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by Manda Salls
A recent study
on the factors that contribute to successful high-performance social enterprises
finds a connection between enterprises that link economic value with social
value.
This was the
focus of a study presented at the colloquium, "The Social Enterprise Knowledge
Network: Seeking Success in Social Enterprise," ending August 1. This two-year
study was the second carried out by SEKN since it was founded in 2001 as a
research partnership between HBS and leading business schools in Latin America
and Spain. SEKN's research centered on smart practices by social and business
organizations in Latin America and Spain.
This research
will be published in Harvard's David Rockefeller Center for Latin American
Studies book series through Harvard University Press.
The goal of the
colloquium is to help leaders in businesses and society create social value for
their communities, while in parallel strengthening their organizations.
The study
centered on forty organizations—twenty NGOs (non-governmental organizations) and
twenty corporations—deemed to be high performers in social enterprise (SE).
Through interviews, field research, and comparative analysis, HBS professor
James Austin, HBS senior researcher Ezequiel A. Reficco, UNIANDES professor
Roberto Gutiérrez, and INCAE professor Enrique Ogliastri presented what the SEKN
researchers found to be smart practices for organizations wanting to create
social value.
The researchers
stressed the importance of synergies between Economic Value (EV) and Social
Value (SV), calling them "two sides of the same coin." By aligning EV and SV,
both nonprofits and corporations can:
1. Improve
operations.
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Nonprofits
can better focus on creating economic value by minimizing costs and
maximizing efficiency.
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Companies
can bring social value into alignment with their core competencies,
improving motivation, loyalty, skill development, and even product
differentiation.
2. Consolidate
relations with stakeholders.
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For both
nonprofits and corporations, a focus on EV and SV can enhance their
reputation with consumers, government, and community. Corporations are seen
as caring, and nonprofits are seen as efficient.
Comparing
Nonprofits and Corporations
When comparing the social enterprise activities of nonprofits and companies, the
researchers found that rich opportunities for mutual learning exist between the
business world and nonprofits. They found that no matter what type of
organization they were looking at, strategy and leadership were the two drivers
that permeated smart practices across all organizations. Researchers then
compared how they were handled in the nonprofit and corporate sectors.
Key elements of
strategy were:
Initial Impetus.
A nonprofit is founded in response to a problem; in the corporate world, social
initiatives are often started because something has interfered with the
business.
Focus.
Nonprofits start with a sharp focus on a problem—a focus that over time broadens
as related issues are addressed. (Sometimes a nonprofit's cause is broadened to
appeal to a larger donor base.) By contrast, the focus of businesses involved in
SE tend to sharpen over time as they home in on what they do best and become
increasingly engaged in a specific issue.
Alignment.
The nonprofit's challenge is to strengthen its economic value to match the
efficacy of its social value. Corporations need to bring social value in line
with their economic successes.
Planning.
Researchers found a paradox here. Although planning is considered a core
competency of corporations, nonprofits were often more effective in planning
their social actions. This is a difference in degree rather than kind.
Corporations are relatively recent entrants into the social arena and are still
learning how to integrate it into their mainstream management practices.
Adaptation.
This can be an important issue for businesses. Corporations need to decide
whether their social enterprise efforts are driven out of the existing corporate
structure or if they need to add a department or group dedicated to SE
initiatives. Another option: Spin off a separate structure, such as a corporate
foundation.
Key elements in
leadership were:
Founders.
Attendees expressed frustration over leadership and governance issues that
stemmed from the fact that many nonprofits are started by a single person.
Founders usually have their own ideas about what is important, and if your ideas
deviate from theirs, you risk being ignored or even ostracized. The researchers
pointed out that nonprofit organizations often become more agile and effective
once the founder is succeeded.
Problem
diagnosis.
Corporations generally have less knowledge than do nonprofit groups about the
social problem, so they experience more ramp-up time. In nonprofits, the
founders often have technical expertise in the problem area and are able to do a
more in-depth analysis.
Resource
mobilization and institutionalization.
When it comes to creating social value, businesses are able to mobilize internal
resources more readily than are NGOs, but often have greater problems
institutionalizing the social activities because they are adding a new dimension
to something that already exists. Nonprofits, in contrast, start as social
enterprises, with the explicit goal of creating social value, but they have to
mobilize resources from external sources.
Leadership
style.
"For good governance you need continuity," said Reficco. "You need some degree
of overlap between governance and management."
Smart operating
practices
The research identified opportunities for mutual learning in areas such as value
generation, problem diagnosis, motivation, and performance measurement. The SEKN
group identified smart operating practices that help organizations implement
successful strategies. Two important elements to get right are performance
management and personnel, they said.
What creates
superior performance management?
1.
Attention to outcomes.
2.
Focus on stakeholders. (Surveys, satisfaction. How do funders and community
perceive what we do?)
3.
Reversing a weak culture of outcome.
4.
Wisdom comes with age; capitalize on experience.
5.
Get the board on board.
6.
Close alignment between strategy and mission.
How can
organizations get the right people with the right skills to develop social
value?
1.
The recruiting processes should be centered on personal values. Then, hold on to
the good people. Corporations should integrate a social dimension in
evaluations.
2.
Organizational learning must be promoted. Create bridges between individual and
organizational learning. Many successful organizations use advisory boards as
sources of critical skills.
3.
Excellence in management should be integrated with social sensitivity.
The future
A large percentage of people in Iberoamerica live in poverty. They have tried to
improve their situation through government, civic society, and business
philanthropy. But what if business could take this one step further? Companies
could develop products for people that would also encourage development and
bring more people into the market.
Through in-depth
research, leadership colloquiums, and teaching initiatives, the Social
Enterprise Knowledge Network generates and disseminates knowledge that will
improve the ability of business leaders to engage successfully in the social
sector.
For more
information, see
sekn.org/.
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