Saturday, March 31, 2012

Why you can be for-profit - and for good

One of the things that people in social enterprise go on about most is about reinvesting the profit in the mission- and this being the differentiator between social and ordinary business.

What they seldom tell you is that there aren't that many social enterprises out there that actually make any profit. Some, of course, blunt their profitability by 'doing business differently' - which, of course, is fine, if it the social benefits can be demonstrated. But many more simply are not profitable full-stop, and don't have a particularly strong story on outcomes either.

When I set up my first organisation, I didn't really think about the reinvestment argument. Nor did I think particularly about how we were set up. Having a social mission was sufficient, I thought, to ensure we would go some way to achieving something more than keeping ourselves in jobs.

About a decade in, I wasn't so sure. In practice, all sorts of things ended up coming between the aims of the organisation and its mission. The biggest was the needs, and interests, of the organisation itself. Feeding, tending and nurturing the machine somehow put the mission into the background. Sure, a healthy organisation meant a bigger likelihood of being on-mission, but, somehow, the organisation felt, to many of us leading it, and end in itself.

Is this unique? I don't think so. When I founded my latest venture, Stepping Out, I decided to approach the question of mission differently - through a profit-making company. We do have a mission - rather grandiosely - to change the way public services are delivered in the UK. We are here, primarily for that reason, more than to provide ourselves with a fine living.

But we also seek, quite unashamedly, to make a profit and we focus hard on this too. Partly because this allowa us to be successful, live reasonably well and grow our founding mission. And partly because this does create a meaningful surplus which we can share with others through the Stepping Out Foundation.

I suppose what I am getting to here is that our being a for-profit organisation doesn't in any way detract from our primary mission - to change public services. Nor does it pull us away from or our secondary mission - to use a decent slice of our profit to support early-stage social entrepreneurs.

In fact, I would go as far as saying we are probably a bit more effective on both counts than had we not set out with profit at least partly on our minds.

Which brings me to my main point here: contrary to the sensibilities of most UK people who operate in the 'for good' sectors, I do not believe there is a simple and linear relationship between profit-seeking and doing good, with the one only rising when the other falls.

It just isn't that simple. You can be non-profit seeking and do very little good. Equally, you can be profit maximising and still, even accidentally, do a lot more good than your typical 'for good' venture. Does being consciously socially-minded matter? Yes I think it normally does - but it doesn't guarantee any social good ever will come of the business. .

The bottom-line here is that a social mission doesn't necessarily produce social outcomes any more than a pure-profit mission always produces profit. You can miss. You can get sucked into your own myth that your very existence constitutes a social benefit (seldom true). A social mission can actually give you an excuse not to do the really demanding things necessary to make a profit.

None of the above is to say that there are not many for-profit organisations that maximise their profits at the expense of social good. One doesn't need to look far for examples.

But there are many organisations in the public, voluntary and SE sector that also subtract from their potential social impact in order to serve other goals, often for the sake of an easier life.

These, in my view, deserve just as much shit from the media as the for-profit ones that don't deliver socially. They are ripping people off just as badly as any poor-performing Work Programme prime. In essence, you can be not-for-profit and, in reality, be not particularly 'for good' either.

1 comment:

OutOfPoverty said...

We at the Out of of Poverty Team enjoyed your post. Of course Paul Polak not only believes in creating profit for good, he believes it is the solution to help end poverty. He speaks about this at a recent Ted talk which I will link to you here:
More about Paul Polak and his work to end poverty can be found at his website, which also has some terrific blog posts on the subject.