Question

Social enterprise are a prime example of hybrid organization form... spanning across the boundaries of private, public, and non profit sectors, how are social enterprises different from other enterprises and what are the challenges and tensions of managing social enterprise?

Answer 1

Social Enterprises:

A social enterprise is an enterprise or business which seek to maximise profits but at the same time maximizing the benefits to society and environment. These business use their profits principally for social causes.

These are the prime example of hybrid organisation form spanning across the boundaries of private, public and non profit sectors. With a motive of maximising profits, they run similar to private sectors and with a motive to use those profits for social cause, they run similar to public (government) or non-profit sectors. These enterprise obtain funding mainly by selling goods and services to consumers and sometimes through grants. Though earning profits is not the primary goal of social enterprise, they still need to generate revenue for sustaining the business. Sustainable revenue differentiates a social enterprise from a traditional non profit enterprise which relies primarily on grants and outside funding to meet its social cause. The priority of social enterprise is

a. to generate revenues and make profits which private enterprises do and non profit organisations dont do;

b. and reinvest profits into their social cause - which public (goverment) or non profit organisations do and private companies dont do;

c. instead of distributing it to shareholders - which a private company typically dont do.

d. and these social causes can be specific to a particular cause or society instead of the society at large.

Thus, social enterprises differ from each of private, public and non profit sectors separately, they serve as a hybrid organisattion form combining all the three sectors.

Challenges and tensions of managing social enterprise:

1.Continually reiterating a social cause - The challenge of continually reiterating a social cause and driving the business towards that cause is difficult. This is more challenging when choices are to be made ensuring that the business model remains feasible and sustainable.

2. Investing in the right people - Investing in the right people to support the skill set of founders and also to maximise profits with a social cause is a major challenge. Majority of the times, because of the cost constraints, cash-strapped founders over-extend themselves with multi-tasking various activities to run the business which eventually leads to sub-optimal performance in the long run.

3. Accessing finance - Many a times, social enterprises work in areas where the gestation period for new product development or behaviour change is high. Thus, this makes access to finance a challenge as investor focus on short term - higher yield situations. Some social enterprises raise funds by clearly demonstrating how they are different from othersand staying focused in a specific area. In other words, there is a science to fund raising which has to be a key focus area for the enterprise.

4. Building and following a ground up business plan - many social enterprises have founders who are visionaries and who do not have much experience in running a business. Thus, the activity of planning and evaluating performance vis-à-vis metrics in a appropriate and systematic manner will be a big challenge for them in managing the enterprise.

5. Planning for Growth - there are many successful social enterprise doing good work, but are limited to specific geographies. However, growing beyond thier geographies and expaning to a new geography or further scaling up is a big challenge as lack funds and resources or the founders’ have limited bandwidth.