Why Nonprofits Should Fear Social Enterprise
Nonprofit organizations exist and maintain their 501(c)(3) tax exempt status for fulfilling missions that address a societal ill or gap and not generate a profit for shareholders.
A social enterprise (great definition on wikipedia) generates a profit to address a societal ill or gap. Toms shoes is one of the finest examples — a privately owned business that provides shoes to children in poor and developing countries — buy a pair, give a pair.
For decades nonprofit leaders have been pushing corporations to embrace “corporate responsibility” which essentially was loosely defined as “donate to us to improve your community image”. A growing trend and a very possible future is those same responsible corporations adopting social and community driven missions as their own, addressing the societal issue, having an impact and (pause for effect) generate revenue and goodwill while doing it. Work once solely reserved for nonprofit organizations is being consumed by a growing population of social entrepreneurs inside and outside of corporations.
Are social enterprises the result of nonprofit ineffectiveness?
I no longer have to donate to the Sierra Club because I purchased hiking boots from a company that funds its own earth friendly awareness programs that are more aligned with my support interests like the impact-free hiking trail development program in my community.
Re-frame, re-purpose or potentially be replaced? It would be wise for nonprofit organizations to adopt some of the qualities of social enterprises.
Social enterprises are purposefully nimble, agile, and quick.
Social enterprises embrace innovation.
Social enterprises develop programs or businesses that fund themselves with revenue streams.
Social enterprises clearly communicate their “why”.
Social enterprises immediately live their vision, some nonprofits spend months writing their vision.
Social enterprises succeed on simplicity, nonprofit organizations create their own complexity.
Social enterprises attract funding and foundation support with their market–based strategies.
Leaders are constantly reminded of the differences in the upcoming generational workforce and their need to connect with a mission and making a difference on their terms — how are we going to attract them? More importantly, how are we going to retain them? For their entire lives they been told to “pursue your passion”, it may behoove leaders to actually let them. Established nonprofits can be cumbersome, awkward, slow and unwelcoming to new or different ideas. Open the doors of opportunity within your organization or more than likely a social enterprise will open it without you.
Two great resources on social enterprises: