The most instructive mistakes of social enterprises

The most instructive mistakes of social enterprises

30.11.2013 Blog

Polish social entrepreneurs, encountering barriers in their actions, often thought with envy about their colleagues from other European countries. Paulina Wajszczak acquitted the fifteen errors, challenges and difficulties faced by practitioners of European social economy on the road toward creating socially useful, profitable and development enterprises. Short description of these 15 errors is presented below.

1. Result versus  impact

It’s hard to believe but large number of social enterprises, especially those non-profit one, operate on the basis of the results of their actions but not on the actual social impact. The difference is crucial, e.g.,  the result of some activity is the organization of fifty-trainings for the unemployed and the impact of the action reflects the fact that, thanks to the training, ten participants found the job. There are tools designed to measure of an social impact. Avoiding the impact’s measure or forcing its postponement  is a mistake when it comes to long-term perspective of that sort of activities.
2 Fear of the impact evaluation

To raise the efficiency of the company and its economic performance  it is necessary to discuss errors and  mistakes of a social enterprises, as well as to carry out the social assessment and to measure impact.
3. Lack of passion

Even the most ‘insane’ business can be successful if its founders are totally committed and confident ideas they wish to pursue – says Cristobal Colon, founder of La Fagedy, Catalan cooperatives producing yogurt and employing people with intellectual disabilities.
4. Business deficiencies

This is one of the most frequently mentioned and cardinal errors of social entrepreneurship.

– We survived because our business model from the beginning was bright and clear. Company to meet its mission needs to make money – says Cristobal Colon.

– The activities of most organizations dealing with socially excluded people rely on grants and subsidies . When the money come to an end, seventy percent of them ceases to exist. Yet, it does not have to be if such costs of the organization were lower and more flexible economic model – says Sophie Robin.
5. Pitfalls of democracy

Cooperatives around the world face the same challenge of democratic decision making.

– When the cooperative has more than fifty people, strategic decision-making can be really complicated. We are trying to work on ways to avoid making crises – says Jordi Ribas, XES.
6. From local anecdotes into a replicable solutions

– The main challenge for social entrepreneurs is to create solutions that can be replicated. There is general lack of this kind of business ideas – says Miquel de Paladella.

– Many times entrepreneurs are absolutely sure that if something works in their communities it will work everywhere. Indeed, the fact that something works in my community might be a result of very specific conditions … . Many times I have seen social entrepreneurs trying to expand its operations  and to replicate it elsewhere. They quickly realized how much depended on the local community and trust, and how difficult it is to convince new stakeholders that the solution is effective – says Sascha Haselmayer.
7. Fear of losing control or open source trap

Some so-called social entrepreneurs are usually control freaks. They want to have total control over the invented by themselves or offered enterprise innovation. They do not try and even hinder its replication and deployment on foreign soil. When, however, in spite of everything, there is someone interested in the idea – they want to have total control over the quality and process of implementation. In some cases, a good solution would be the opposite strategy – release the idea to the Internet and allow to life of its own.

Opposite phenomenon is called ‘open source trap’. Entrepreneurs committed to their mission, provide a solution for free and without any restrictions, while better effect would be to create a stable solution around the business and focus on quality.
8. Do not keep up with the problem

Social entrepreneurs tend to be attached to their ideas despite the fact that the problem they want to solve is growing much faster than their ability to cope with its negative effects. They are thus doomed to irrelevance and frustration.
9. The attitude: “I know everything”

Increasing complexity of problems requires a huge capacity to experiment and to innovate. Some social entrepreneurs create innovations in solitude, based only on their own experiences and lack the ability to meet the complexity of this problem. They think that they can find the answers to all the questions.

– However, as experience shows, only innovation combined with openness to experience and opinions of others can really move forward: collaboration, information sharing, the creation of communities of practice, converting users into designers may be the most important lesson – explains de Paladella.
10. Prejudice against the business or government

An important challenge for social entrepreneurs are sort of bias against the business or government.

– Many times we have seen situations in which entrepreneurs start off on a project assuming that the government is bad and business full of dark power. This leads to narrowing the options and reducing the potential impact as well as gives up the opportunity to use the potential of some very important social factors. Good entrepreneurs know how to pluck what is the best cooperation with all stakeholders, and are aware that behind such general terms as “government” or “business” stand living people who often want something good – says Sascha Haselmayer.
11. Company so social that it cannot pay

There is a significant and visible difference between baseline attitude of social entrepreneurs and start-ups creators when they meet the proposition to enter new markets . Most social entrepreneurs immediately asks for money and ensures that they cannot do anything without subsidies, because they are “social organization “.

– Meanwhile, business start-ups in the same situation (and often with fewer resources ) observe a chance for himself and trying to develop intelligent strategies in order to find the first or new customers, and are ready to take on the commercial risk themselves. … Social entrepreneurs have much to learn from them how to cleverly present their offer to new stakeholders , to emphasize its value, how to create more realistic the process of selling or purchasing and build confidence necessary for a true partnership – says Sascha Haselmayer.
12. Excess of rules and restrictions or fall of reputation

Expected high moral and ethical standards of  social enterprises and prejudices who can be a good partner for making a business, often limit the potential field of action. Finding of a balance and prioritization actions can be of great importance for the final capabilities of the company.

At the same time if somebody has already established the precedence of the mission of a company, has had not given them up in order not to lose the reputation, so difficult to rebuild.
13. Underestimating yourself

Many social entrepreneurs are working below cost (because they want to make their solution more accessible). In this way, however, they are getting rid of the resources allowing them to invest, to support innovation, etc. Too low price may in some sense be misleading when it comes to the proper evaluation of the solution and give the impression that it is not as good as it should be.
14. Too optimistic partnership and HR policy

Many social enterprises are experimenting with partnership models, franchising, covenants and the “liberation” of their innovative solutions, e.g., by providing them for free.

These experiments often fail due to the lack of a stable business model, a valuable strategy or simply motivation to help others succeed. It may be that in many cases, social purpose, which should be the driving force behind the group is not enough. Too much optimism, when it comes to partnerships and coalitions, may thus lead to disaster, deterioration of relationships and the whole mass of frustration.
15. No mergers, acquisitions, contribution to the consolidation and market integration

Why social enterprise business is not creating a coalition and does not aim to consolidate the market?

– I think that social entrepreneurs should more actively consider selling their organizations, buying other to reach critical mass faster and to combine various functions . Business leaders who want to sell coffee , for example, try to take as much of the market by buying café restaurants. It would be great if this kind of desire to create larger organizations began to appear in the world of social enterprises – says Sascha Haselmayer.

Otherwise there is a risk that social entrepreneurship will have a range too small to actually transform and affect society, to defend their interests in confrontations with other concepts and to be too small to invest in lobbying and use other tools to change the law or social conditions.

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