In this blog too, I would continue the topic of profit for social enterprise. Kim Alters and Greg Dees describe a framework for the social enterprise as a spectrum from pure philanthropic to pure for profit. Foster and Bradach, in their paper “should non profit seek profit” argue that the number of successful SEs who have transited to “for profit mode” is very few to make a difference. Both Des and Foster argue that the quest for profit might move the SE away from their core mission. The paper to which I would subscribe the most is Mohd Yunus’s benefit maximization approach. I would argue that it is very important for the SE to make continuous attempt to be profit making. Let me discuss the reasons in a bit more detail:
Sustainability and scalability model: Sustainability would be a basic criterion for success of the social enterprise. The unmet need can be met either by sustainable effort or else by making the enterprise itself redundant over a period of time. An example of sustainability can be Teach for America, which as been around now for 20 years and is growing the footprints across the globe. The Fairtrade movement in the developed world has gained quite some momentum for it to become an accepted business practice. Scalability is debatable; however my view is that for the SE to have a profound impact, both sustainability and scalability are essential.
Now imagine a pure philanthropic model, how would you rate it on these two parameters? Attaining scalability and sustainability when you are completely dependent on external resources is close to impossible. Entrepreneurs do spend a great deal of time on generating resources, but having to barely survive would mean no thoughts on growth.
In the paper “Toward a better understanding of social entrepreneurship: Some important distinctions” By Jerr Boschee and Jim McClurg, convincing argument is made on these lines.
Financial Discipline: Profit making (and not seeking) would instill an acute sense of financial discipline. Costs would be looked at with a microscopic lens and so would be the revenues. “Sweating the capital” is the mantra for entrepreneurs and would lead to what Mohd Yunus describes as “benefit maximization”. With as ever increasing competition, even within the social sector, the resources would come to the entrepreneur who delivers the maximum value for money.
Would it deviate from the mission: The argument in the papers by Dees as well as Foster is that seeking profit would deviate the SE from the mission. Yes, possibly. The difference in a business venture and SE is the core mission. Number of organisations has corporate social responsibility programs for social benefit. The difference is the core mission. Hence, as rightly argued, SE needs to be very careful that in the “earned income behaviour” it should not loose sight of the core mission. Example is cited of the opera house for aiding budding artists vs conducting for profit professional shows. In this case also, I would argue, that if the core is to help the upcoming artists; reasonable number of shows to support the main cause is justified.
Do the numbers indicate critical mass: No, the numbers would indicate that the SEs attaining financial independence is far little. That is where I indicate the difference between attempt to make profit and having an earned income behaviour vs actually making profits. Also, let us also look at the data of successful entrepreneurial launches in the business world and compare these two.
To sum up: To sum up, I would quote from Mohd Yunus paper, benefit maximization. “We started out by assuming a world with two kinds of people, one kind wants to make money and the other kind wants to do good. But in the real world there are not two types of people, but only one type of person with two types of interests, in varying proportion. The recognition would lead to building of appropriate conceptual and institutional frameworks. Introducing SBE into the market place will be the most important part of this recognition process. Let us make a beginning.”
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