Geof Cox's Blog

Day Two in Rybinsk: -18°c

By way of background I gave Helen a copy of the Wikipedia article on Rybinsk – unfortunately her eye was drawn unerringly not to the town's illustrious past or many architectural treasures, but to the article's apocalyptic warning that...

the giant Rybinsk dam, which holds the Rybinsk Reservoir (until recently the largest man-made body of water on Earth) places the town in imminent danger of the dam breaking and the reservoir flooding the city

Hopefully the fact that the reservoir, and most of the huge span of the Volga, are almost entirely covered by ice at the moment makes the danger a little less imminent!

Many people in Rybinsk have other pressing problems. In soviet times this was a closed town, and they still manufacture aircraft engines and components, but during the collapse of the soviet system in the 1990s most military work here ceased, and about 80,000 people lost their jobs. Only about 20,000 new jobs have been created over more recent years – this in a country where welfare benefits are not really enough to live on at all, let alone achieve any quality of life.

My social enterprise development sessions – which sometimes seem to revolve entirely around discussions of the impenetrable workings of Russian customs – are thankfully interspersed with Helen's story development workshops.

2010 social enterprise visit to Russia - 1

When I got into the car in Rybinsk this morning Victor pointed to the temperature displayed on the dashboard. Although it was a beautiful sunny morning and not even particularly early – about 9am – the outside temperature was still only -16°c. Victor told us about a previous visit to Rybinsk, when even he had found it so chilly he ran to the car. When the dashboard lit that day the outside temperature read -42°c.

Over the last two years I've been advising Oxfam on the role social enterprise might play in their anti-poverty work in Russia. At first this was focussed on strategy: understanding the legal/financial environment for social enterprise, the resources and capacity of the NGOs for disadvantaged people Oxfam is working with, what external support might be available, and so on. Now at last the work has moved on to what for me is a more exciting phase: real social enterprise development work.

The kind of felt character that first caught my eyeThe kind of felt character that first caught my eye

Last year I met a group of people from the 'Big Family' NGO in Rybinsk who were creating a network of homeworkers to manufacture felt products. It was work ideally suited to housebound, single parent and hard-pressed families. Among them was a very talented designer, Pavel Gavrilov, whose felt characters had such personality they almost told you their own back story themselves. I immediately knew they would sell in the West, or anywhere there was significant disposable income, but the simple lack of economic activity in most of Russia (outside a few big cities - which are booming) made it impossible to realise anything approaching the real labour time they embodied.

How to solve this problem?

I approached it by bringing together two kinds of business model:

  • fair trade, and
  • merchandising (book and movie tie-ins)

First, incorporate some of the characters in a book aimed at children and sold through the Oxfam shops and other sympathetic retailers – this book itself being a wholly ethical product - and second, set up a 'fair-trade' style supply chain mechanism to take the felt characters from disadvantaged home workers in Rybinsk directly to the shops to sell alongside the book.

The idea is that they acquire sufficient added value to pay the homeworkers at least the average wage in Rybinsk, because they both reach a market with more disposable income and gain the emotional attachment people have with characters in a well loved story. I have never presented this idea to anyone without acknowledging how difficult it will be to pull it off – not least to create a great story starting only with the characters; yet everyone I have spoken to has loved the idea, including Oxfam, who have now brought me out to Rybinsk again with a writer and publisher, Helen Limon, to initiate the development of the story for the book.

One of Pavel's new more child-friendly felt charactersOne of Pavel's new more child-friendly felt characters

There are two main reasons for this I think...

  1. You only have to look at the characters to see them living and breathing in a successful story; and
  2. There is actually in this idea an attempt to move fair trade models up to a whole new level.

More of this in my next blog – but obviously Oxfam, as one of the fair trade pioneer organisations (they were among the founders of Cafedirect) saw in this approach an initiatve whose ripples might spread far further than the poor Russian families who will be its immediate beneficiaries.

So, after flying into Moscow at the weekend – fortunately just in time for the Maslenitsa pancake festival - and a Monday of meetings in the Oxfam office there – we traveled yesterday the 500k through the beautifully frozen Russian landscape, northeast to Rybinsk.

Read my next post from Russia here.

A typical question...

Here's a question I received in an e-mail last week:

I'm going to the SE conference in Cardiff next week. On their registration form they have Charities and Social Enterprises listed in different delegate fee categories. I thought that Charities (or more specifically their trading arms) are SEs? Am I easily confused?

I get a lot of questions like this at workshops and seminars, and you can read my own attempt to cut through the definitions confusion here: What's all this about social enterprise?

But this particular asking of the question did make me think a bit harder - because it came from a lady who has worked for years at a high level in social enterprise - actually for one of the employee ownership apex bodies - and who is currently researching her Masters in Ethical & Responsible Tourism.

Do we just have a definitions mess - or is there a bigger tragedy going on here? Have we actually succeeded in taking our wonderfully clear and simple and popular message - that you can do business to do good - and muddying it up so thoroughly that hardly anybody can now understand it?

Sounding like David Cameron...

I was in a meeting with a well-known social entrepreneur today who was most disturbed when somebody said he sounded like David Cameron. Are we turning Tory? Or have they finally worked out, in the aftermath of the financial world collapse, that business models based on greed and exploitation really don't work?

Here's what I think is happening...

The historic alliance of Big Business and Conservative Counties has collapsed. Globalisation with its reduction of market town high streets to bland uniformity and replacement of human contact with automated switchboards is no more acceptable to Middle England than it's ability to move production to China is to Trade Unionists.

It's obvious to all now that unfettered competition doesn't lead to real diversity and choice – to the local and individualistic and quirky - but to the illusory choice of colourful wrappers around international monoculture and financial institutions too big to fail.

We may have different views on where to put windfarms, but we can all see that using more and more energy on making more and more stuff we don't really need, spending more on advertising them than making them in the first place, and transporting them half-way round the world, is just plain crazy.

Do structures stymie social enterprise?

At a recent social enterprise investment conference Financial Times enterprise editor Jonathan Guthrie said that although social enterprise was 'an attractive-sounding phrase', one of his worries was the 'vagueness of the structures'. According to Guthrie, this presents problems for funders - and in the end funders will impose what they see as appropriate structures. Nick Temple from the School for Social Entrepreneurs, who shared the podium with Guthrie, disagreed with this.

I think this disagreement is over two sides of the same coin: the positive side of the diversity of structures we have is being better able to develop exactly the right structure for purpose; the negative side is how confusing and difficult the choices involved in this can be.

Funders have always, and will always have specific requirements on legal/financial structure: grant-giving trusts and foundations have them, banks have them, and now specialist social enterprise funds have them. This is not a problem in itself - a big part of developing the right structure has always been anticipating the scale and type of funding that will be appropriate - though getting the optimal structure to meet funders' criteria, plus all the other constraints of business model, scale, mission, values, and so on, can indeed be difficult. I was involved a few years ago in a research project for Social Firms UK that revealed that over half of all the social enterprises surveyed were disatisfied with their legal structure!

The real problem in my view lies not in the diversity of structures - in itself some choice is usually better than none! - but in the lack of a proper advice/support service for organisational structure design - social entrepreneurs have to rely either, on the one hand, on solicitors - who may know the structures but usually do not really understand social enterprise - especially the fast-evolving social enterprise funding environment - and moreover lack the experience to advise on how radically reshaping a business model can make a better choice of legal structure possible - and on the other hand business advisors who know enterprise well enough but usually have a limted understanding of legal structures. If you are lucky you'll be able to access a third sector specialist - who still won't really know options less used in the third sector like share companies.

Yet it would be relatively cheap and simple to develop a national support service to help social entrepreneurs get the right organisational structure for their particular needs, and sweep away much of the current confusion. If like me you too see this as an urgent need for social enterprise, do get in touch - geof@geofcox.info.

'Right to Request' tender collapses

The DoH tender to provide support to NHS staff wishing to set up social enterprises has been suddenly withdrawn.

The collapse of this tender will have come as no surprise to social enterprise developers engaged with the NHS - but the slow take-up of the 'right to request' is not because social enterprise goes 'over the heads' of frontline staff as one senior NHS manager patronisingly claimed.

The problem is much simpler than this: it is the failure of the DoH to deal clearly and honestly with the NHS pensions issue. A survey of PCTs in April revealed that 'the biggest [stumbling block for frontline staff exercising their ‘right to request' to set up a social enterprise] is uncertainty over NHS pension rights and benefits'.

In a number of places, such as its official Guide to the Right to Request, the DoH lays out clearly the many contracting routes open to social enterprise, including the so-called 'PMS' contract forms that can provide proper NHS pension scheme membership. Except that – you guessed it – when you actually come to the contract negotiation you find that those forms of contract are no longer really available for social enterprise.

The fact is that far from smoothing the path of social enterprise, it is now almost impossible to set up a social enterprise within the NHS pension scheme (although existing staff already in the pension scheme will probably be able to remain in it).

The number of 'social enterprises' just doesn't add up

The government has increased it's estimate of the number of social enterprises in the UK from 55,000 to 62,000. However, this is due neither to any actual growth in the number of social enterprises, nor any new research – rather it is 'down to a new and 'complicated' way of working out the estimate'!

The actual basis of the figure of 55,000-62,000 is rarely scrutinised. It in fact derives from the Small Business Service Annual Survey of Small Businesses: UK 2005 (www.berr.gov.uk), but this counted only social enterprises that confirmed ALL of the following criteria:

  • they think of themselves as a social enterprise (Q45b)
  • they never pay more than 50% of profits to owners/shareholders (Q45)
  • they generate more than 75% of income from traded goods/services (or receive less than 20% of income from grants and donations) (Q43)
  • they think they are a very good fit with the Government Definition of a Social Enterprise.

These criteria in my own view would exclude much – perhaps even most - social enterprise. Here are just some examples:

Social Firms Conference

I'm just back from the 2009 Social Firms UK Conference. One highlight was a surprise presentation to its 'turbo-charged' Chief Executive Sally Reynolds, marking Social Firms UK's 10th Birthday. I wonder how many people (in addition to Sally and myself) have been to EVERY Social Firms UK Annual Conference (I even remember the geese!).

This year Simon Hebditch and I ran the 'Tinkering with Frankenstein' workshop as previewed in this blog. One aspect of the Conference that closely reflected the workshop/blog themes – and that some old Social Firm hands found a little disquieting - was the emergence of 'WISE' – Work Integration Social Enterprises – as a major focus. This is one of the effects of the recent broadening of the focus of Social Firms UK itself - beyond disabled people to anyone with 'a disadvantage in finding employment'. I was among those who welcomed this broader focus, on the grounds that ex-offenders, homeless people, substance abusers, etc, often present similar issues (in terms of employment and enterprise) to disabled people – and indeed such groups often suffer from learning disability, mental health or other problems that precipitated them into crime or drugs or homelessness in the first place.

However, a 'WISE' like Create – Community Recycling & Training – which was one of the presenters at the conference – is clearly a very different animal indeed from Social Firms as they were formerly understood. Create takes on long-term unemployed people – especially 18-24 year olds and ex offenders - for 3 months, during which they work on recycling 'white goods' and receive a range of support preparing them for permanent employment – and finding it for about 25% of them.

Create sees itself as a Social Firm not because of these temps/trainees, but because 60% of its permanent staff are ex-trainees. This is all good stuff - and Create is obviously a great social enterprise – but go forward 10 years when these employees have forgotten their youthful unemployment, criminal record, drug problem, etc – to when they no longer need a specially supportive workplace – and it is clear that this is a very different animal from our old idea of Social Firms, whose staff with disabilities or enduring mental ill health need pretty permanent support.

I still think broadening its focus was the right way for Social Firms UK to go, but there was disquiet at the Conference similar to that previously expressed by Adrian Ashton, and it brought home to me that we have to think harder than before about valuing - and communicating – the increasing diversity of Social Firm models.

Other points that emerged most strongly from the 'Tinkering With Frankenstein' workshop were:

  • The continuing big problem of the lack of 'specialist knowledge' among business advisors, and especially the lack of those who can vision the right business model for a particular group/trade/purpose. I have written elsewhere about the importance of business models for viable social enterprise – and especially the pretty exotic nature of many Social Firm business models (such as Create's 2 symbiotic businesses - recycling white goods and employment training/support - in the shell of a larger enterprise) and the workshop reinforced my view that we have many people who can do business planning but few that can help with the more important task of visioning the right business model. Moreover – we are hardly even conscious of this crucial gap.
  • The increasing importance of self-employment, especially for people with disabilities and long-term illness, and the need to bring organisations that create work for self-employed disabled/disadvantaged people into the Social Firms fold. (I subsequently discovered that Social Firms UK is in fact now considering this issue).
  • I put forward – as devil's advocate – the view that Social Firms were less successful for learning disabled people than other groups – but the learning disability specialists in the workshop roundly rejected this. Instead, they thought that prejudice rather than concrete support needs is still the biggest factor in unemployment among learning disabled people – we still have our own work cut out getting across the message that in the right job many learning disabled people are in fact more productive than other workers. Those present knew many examples of this – but they are sadly not widely disseminated (if you can help – get in touch).
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