[dropcap]S[/dropcap]ocial enterprises use earned revenue streams to focus people and resources on solving societal and ecological problems. These revenues are self-sustaining, which greatly helps social enterprises to fund and grow solutions that work. This self-reliance really does distinguish these organizations from nonprofits, who are often face debilitating philanthropic constraints in scaling their most successful programs.
Ironically, it’s this source of strength – these revenues – that are also what lead to the greatest difficulty faced by most social entrepreneurs: the challenge of balancing profits and mission.
Social Entrepreneurship Tips for Balancing Money and Mission
There’s something very satisfying about having one clear goal for managing an organization, and as much as I hate to admit it, balancing profits and mission really does dilute that simplicity and clarity.
This is a topic I happen to know a lot about. For nearly ten years, I once ran a technology consulting shop called Groundwire, which operated as a social enterprise. In that job, I wrestled on a daily basis with balancing profit and mission, and I’ve seen this tension rip social enterprises to shreds over time.
It doesn’t have to though, and in this post I want to share three social entrepreneurship tips to help manage this balance between money and mission.
1) See Balance as a Verb, Not a Noun
The human mind is really good at seeing opposites and using them to simplify reality. In doing so, we may turn ideas like profits and mission into a zero-sum game, where we believe more of one always means less of the other.
We can stop ourselves from falling into this trap by shifting perspective. One tool for doing that is Ragini Michael’s “paradox management.” I’ve had enough success using it to balance this tension between money and mission that I think it’s a tip worth sharing.
The first step in this technique is to set the apparent opposites on the X axis of a diagram; in this case, “money” on the right and “mission” on the left. The Y axis is about outcomes: the bottom negative outcomes and the top positive.
One of the first things you’ll notice about this diagram are the little arrows moving around that infinity symbol. They symbolize movement and the fact that the relationship between money and mission is dynamic, not static.
Balance here is a verb, not a noun.
A basic assumption here is that moving too far in one direction eventually leads to too much of a good thing – and to negative outcomes.
- We start in quadrant one, and eventually become too focused on mission. Resources start drying up and people start getting stretched too thin, as we move into quadrant two and the negative outcomes of too much mission.
- In response, we take corrective action, and by following the arrows, move to quadrant three and the positive outcomes of increased focus on money. Resources start flowing again, and fears of having to close shop recede.
- But then, we continue applying the money focus and move down into quadrant four as the inspiration of staff begins to fade and customers start to feel they’re just a meal ticket.
- Again, we take corrective action, striving for more mission and move back to quadrant one, where we start experiencing the positive outcomes from a renewed focus on mission.
The point of this exercise isn’t that we’re somehow doomed to endless cycles of over-response, but that there isn’t some perfect, static balance between money and mission. Balance here is a verb, a never-ending process, and you can use this diagram to help you identify early signs of imbalance without wasting time chasing after some perfect state that doesn’t actually exist. Trust me; I’ve tried finding it, and it’s just not there.
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2) Leverage the Love
Social enterprises make it easy for people to feel a deep sense of ownership in their work. As Dan Pink has so intriguingly shown, this kind of drive can’t be bought – it comes through feelings of autonomy, mastery and purpose. When we know the work we do really matters, we tend to engage in it much more deeply.
And it doesn’t always matter whether we’re paid.
When they excel at engaging people outside their organizational boundaries – people who aren’t necessarily employed, yet still do valuable work – organizations build enormous leverage. I call this “third-order engagement,” and it’s what happens when customers and other stakeholders engage each other in the work of the organization. Wall Street regularly wields the financial leverage of borrowing other people’s money. But it’s social enterprise that wields the ‘engagement leverage’ that comes from harnessing other people’s drive.
In our networked, modern society, it’s easy for me to promote your social entrepreneurship via social networks and contribute to it through wikis and other online collaboration tools. These engagement technologies pack extra punch when they connect me with work that engages me on a deeper level, which is why they’re such a good investment for social enterprises.
As a social entrepreneur, how do you know you’re investing enough in technology? Here’s one rough benchmark: US businesses spend around $7,500 per technology-using employee every year. That’s an average that blurs many types and sizes of business, and to me, feels a bit high for smaller organizations. But it’s not a bad baseline if you believe social enterprises are particularly well positioned to benefit from engagement technology – like I do.
3) Weave Money Around Mission
Good business model design is the most difficult job of the social entrepreneur. It requires a particular type of creativity to mesh money and mission so they aren’t some uneasy compromise but a source of synergy and strength.
I like to think of a social enterprise as a fabric, woven out of mission and money. The vertical ‘warp’ is the undergirding support – the mission and reason the organization exists in the first place. The horizontal ‘weft’ is the money that’s woven through the vertical supports over time, solidifying the overall structure into a unified whole:
Social enterprises that succeed wildly don’t just figure out a way to be profitable enough to do some nice things on the side. They create positive feedback loops where more money leads to more mission and more mission to more money. This is the fabric of social entrepreneurship, and it requires a very deliberate and creative business design.
There are many ways to weave this fabric, but I’ll close with the approach I believe is most powerful: linking customer mission and social mission.
The first step here is clearly identifying how the organization can partner with customers to achieve their goals. Step two is monetizing this value creation into a revenue stream. Step three, and the real differentiator for social entrepreneurs, then shapes the partnership so that the customers’ use of the organization’s products and services simultaneously achieves some particular ecological or societal goal. This isn’t a linear process, but a gradual and ongoing iteration – a weaving – that takes place over time.
It’s been several years since I’ve born the organizational pressures that come from balancing mission and money. I speak from personal experience when I say that it’s not an easy job, but it is some of the most rewarding work we can do with our lives.