Wednesday, November 10, 2010

Social enterprise advances despite snags

Stephanie Strom’s article (NY Times October 5, 2010) headlines Hybrid Model for Nonprofits Hits Snags. Of course it has - It’s a relatively new business model, at least here in the United States, and it has hit snags. It’s cutting edge. If it were simple we’d be doing it already. And look where simple has gotten us.

Our traditional business model has one simple measure of success – profits to shareholders. This approach focuses on the bottom line to the detriment of us all. It creates externalities that are killing us but which have no place in the simple business model. Externalities such as depleted natural resources, diminished air quality, over fishing, and climate change. With this simplistic business mindset it makes sense to outsource and offshore work. In the name of profit companies have cut everything to the bone, and dispensed with loyalty, common sense and decency, all in the name of the clear mission that Mr. Hussy the “no-nonsense investor” speaks of. Clearly our traditional business model has hit some snags too.

Social Enterprise solutions are springing up everywhere from the nonprofit end of the spectrum to the market oriented domain. Social Enterprise, for those new to the term, is any organization structured to use the free market to make a social contribution. For the nonprofit sector social enterprise offers a path to become self-sustaining - an attractive alternative to any organization now relying on the dwindling beneficence of public and profit sectors. For the more tradition businesses it offers a way out of the soul numbing world of business as usual and offers an opportunity to use ones business to make a difference.

There are a lot of questions to be answered and a lot of problems to be ironed out for sure. But let’s not wave the white flag yet. Creating investment vehicles for these new structures is one of the key areas for development. Traditional investors are out to maximize their return. Social Investors are willing to take less of a monetary return in exchange for a larger social return. Involving traditional venture capital in a social enterprise is like asking a fox to manage a chicken orphanage. Chances are the fox sees a meal rather than an opportunity to contribute. No one should be surprised at the outcome.

Describing the hybrid as a pushmi-pullyu is a wonderful analogy but perhaps the more descriptive picture is that of the typical human being with an angel on one shoulder and a devil on the other. Everyday we’re faced with decisions of me versus we. Should you turn in the wallet you found on the sidewalk, should you lie on your expense report or cheat on the exam. Should you use the emergency lane to get around the traffic jam at rush hour. We make these complicated decisions daily, jumping over the mental hurdles of conflicting goals of maximize personal gain with something more beneficial to the whole. It’s what we do as human beings functioning in a society. We compromise and cooperate.

The news isn’t that we’ve hit snags. You don’t see the headline “Search for Cancer Cure Proves Difficult.” The news is that we’re trying brave new approaches and the intrepid explorers like the founders of GlobalGiving, Unitus, and Freelancer’s Union should be applauded for venturing out into this new terrain.

There will be failures and there will be setbacks. But progress is being made and will continue to be made until someday, like the hybrid car, the hybrid business becomes ubiquitous and we’ll wonder what all the fuss was about. We’re inching forward, mistake by mistake, and that is how evolution works.

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