Is social enterprise being set up to fail?

2 December 2010

The article at a glance

Is ‘Enterprise Society’ a myth or a reality? Are the resources needed to successfully deliver it in place? As redundant public sector …

Is ‘Enterprise Society’ a myth or a reality? Are the resources needed to successfully deliver it in place?

Social EnterpriseAs redundant public sector workers prepare to bid for contracts to win their own work back, academics from Cambridge Judge Business School have expressed concerns that the new social entrepreneurs of the future will not have the necessary support structures to succeed. However, for some of the new greener industries, lessons from Europe teach us that “small” maybe better than larger business models.

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Dr Shailendra Vyakarnam, Director of the Centre for Entrepreneurial Learning at Cambridge Judge Business School, says the concept of social enterprise must not be used wrongly, and that he fears that without the right skill set, workers are being set up to fail:

“Social enterprise as a model of business is more about the community and the planet and less about profit. In some business environments concepts like so called ‘shareholder value’ mean that the profit comes first and the impact on people and the planet comes next.

“What is happening at the moment with the so-called ‘Big Society’ takes me back to 1979 when Margaret Thatcher came to power. We had the closures of the coal and steel industries and there was a huge growth in small businesses from people who had been middle managers. There was a degree of selfishness to that period, but the way of now is that we do want to survive and make a living for ourselves but we also want to be socially responsible too. It is a very different external environment.”

Dr Vyakarnam also said vulnerable people could be subject to all kinds of scams.

“I don’t think the infrastructure has been put in place for social enterprises to succeed. The not-for-profit organisations, the more established ones, would have the managerial skill to deliver that. However, to expect people who have been employees without the necessary training of how to do a balance sheet for instance, to suddenly find themselves having to sell their services rather than simply being an employee, strikes me as a disaster. They may go into franchise deals, be stitched up, and we’ll see them long-faced on Watchdog.”

In the United States Obama has a White House Office of Social Innovation and Civic Participation, which is being likened to Cameron’s vision of a social enterprise economy. But Dr Helen Haugh, Senior Lecturer in Community Enterprise at Cambridge Judge Business School, said social enterprises need careful handling if they are to succeed here:

“Expecting people to know intuitively how to set up a business, how to run a business, how to negotiate contracts is unrealistic unless they have had either some previous experience or access to some expertise to enable them to do that.

“I think the structure of an organisation does matter. Social enterprise is attempting to combine social purpose with a profitable business model. But if you dispense with the intermediaries and expect social enterprises to bid for public sector contracts without support there will be problems. I think that trying to encourage more people to become engaged is something that needs to be adequately resourced with the necessary advisory function to enable them to bid for the contracts and deliver the services.”

Investment in green technologies is seen to be key to our entrepreneurial success in the future, and Dr Michael Pollitt, Assistant Director of the Electricity Policy Research Group at Cambridge Judge Business School, said learning lessons from what’s happening elsewhere is important:

“I think the key focus for us as a country must be keeping the cost of meeting our emission targets down and that involves having a vibrant green sector that is responding to the subsidies put into it. This is also about new business models to encourage people to buy and invest in it and it maybe possible to encourage these at quite low costs.”

Dr Pollitt said the UK maybe about to see the growth of small ‘community interest companies’ supplying energy to local communities:

“In some European countries local communities have got involved in investing in wind turbines and in supporting their creation through the planning process and that is a clear area where the UK is lagging behind. There is more we should be able to do and that may involve setting up community interest companies or local shareholder owned companies, where people feel they have a direct financial stake in the wind farm going up outside their window. This maybe a way of encouraging people to support these projects and I do think that is an important area for future development in the UK.”