proposed that community development had to include local economic development in a much more tangible way. Money, earning power, ‘good’ work was integral to social change within communities – and he believed that local folk could take control of their own economic activity for the wider benefit.  John, along with others, started the community business movement in Scotland;
  • he thought that acting locally but thinking globally was crucial to avoid community and national introversion. John, again along with other like-thinking people, established COMMACT (an international network dedicated to sharing community development practices);
  • in 1990 he pushed for the establishment of a fund owned and controlled by the community business movement to enable community businesses to have access to capital which was not being provided by high street banks or traditional investors. John led on the formation of the Scottish Community Enterprise Investment Fund which was active for 10 years before it was incorporated into the Charity Bank;
  • he recognised that organisations with a central core purpose of social and community change had to get better at explaining and reporting regularly on their social and community impacts as well as their values, approach, and credentials. John initiated the process of social accounting and audit running alongside financial accounting and audit.  This moved him (alongside others) to found the Social Audit Network (SAN).

I could go on explaining some other aspects of John Pearce’s approach and work but they have been documented elsewhere and re-surface annually in the John Pearce Memorial Lecture.

Essentially, John’s work often challenged the ‘sacred cows’ of traditional economic community development.  He believed that social and community enterprises/businesses should do things differently and not ‘ape’ traditional business.  He pushed for business planning to become a more relevant form of social enterprise planning; for social capital to be part of a local community enterprise strategy; and for social benefits to be recognised as having an integral and tangible value.

And this latter point brings me to an area that John worked on but never really followed through.  It has remained an idea, I believe, that is yet to come.  It is about changing the way financial accounts are presented to show the amount of time, money and resources that have been used by social and community enterprises in furthering their social and community aims.

Back in 2004, he referred to this in a short paper included in the Social Accounting and Audit Manual and called it the ‘Social and Economic Impact Accounts’.

What John was trying to show was that financial accounts could be presented in a way that separated out the Trading Costs from the Social Benefit Costs.

Please bear with me and I shall try to explain using an example of a community-owned shop and cafe.  In the interests of illustration, I have used a table – which is rarely normal, and the figures are made up…

Table 1

John reckoned that this simplified but traditional accounting of profit and loss could be recast.  The re-cast shows Revenue Costs divided between Trading Costs and Social Benefit Costs.  By illustration, as follows:

Social & Economic Impact Accounts table

The ‘sacred cow’ of financial accounting presentation has, of course, been subject to examination and change before.  Academics, in particular, often re-do traditional financial accounts to take account of environmental and social change.  They refer to this as ‘shadow accounting’.

Similarly, the Office of the Scottish Charities Regulator (OSCR) asks for charitable financial accounts to separate out Governance from Charitable Activities.  I seem to remember that the new economics foundation presented their accounts in their annual report some years ago, applying a similar principle to the example I outlined above the one above.

I realise that thinking along the lines John outlined, will require a lot more work by qualified accountants and their respective bodies – but hopefully, the principle could still be applied.

If social and community enterprises adopted this as a regular practice there are a number of clear benefits, namely:

  • there is an openness in understanding the social and community enterprise priority towards social and community benefit;
  • it can help a Board of Directors make more transparent decisions over resource allocation;
  • it can, to a degree, help in our collective understanding of what a ‘social enterprise’ is actually doing; as opposed to what it says it is doing;
  • it can lead to better management of a social or community enterprise as it can assist a social enterprise to assess just how much social benefit it can afford to engage in without compromising its financial sustainability;
  • it might help when an enterprise asks for funding for its social and community aims as opposed to requesting funding for the overall expansion of its business;
  • it can counter the argument for Social Return on Investment (SROI) that has received considerable support in recent years. This alternative approach requires a focus on the real costs of providing social impact rather than trying to monetise all the outcomes into an impact score;
  • it is especially useful for a social enterprise whose audited accounts show that it is only marginally viable (or even loss-making) whereas the true picture is that it is fundamentally profitable but devoting (perhaps too much) surplus to social benefit.

I admit that the Social and Economic Impact Accounts are based, to a degree, on assumptions and allocative decision-making within the enterprise.  But at least there would be greater clarity and more understanding of the type of organisation it is, and how much it focusses on social aims.

Back to John Pearce.  I mentioned at the start of this piece that he was ‘complicated’.  True. but he was someone with a clarity of vision and a clear idea of how we, through working collectively together, can change things for the better.  He believed that the way to do this is within your own community – and if along the way you take a poke at a sacred cow or two, so much the better…

Alan Kay, Social Audit Network (SAN)
www.socialauditnetwork.org.uk

social accounting, social audit, social value, social impact