Education and Social Enterprise
Social Enterprise, Business
I’ve always found it curious that the not-for-profit sector describes itself by what it is "not." So our firm decided to re-name the practice which serves this sector from "not-for-profit" to "social enterprise" to better reflect what in fact the sector "does."
The term "not-for-profit" can be confusing, as many of these organizations benefit from successful fundraising. It also has about it a whiff of struggling charities "making do." But not all social enterprises are rich and not all charities are poor.
Almost all, however, share a need for greater professionalism.
This sector is, by necessity, becoming more focused on performance, and, as a result, their boards are attracting more business people with corporate backgrounds.
I spoke recently with Paul Murnane, an Australian investment banker who chairs the Multiple Sclerosis support group, MS Australia. He told me about some issues he has observed in Australian social enterprises: "Strategic planning can be weak. Many groups struggle just to get through the year. While a huge amount of time goes to fund-raising and just keeping afloat, often they don’t understand whether they are successful or just going south."
Governments outsource services to not-for-profits through a tender process, Murnane says. The winner is often the charity with the lowest cost of service delivery. But if a charity doesn’t understand the true cost to them of delivering those services, if they reduce their costs too low in order to win the contract, they will start running deficits and have major problems trying to fund the programs.
Paul says it took him under an hour on one occasion to figure out that a particular group was losing money on many projects.