Overview and Rationale

Ask any self-respecting social entrepreneur why they do what they do, and they will tell you passionately about a social problem and how they are working to solve it. Most achieved a moment of clarity when they recognized an injustice and were compelled to take action. In tackling the social problems, their approaches are as wildly different as the problems themselves, yet our research and experience tells us that social entrepreneurs’ motivation is ubiquitous—to make sustainable social impact.

To this end, social entrepreneurs are obsessed with how well they achieve social impact. Regrettably, little attention has been given to examining performance in social enterprise methodology; instead numerous pages have been written on capturing how much social impact social entrepreneurs achieve. At first glance these perspectives appear identical, and they are indeed interdependent: the first stresses organizational performance, which then produces the second, external impact (measuring social impact metrics).1 Our assertion is that by enabling social entrepreneurs to assess and improve how well they achieve social impact they can in turn improve their performance, and increase how much impact they achieve.

We begin with a bold thesis: social enterprise is a paradigm for social organizations to achieve high performance.

In this paper we define social enterprise as: “socially-oriented venture (nonprofit/for-profit or hybrid)2 created to solve a social problem or market failure through entrepreneurial private sector approaches that increase organizational effectiveness and sustainability while ultimately creating social benefit or change.”3

We define high performance organizations as “efficient, adaptive, strategically-minded organizations capable of simultaneously creating economic wealth and social value and addressing root causes of social problems in order to achieve deep, lasting social impact.”

However, at the time of this writing there is a dearth of tangible materials and tools devoted to helping social enterprise practitioners understand and improve their performance—do what they do better. Instead, social enterprise literature is rife with definitions and chronicles of social sector leaders and their endeavors. The power of inspirational stories to motivate aspiring social entrepreneurs to implement their ideas should not be underestimated; however, analyzing and chronicling best practices is required to understand social enterprise performance, ergo develop social enterprise methodology.

Social enterprise methodology gains to date underscore three narrowly-focused schools of thought:4

1. the Social Entrepreneur Approach, which supports leadership development of the practitioner;
2. the Funding Approach, which advocates earned income as a means to fund social projects and organizations; and
3. the Program Approach, which uses commercial activities to execute social programs (i.e. micro-credit).

All three approaches have merit, yet neither alone nor together do they go far enough for the practitioner who is interested in mitigating a social problem. Money is motivating only in that it is a necessary means to finance costs related to solving a social problem. Strong leadership is essential to the success of any social enterprise, yet does nothing to address pragmatic questions related to institutionalization or capacity building. Finally, employing business activities is attractive only if doing so generates greater social value.

Social enterprise lies at the nexus of management science and social science, and therefore its practices should be drawn from and inspired by multiple disciplines such as business administration, social work, geography, policy studies, anthropology and economics. Social problems, too, are complex and often require multifaceted tactics to untangle their causes and effects. Thus, any comprehensive social enterprise methodology must take a holistic view of the social enterprise and integrate and build on current schools of thought—leadership, funding and program.

An integrated methodology requires that a complex network of internal systems function individually as well as interdependently to achieve a healthy whole. Diagnosing “symptoms” of poor social enterprise performance such as the inability to draft a strategic plan, high staff turnover, improper financial management, mission discord, dissatisfied clients, a poorly functioning board, etc. may indicate weaknesses in one functional area, whole systems, or institution-wide. Correcting problems may be isolated events or require comprehensive change management; either way changes in one area or many has an inherent impact on the performance of the social enterprise, for better, for worse or both concurrently. Social enterprise performance is dependent on the interrelationship between money, people, community, resources, capacity, leaders, values, knowledge, culture, acumen, and vision, etc. and how these aspects work together, or in opposition, toward achieving the end goal of sustainable social impact. Thus, achieving a high performing social enterprise is like a steady fitness regime that requires enduring vigilance, not only to remedy problems, but to strengthen capacity and maintain general health.

• 1The relationship is illustrated with a logic framework: organizational outcomes are the result of activities that lead to measurable outputs and subsequently organizational change, the cumulative effect is impact.
• 2Social enterprise is agnostic about legal form, which is usually dictated by governing laws in the countries where they operate.
• 3Alter, Kim, Social Enterprise Definition, Virtue Ventures, 2006.
• 4Alter, Kim and Vincent Dawans, “The Integrated Approach to Social Entrepreneurship: Building High Performance Organizations,” Social Enterprise Reporter, April 2006.