Scale or Impact for Social Enterprises: What’s more critical?

Non Profits serve a critical role in lubricating the society’s larger scheme of  vital services which sometimes the government falls short of delivering. They are the part most loathed and least respected for everyone expects people in the Non Profit Sector to do charity. I remember an Old Communist Joke in Russia in this regard; that a supervisor asks the worker, ‘why is’nt he working?’ The worker replies to the supervisor ‘You pretend to pay our salaries, in the same light i pretend to work’ !.  As in the case for all workers, money matters as everyone has got bills to pay at the end of the month. The question which I have raised in the heading of this article is a textbook question for folks following the not for profit space, should we target scale for cost effectiveness and economies of scale or should one stay niche and concentrate on metrics of quality, in other words should a NPO/Social Enterprise stay a boutique investment fund or go public and venture into retail services to borrow a financial services analogy.

I would suggest that the Business Model for Non Profits should be tailored to meet its end goal. It has to driven by its impact and the number of lives it can change. Of course values and altruistic motivations are the catalyst for the founding team of the Non Profit, but the mundane biting realities of daily operations lead people to think about ‘commercial’ jargons such as quantifying impact of the donor dollar and fundraising dilute the soul of the activist within the social entrepreneur. It does not really matter if the non-profit is dependent on grant money or its selling some variety of services to break even. If it serves the need of the community which it serves, then it has done a decent job.

 

In the hallowed annals of Business Academia, there is a lot of hue and cry about the nature of the Business Model, but a true entrepreneur considers his venture a work in progress and ideas or models in business literature do not hold much weight as the end should justify which ever means he uses.  Whether it is a Gawad Kalinga or a Grameen or a Community Enterprise in our area, it is the impact which matters ultimately. Scale is Sexy for the media to cover, but we have SKS fiasco to ponder upon whenever we think of Scale. Scale at what cost is also an important question to ponder when thinking through such questions.

 

I would like to wind up this read by suggesting some limitations of scale. I am not against scale if it is required as in scale works wonders in healthcare and financial inclusion. Just think Aravind Eye and Grameen and scale seems to do the magic. But some things are far more effective when dealing with groups at risk, an Old Age Home or a Half Way Home is best operated when a bottom line driven mandate is missing from the equation. But when a business enterprise such as a restaurant chain in Singapore founded by an ex offender employs other ex-offenders, it serves a social end by creating employment opportunities for ex offenders which are usually rare in an Asian context with the bottom-line being taken care of.  The theme of this article is a classic chicken and egg question, and the debate will continue which one will takes on more emphasis, as with all things in life- context matters.

 


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