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.