The voluntary sector

What's all this about social enterprise?

Nobody working in the voluntary sector can have failed to notice the hullabaloo about social enterprise in recent years. High-profile examples like The Eden Project and Jamie Oliver's Fifteen restaurants are frequently discussed in the media; the law of the land has been adapted to social enterprise, for example through the introduction of the Community Interest Company form; many big new funds have been established, such as the Department of Health's £100million Social Enterprise Investment Fund; and of course the politicians are in on the act:

Social enterprise is the new British business success story, forging a new frontier of enterprise

Gordon Brown

The social enterprise is the great institutional innovation of our times

David Cameron

So what exactly is all the fuss about? What is 'social enterprise?'

‘Social enterprise’ is in fact a vague and contested term. The UK umbrella body for social enterprise, The Social Enterprise Coalition, promotes the following definition:

Social enterprises are profit-making businesses set up to tackle a social or environmental need.

In fact, the use of the term 'social enterprise' was first adopted in the UK in an attempt to cohere the disparate sectors of co-operatives, community businesses, development trusts, etc. All of these were using business models – broadly self-financing and with a good seasoning of approaches taken directly from normal business practice – but to achieve social or philanthropic purposes. The term 'social enterprise' was taken from international, particularly American usage. Internationally, however, the term was - and still is - generally used as a verb rather than a noun: as something you do rather than something you are. Many now believe the British use of the term mainly as a noun has caused a lot of unnecessary confusion. Many voluntary sector bodies do social enterprise, and have indeed been doing it for years - whether they are charities with trading subsidiaries or working directly themselves on a social services contract – but they are certainly not 'profit-making businesses'. I have many times been called in to charities that want to 'develop a social enterprise' - or even 'become a social enterprise' - only to find that in fact they already generate most of their income from contracting. How quickly the social enterprise fog clears when I tell them they are already doing it!

Can it really be as simple as this? Is the hype surrounding social enterprise just a case of 'the emperor's new clothes'?

Well... not quite. For many reasons, all across the world, but especially in the UK, there is an increasing emphasis on self-financing but socially-useful activity. In part this is due to the collapse of the Eastern Block and loss of faith in 'planned economy' models. The market has triumphed – but many doubt the ability of a financially-driven market to deliver social benefits to all. As the public sector withdraws from many areas of service delivery – the current movement of Primary Care Trusts towards commissioning-only is an example – a requirement for new service providers is created – on a BIG scale. Even after years of 'getting ready for the contract culture' the traditional voluntary sector with it's thousands of small organisations that are run, or at least directed by volunteers, is not seen as having the capacity to bid for some of the larger and more complex service delivery contracts, but big business lacks local accountability and indeed another capacity – to put social good - if necessary - before financial gain. It is this gap that social enterprise is filling.

Social enterprise is not undertaken by any one kind of organisation – perhaps the majority is done by charities, or the trading subsidiaries of charities; many organisations that think of themselves as social enterprises are 'not-for-profit' guarantee companies but not actually registered as charities; a few are community interest companies, or societies, or take some other legal form. But what they share is the use of business models and approaches to achieve their social purposes:

  • they are mainly self-financing – they trade, or contract, rather than receive grants (though many still also run grant funded projects)
  • they have paid trade specialists running their operations – usually as directors, if not on the main board at least on a trading subsidiary company board
  • they have a business-like world view – for example they understand the service they provide as part of a changing market environment; some even refer to their service users as 'customers' (though this always sounds odd to me – one too many management courses perhaps)
  • they use business systems - for example in collecting management information or organising their accounts.

The 'emperor's clothes' of social enterprise is precisely the application of these business models, techniques and systems to achieve a social, rather than primarily a financial gain. This is a substantial undertaking, and of tremendous importance. The best social enterprises – Cafédirect for example – not only combine the strengths of business and charity, they can outperform both even in their own terms – for example by consistently taking market share from multinational companies – and in so doing they model a whole new way of organising human affairs. Someday, perhaps, all business will be done this way, and the current man-in-the-street view that business = making money and charities = doing good will sound as old fashioned as the medieval craft guilds do to us now.

How can Geof Cox Associates help charities deal with 'social enterprise?'

Geof Cox Associates have a wealth of experience assisting charities with the establishment or growth of social enterprise. It is our policy to work across all kinds and sizes of charities, from some of the largest in the world – for example -

  • advising Oxfam on how social enterprise might contribute to the anti-poverty programme they are currently running in Russia
  • developing model processes and structures for the growth and floating off of RNIB sheltered employment activities as linked but substantially independent Social Firms

- through large UK regional charities – for example -

  • training Dementia Care Partnership staff in social enterprise development and management skills
  • helping Tyneside Cyrenians (2008 Charity of the Year) restructure around their increasing social enterprise activites

- to smaller local charities – for example -

  • training CAVOS staff in social enterprise development, especially enabling them to understand the organisational implications of charities trading
  • helping staff at Chester-le-Street CVS do their own social enterprise company formations and set up trading subsidiaries for charities.