The Future of Social Enterprise
As our conversation on The Future of Social Enterprise turned toward conclusion, participants focused on the topic of measuring success. Is "impact" the best way to measure the fruits of our efforts? How is impact measured when a project or program is long term and involves a network of organizations?
Rowland Freeman emphasized the importance of establishing business goals and performance measurements to guide not-for-profit businesses. "Trying to convince a ... not-for-profit client that he/she needs a business plan or a revised one is difficult. However, without a 3-year vision/mission and the strategies to get there, coupled with progress measurement, most not-for-profits will gradually fail."
Virtually all of our commentators agreed that no single measure exists that tells the full story of accomplishment or failure. "Is there a single scale that could weigh the value between two extremely beneficial programs?" asked Leonardo Letelier. "On the social sector, I am not sure we will ever be able to say that a program that distributes HIV/AIDS medicine for low-income seniors will be better (or worse) than a program that teaches math skills to girls aged 7-10."
The art is in finding the right blend of measures analyzing financial and social returns, a complex task for any endeavor. And just as important is to forge agreement around these success measures among the many parties involved: those being served, local officials, funders, project managers, and the social mission organizations themselves. "Organizations have an opportunity, through discussions with the funder, to 'tune' the financial tools to be used in evaluating the investment," wrote Andy Kaplan.
Both for-profit and nonprofits have discretion as well as responsibility to apply quantitative and qualitative measures. Stevan Trooboff recommends such measures as client feedback, staff stability, financial measures, and positive change in clients' lives. Efficiency as a sole measure faces problems if it does not support healthy growth. "Most [donors] won't invest in program operating costs," wrote Vanessa Wilkins. "This is why it is much harder for nonprofit organizations to grow to scale than for-profit[s]." Yet the ROI measure can be useful in social enterprise if profits are re-invested to support operations and growth, noted Brian Scott.
Gandhi might have provided us the most universal of measures, observed Ajit Jhangiani, in advising that the only imperative is to act. "You can't be stuck on orange all the time while you diagnose and analyze the situation. If the signal is green, go. Jhangiani concluded.
V. Kasturi Rangan
Malcolm P. McNair Professor of Marketing
Director of Research
Professor Rangan is also co-chairman of the HBS Social Enterprise Initiative. He talks about a new generation of business leaders and philanthropists experimenting with hybrid forms of social enterprises in the June 2008 Alumni Bulletin. An executive summary of "The Future of Social Enterprise" working paper is now available on the Faculty and Research site. And, if you like The Conversation, you may also enjoy What Do YOU Think?, an ongoing dialogue between Harvard Business School professor Jim Heskett and the readers of HBS Working Knowledge.