Building a social enterprise with added ambition
Most social enterprises have either struggled to grow or simply don’t want to. Is there anything holding so called 'social entrepreneurs' back?
James Hurley, Daily Telegraph, 6 Jun 12
Technology entrepreneur Peter MacDonald says his new business will be “much, much bigger” than his last. Nothing unusual in that, even if it is a relatively ambitious goal given that he achieved a “modest” return from the sale of his last venture, £8m turnover IT company Croft Technology. If his prediction is proved correct, what would be remarkable is that his latest company is a social enterprise – Autism Works employs people on the autistic “spectrum” as software testers.
While there’s no shortage of commercial organisations that place this kind of “social” mission above generating returns for shareholders, the vast majority remain fragile, parochial projects which often rely, to varying degrees, on grant funding to be viable. Despite lots of woolly statements from the likes of Sir Richard Branson – who has predicted a “sea change from the way business was always done, when financial profit alone was the driving force” – most social enterprises have either struggled to grow or simply don’t want to. “Very few social enterprises have got to a national scale and had a major impact,” as Liam Black, a former chief executive of Jamie Oliver’s Fifteen, has put it.
MacDonald, however, wants to do exactly that by replicating the success of another rare example of a social firm with growth potential: Danish firm Specialisterne, which employs autistic people as software testers in five countries. Where other social enterprises which employ workers with a disability find that they have to price an inevitable productivity lag into their services, MacDonald says autistic software testers give his company an advantage over conventional competitors. He believes the software testing sector could help dramatically improve on the 15pc of the UK’s 500,000 autistic people who are in work: it’s a world where detail and concentration count for more than people skills. “It requires persistence, an eye for detail and methodical working without getting distracted. What can be quite boring tasks for most people play to the positive side of autism,” he says. “We’ll test, better, faster and deeper than other companies – we won’t be having the coffee machine conversations.”
While the company is currently tiny, MacDonald’s target is to have units across the UK employing 30 people each, and he says an overall staff of 120 is achievable within five years. The company will reinvest a set proportion of its profits each year into autism care, but the focus is unashamedly on growth. “I think the marketplace is changing dramatically. We’re a growth organisation rather than a feel-good organisation.” Autism Works was selected by accountants Deloitte for its Pioneers programme, which is designed to provide social enterprises with the commercial financial, management and sales skills to help them scale more quickly. MacDonald is in no doubt as to the value of this sort of scheme, which is one of a number of similar ones being run by giant companies: “We can stumble our way through small contracts, employ some people and do bits and pieces of work. It will take five years to achieve some sort of stability. This gives us credibility – and changes the whole perspective of the conversations we’re having.”
Reluctance to scale up
However, David Floyd, a social enterprise journalist and entrepreneur, isn’t convinced that a flood of corporates rushing to support social enterprises – or the raft of capital that’s about to arrive on the scene in the form of the Government’s £600m Big Society Bank – will find enough growth-hungry social businesses to back. “There’s no likelihood we’ll see large numbers in the current movement scaling up,” he says. “And it’s a myth that all skills useful to conventional businesses are useful to a social enterprise. Someone who works for KPMG probably doesn’t understand a company turning over £70,000 a year in a community setting.”
He’s also sceptical of “investment readiness” schemes designed to make social enterprises more commercially palatable for investors; for most entrepreneurs he says that “this isn’t want I want to do” is a bigger barrier [to scale] than “I really need some investment-readiness training to tell me what to do”. “People in social enterprises don’t lack intelligence or skills – if they were smart enough to start a profitable business they would find a way [to raise money] if they wanted it.”
Jonathan Jenkins, chief executive of the Social Investment Business, the UK’s largest investor in the sector, insists investment readiness is not about trying to foist money on to small projects. “We’re not saying, 'if you can’t scale, what’s the point’. Forcing them to scale would be dangerous. Do we need to signpost people to know where the money is? No, they can Google it. But if you haven’t come from a commercial sector, you need to communicate in a different way. It’s not all about the social mission, that’s taken as read, it’s how you articulate the financial returns and some hand-holding can help.”
Another organisation enjoying commercial support through a mentoring scheme is Training for Life, which runs a chain of proto-Fifteen style restaurants, including the Hoxton Apprentice, which teach catering and service skills to the long-term unemployed. Iain McArthur, Training for Life’s managing director, is using a City of London initiative which provides free professional support from 56 City firms. “The way forward is partnerships with more commercial organisations. We can be more efficient and profitable if we work with people who have made successes of hospitality businesses,” he says. McArthur adds that there is a lack of basic commercial skills in some social firms: “When you start a business, you research the market and do it properly – with social enterprises there’s a bit of confusion, it’s "it will be fine, the outside world doesn’t see us as a commercial organisation”. He even suggests less government funding for certain social enterprises might prove bracing in the long run. “We need to look at our models. Social enterprises probably became very reliant on public funding and haven’t been run as commercially as they should have been – we’re becoming far more streamlined than we ever have been.
Source: James Hurley, Daily Telegraph, 6 Jun 12: http://www.telegraph.co.uk/finance/businessclub/9313730/Building-a-social-enterprise-with-added-ambition.html