“To succeed, these (social) ventures must adhere
to both social goals and stiff financial constraints.” [1]
Farmers historically have been severely exploited by a chain of
middlemen, but no existing model sustainably connects them directly with the end
consumers. Having worked with a Social Enterprise in the past which directly
worked towards bringing marginal farmers (farmers who do not own more than 2
acres of land) and retailers together, I was faced several bottlenecks
concerning availability of funds. The
project was ran through a Hybrid model. Our
team was actively seeking funds and grants from the foundations and trusts, working
closely with the government to avail tax benefits and subsidies and devising
financial models to bring in as much revenue as possible – both to sustain the organization
and to provide a fair share to the farmer.
There were many challenges with this model.
A) A disproportionate amount of
time was spent in writing donor reports and proposals. Since trusts don’t prefer
to work with small numbers, we had to either scale the project (purely to adhere
to the foundation’s mandate) or show inflated numbers so we could fall under
the “high impact” category.
B) The same was the case with partnering with government agencies.
Moreover, the bureaucracy was acutely high in these agencies. Both sources of
funding were “difficult to guarantee indefinitely”
[2]. More
often than not, the question of financial viability was in question.
“For
social entrepreneurs, the social mission is explicit and central.” [3]
Though definition
[1] was most obvious, there was a
resistance and a sense of guilt amongst stakeholders (employees, farmer
leaders, organization heads) in adhering to “stiff financial constraints”. Ideas
on making revenues or engaging in income generation activities were rubbished as
ignoring the core mission. I was almost ashamed to ask the question that has
been daunting me for the past couple of years, “Is it OK for a Social Enterprise
to be rich?” When a fellow classmate brought this question up in a class
discussion, Proff Z’s quote, “No Money, No mission”, struck the chord perfectly.
Financial sustainability or sometimes
profitability is after all is a key component in maximizing impact. It reiterated
that, “by growing (a steady) revenue, improving
gross and operating margins, increasing free cash flow, efficiently managing
both capital expenditures and working capital, and building an asset
base” [4] the goal of Social impact is not
compromised in anyway.
One of the
classic cases is the Arvind Eye
Care Hospital in India. Arvind Eye Care follows a “cross subsidization” approach
wherein the rich pay for the services while the poor (BPL population) do not. Though the same doctor performs surgery on
either of the patients, the relatively wealthier patient pays for other value
add services such as an exclusive para medical care, better boarding and
lodging facilities, etc. while the subsidized patient just avails the very basic
amenities.
Though the
Hybrid model is not a one size fit all approach (some of the greatest social
innovations did come from a government agencies or not for profit models) to
solving social problems, this approach is not to be dismissed. The amount of
time and resources that needs be dedicated to each (Impact vs Profitability)
are variable, but they most certainly are not mutually exclusive. The organization
or the enterprise could clearly defines the priority of each while constantly
reevaluating the goals and objectives as the project progresses though time,
scale and geographical boundaries. In the end, high impact organizations can be
rich as long as they build an effective mechanism so that the different
stakeholders, while receiving real time market based inputs, do not lose track
of the shared Mission and Values of the project.
[3] The
Meaning of “Social Entrepreneurship” J. Gregory Dees
[4] http://www.northeastern.edu/sei/2013/09/how-to-build-financially-sustainable-social-enterprises/
