Part 2: Framing PerformancePart 2: Framing Performance
The performance of a social sector organization is ultimately measured by its ability to create and sustain social impact.1
Sustainable Social Impact
Sustainable social impact, meaning enduring social impact, is a frequently used term in social enterprise literature and jargon. In some camps, creating sustainable impact is linked to institutional and financial sustainability; the underlying assumption is that if an organization exists in perpetuity its impact is sustained. In the context of this paper, however, and for the purpose of informing social enterprise methodology, sustainable impact, has everything do with solving a social problem or market failure. In other words, when a social problem or market failure is resolved, continued impact is achieved because the problem ceases to exist.
Does that mean that the concept of creating a sustainable institution is in conflict with solving a social problem? Not necessarily. In most cases solving social problems is a long-term proposition requiring systemic change that can take generations to realize. Working toward the resolution of a social problem may require rendering ongoing social services through a sustainable institution over many, many years. In many cases the social enterprise becomes a permanent fixture, a third sector institution in the landscape of private, state and civil society. Nonetheless, it does mean that a social enterprise must plan formal exits or reinvent itself to address new problems as old ones fall away. Here, it is relevant to consider Maslow’s Hierarchy of Needs,2 and how the nature of human need evolved: as base physiological and safety needs are met, a person moves up the pyramid toward self-actualization. Hence, once one problem is solved, another one often surfaces, so new opportunities continue to present themselves.
Beyond Financial Sustainability
Private sector practices in social enterprise are borrowed from the commercial business and pertain to financial profit-making activities. However, for a social enterprise whose goals are to sustain social impact as well as its own existence, sustainability is a good deal more complex than simply earning money. Also, lest we not forget, one role of the social sector is to mitigate or undo harm to society, the environment, and its people, some of which is the result of unsustainable behaviors of the private sector. To fully appreciate sustainability in the context of the social enterprise, one must consider the three interrelated aspects that enable a social enterprise to become self-sustaining: financial sustainability (the ability to generate income to cover expenses), institutional sustainability (organizational capacity to execute and compete in the market) and sustainable environmental practices (the use of renewable materials, energy and processes that do not ravage the environment). A social enterprise combines at least financial and institutional forms of sustainability, and often environmental sustainability, to create and sustain social impact.
Identifying Common Performance CriteriaIdentifying Common Performance Criteria
The challenge in creating a common performance framework is that both the concepts of social impact and sustainability are hotly debated and highly subjective.
Hence, in creating a common framework, we have chosen to focus on a set of common criteria that can be simply demonstrated and accepted as being essential to sustainable social impact creation, without pretending to define the full scope of sustainable social impact.
The framework establishes four common performance criteria that lead to increased sustainability:
Depth of Impact. How effective is the organization at addressing the underlying causes of the social problem? There is no sustainability without deep, lasting impactsolving (not palliating) the social problem should be the end goal.
Blended Value. How effective is the organization at making economic wealth creation and social value creation truly interdependent, so that eventually one cannot exist without the other? There is no sustainability without blended value creation because it is not viable to maintain activities that generate a value deficit.1
Efficiency. How effective is the organization at systematically striving to do more with less? There is no sustainability without efficiency because waste leads to a vicious cycle of resource attrition.
Adaptability. How effective is the organization at adapting to changing conditions? There is no sustainability without adaptability because the inability to negotiate threats and seize opportunities leads to exhaustion and extinction.
We can think of these four performance criteria like the central pieces of a puzzleif one is missing, we will never arrive at a full picture of sustainability. That said, we do not assume that these performance criteria are all there is to achieving sustainabilityour focus has been to identify the common pieces at this stage of development of the social enterprise field.
- 1We use the term blended value here as defined by Jed Emerson: What the Blended Value Proposition states is that all organizations, whether for-profit or not, create value that consists of economic, social and environmental value componentsand that investors (whether market-rate, charitable or some mix of the two) simultaneously generate all three forms of value through providing capital to organizations. The outcome of all this activity is value creation and that value is itself non-divisible and, therefore, a blend of these three elements. Read more about blended value at www.blendedvalue.org
Applying the Performance Criteria to the Social Enterprise MethodologyApplying the Performance Criteria to the Social Enterprise Methodology
To be relevant as a methodology for social sector practitioners, social enterprise must address the challenges common to all social sector organizations, while offering novel approaches to addressing these challenges.1
At the core of social enterprise methodology lies a simple observation: private sector marketslike it or notare predominant worldwide, massively overshadowing public sector markets. At the same time, many social sector challenges can be demonstrably related to the inclination of private sector markets to provide for the short-term needs of a few rather than for the long-term common goodparticularly when the two are not deemed compatible.
The social enterprise methodology differentiates itself in the way it seeks to associate social sector challenges and private sector limitations. It addresses both concurrently by leveraging the strengths of private sector markets (as exemplified by the business methodology) to achieve social gain.2 The beauty of social enterprise is that commuting business practices to effect social change offers so much more possibility than just money.3 Social enterprise methodology harnesses the power of the private sector by actively engaging in the market and strategically employing market mechanisms in decision-making to solve social problems and generate value for the greater good. Other methodology tenets include operating the social enterprise with the financial discipline, innovation and determination characteristic of private business, which promote savvy survivalist behavior time-tested in markets.
|Address social sector challenges…||…by leveraging private sector strengths while addressing its limitations.|
|Depth of Impact:
How effectively do we address the social problem?
How effective are we at integrating social and economic value creation?
Do we systematically strive to do more with less?
Are we willing and able to respond to changing conditions?
- 1We are not implying that being novel automatically makes you better; instead we are saying that to be relevant, a new methodology obviously has to bring something new; whether it performs better has to be judged on, well, how it performs! This seems rather obvious but important to avoid falling in the trap of innovation for the sake of innovation.
- 2This "fighting-fire-with-fire" aspect is probably what makes the social enterprise methodology both effective and hazardous at the same time.
- 3Alter, Kim. Social Enterprise Models and Their Mission Relationships, in Social Entrepreneurship: New Models of Sustainable Social Innovation. Oxford University Press, 2006.