Exploring Social Enterprise with Jill Andres

Quick Reference Transcript

July 15, 2014
Jill Andres, Creating Value, Inc.
Danielle Carruthers, theSedge.org

Danielle: Thanks, Jill, for joining me today to share a little bit about your experience and expertise in the world of social enterprise. I’d love to just ask you a few questions and here what you have to say and we’ll have a good conversation about the beginning stages of embarking down the path of social enterprise.

Jill: That sounds great, Danielle.

Danielle: Great! If we could start off, could you please tell us a little bit about yourself and the work that you do now with your organization, Creating Value?

Jill: Sure. Creating Value is a social purpose consultancy that I founded a few years ago. The work that I do now builds on work that I’ve done in the past and also interests and some work that I have done from an academic perspective not too long ago as well, so I have the pleasure of working with organizations that are mission driven. Many of those are non-profit organizations or charities, some have different legal structures and are just starting social enterprise right from the get-go.

I work with organizations in Alberta, so Calgary and Edmonton, as well as in Vancouver. It’s such an amazing job, I love what I do because I get to work with incredibly inspiring individuals and organizations that are just making such a tremendous difference.

Beyond Creating Value, I also have the opportunity to be involved with Thrive, which is Calgary’s Community Economic Development Steering Committee and also REAP, which is a small business association but works primarily with local and sustainable businesses here in the Calgary area.

So I get to wear a number of different hats. The final position that I would mention is also a brand new one and it’s at Mt. Royal University as change-maker in residence. It’s like an executive in residence position, but I’ll have the opportunity to be involved with social entrepreneurship, social innovation, and doing a little bit of research, potentially a little bit of teaching as well, but really helping to build out that area and I’ll be situated in the Institute for Non-Profit Studies at MRU. I’m really looking forward to digging in more deeply to that position as well.

Danielle: That’s fantastic, that’s so great to hear. You’re involved with a lot of different groups of types of people now where you can reach everyone from students just getting to know this work all the way through to existing non-profits and also new organizations just starting out, so that’s great.

This wasn’t in our planned questions, but I’d love to ask, I’d just like to note, I guess, that you mention you work with organizations from all different legal structures and backgrounds, but it sounds like there’s still very much a central focus, being purpose driven. Do you have to remind people that the legal structure is not necessarily the be-all and end-all of their work?

Jill: Yeah, absolutely. Often people will ask right at the outset of what they’re building, what legal structure should this enterprise take? Should it be a non-profit, should it be a co-op, should it be a for-profit? We’re hearing more about B corps, what does that look like? There are all kinds of questions about the legal structure and really, as with so many things, form needs to follow function and the legal structure matters less and less, particularly as we are seeing more of this blurring of the boundaries between the various sectors and that real convergence of business and social purpose.

Danielle: Okay, great. It’s good to hear straight from somebody who has been working with all of these different types of groups.

I wanted to ask you about your MBA that you completed with the University of Calgary here in Calgary because I know that in your thesis you were exploring critical success factors for non-profits who were starting social enterprises, so I’d love to hear a little bit more about that and if you could share kind of some of the key things that you learned.

Jill: Sure. I should begin by saying probably that the literature in this area is still small, the volume of literature is still small and particularly from a Canadian context. We have much more research that’s been done in the US and the UK and a few other places around the world, but much less in a Canadian context, so it was really interesting to be able to dig into what was there and also then have the opportunity for conversations with the participants in my study. So I really appreciated learning about what they had experienced. I spoke with funders, so either people who invest, looking for a return in social enterprises, or individuals and organizations that provide grants or other types of funding to organizations that are starting social enterprise, as well as organizations that had existing social enterprises.

I looked at not only organizations that had been successful, but also organizations that hadn’t been successful, that had failed in their social enterprise attempts and tried to ascertain what the key variables were that made the difference between success and failure.

It was really interesting learning and the four major pieces I ended up focusing on in my discussion were complexity and purpose and leadership and culture. I’ll maybe talk a little bit about those, if you’d like.

Danielle: Yeah, that would be great.

Jill: In terms of complexity, non-profit organizations are established to fulfill a social mission, not necessarily—well, not at all to meet commercial objectives. When commercial objectives are added, it increases the complexity of the non-profit’s business model. Again, just to remind people at this stage, that while my work focuses on organizations from a variety of legal structures, my thesis did focus on existing non-profit organizations that had started a revenue-generating venture.

When you’re adding those commercial objectives to a social mission, it does increase the complexity of the non-profit’s business model. The challenge arises not just from operating with a double bottom line, but also concurrently operating in two very different environmental contexts. They’re operating in the non-profit context that has unique characteristics, whether it’s the funding context, the tax and regulatory environment, those kinds of pieces. Now all of a sudden they are also trying to become experts in another industry, whether that’s the restaurant/hospitality industry, whatever it is where they’ve started their social enterprise.

Whereas on the one hand, they’ve got this tax and regulatory environment that penalizes profitability, on the other hand they’re wanting to ensure that the business that they’re starting is in fact profitable to reach their business aims.

The other thing though that’s challenging is if it is an organization that’s starting a business or a social enterprise with the goal to say employ a group of people who have experience barriers to employment—so where there’s social goals that are added to the business model, they also add considerable cost to the business model. That’s another element of that complexity that non-profits are struggling with and are challenged by, I guess I should say, when they’re looking at social enterprise.

The second would really be that purpose piece that I was speaking about. What I looked at was the difference between what I call on the one hand direct social enterprises or direct mission social enterprises, where the mission is a very integral part—or the social enterprise, I guess I should say, is instrumental in the organization’s being able to further achieve it’s mission. For example, those employment-based social enterprises that I just spoke of, those would be an example of a direct mission social enterprise.

Danielle: Right. I’ve heard that maybe referred to also as a very integrated social enterprise.

Jill: Sure, absolutely, yeah.

Danielle: Maybe that’s a different term meaning somewhat the same thing.

Jill: Yeah, or affirmative businesses, that’s been a term—it’s an old term now—but that was a term that was also given to organizations by Jerry Bosche suggested that that was a category for social enterprises that were providing employment for people with barriers to employment. So it can be referred to by a number of different names.

Then on the indirect mission side, it’s social enterprises that established so they can generate revenue to support the operations of the parent non-profit organization and thereby they’re indirectly furthering the mission of the non-profit. In that case, economic goals would be the primary driver and profitability would be a key indicator of success on that side, whereas the achievement of the social goals would be a key indicator of success on the direct mission side.

It also brings up questions of trade-off and I think we’ll talk a little bit about organizational readiness in our conversation today and really understanding the purpose of the social enterprise is incredibly important and can save a lot of conflict down the road. For example, you might be willing to have funds from the parent non-profit organization support a business that’s directly furthering the mission of the organization, whereas you may be more reluctant to have those same funds supporting a social enterprise that is in and of itself supposed to be generating revenue for the organization.

Danielle: Right. Especially from the donors and the granting organization’s perspective, right?

Jill: Exactly. So how are we accountable for the dollars that we’re spending and what are the outcomes and what’s the impact of the dollars that are being invested in the social enterprise?

Danielle: Right.

Jill: Really being clear on that purpose is another important piece.

The next one would be leadership and this was a really important learning for me and we often like to think of that hero entrepreneur, the lone wolf who starts this venture and is extremely successful in that, but what I learned was that that’s really an exception. In the situation where there is social enterprise success within an existing non-profit organization, it’s because they have built a structure that enables this sort of shared leadership, if you will, but leadership that comes from those two main pieces that social enterprise is attempting to accomplish, the social and the enterprise.

When we talked about complexity earlier, a non-profit organization is set up to accomplish social aim and that takes a skill set that not every body has and it’s a really important skill set that we need to value within this context, how does an organization create social value?

On the other hand, starting a venture requires knowledge of the industry in which you’re starting that venture so that industry-specific skills and experience is really, really critical. So being able to ensure that both types of leadership exist within the organization is really important. Focusing on building an outstanding management team with complementary skill sets and experience that can then be supported by in effect, a social enterprise advisory team, but not just looking to have all of the skill sets that you need the complementary skill sets exist sort of external to the organization in the form of an advisory team, it really has to exist within the organization as well.

There’s an old adage among venture capitalists that says that investors would rather back an A team with a B idea than a B team with an A idea and that applies equally well in the context of social enterprise.

Danielle: That’s a great kind of tidbit to keep in mind, that the success really comes from the team. The idea is obviously a piece of it, but a team can make something average work really well.

Jill: It’s interesting as well because we talk about the business skills that are required but it’s beyond business skills, so it’s not just getting someone with an MBA into your organization, it’s also ensuring that if you are starting in that specific industry, that those skills and experience are specific to that industry, that it goes beyond just the business skills themselves. I think those are really important.

Of course there are those dimensions of leadership that factor in. I mean, it was very interesting, there were four elements that did continue to show up and one is what one of my participants referred to as “entrepreneurial DNA,” and I thought that that was fantastic.

Danielle: That’s great. I haven’t heard that before, but I might steal that. [Laughs]

Jill: Isn’t that wonderful? I thought it was a fabulous expression.

The second is that champion, you need to have a champion who will continue to bring this idea forward but that champion has to have not only the strong vision and the persistence, but also that positional authority to ensure that the social enterprise stays front and center in the minds of key stakeholders. By positional authority, I mean, it has to be someone like your executive director, so someone right at the forefront of the organization, who is able to convince the board, convince the funders and do the setup that has to happen within the organization to set the social enterprise up for success. We’ve talked about industry-specific experience, that continues to be really important and the other that we just can’t let get lost in all of this is that passion for and understanding of how to effectively address the social cause that the organization is all about in the first place. Sometimes we get distracted by the business at the expense of the social and we want to make sure that we stay consistently oriented toward achieving that social mission, which is why we’re here in the first place.

Danielle: Exactly. Great point. Our social enterprises are a means to an end, not the end themselves, right?

Jill: Absolutely, I couldn’t agree with you more, Danielle, on that, I think that’s really, really important.

Then finally the very last piece would be that culture, the organizational culture. It’s interesting because there have been authors who have gone so far as to say that if you fail to balance the differences in cultures so the social culture and the business culture, that that in and of itself could be the largest threat to a social enterprise’s survival.

What’s really interesting is that it goes beyond the differences in business and social. My findings suggested that it’s organizations that already possess an entrepreneurial ethos, if you will, so that one of the things that you might hear an organization saying, for example, is completely unrelated to this mess. It might be, “You know what? We were the first organization in Canada to pilot a program that addresses XYZ,” or those kinds of expressions that suggest that this organization is looking for opportunities, looking to build on opportunities and that they have that orientation toward calculated risk taking but that they are willing to push things forward.

Then that participatory culture and the openness to individual and organizational change, those are some really important pieces that are also important from a cultural perspective.

Danielle: Great. So that entrepreneurial ethos could be they’re willing to do something that hasn’t been done before because it makes sense, given the information that they have at hand when other people might say, “No, we haven’t seen it be successful in that way,” maybe the more entrepreneurial-minded organization would say, “Well, yeah, but it could be something that will work.”

Jill: That’s right. Maybe, “Let’s give it a try, let’s pilot something, let’s see if there’s anything out there that we can build on that would take this to a different place that would really benefit our clients or our stakeholders.” Yeah, absolutely.

Danielle: Fantastic. Those are the four kind of critical success factors that you uncovered in your work. They seem to really paint quite a broad picture in terms, it’s simple that it’s four things, but each one has a lot of nuances but maybe keeping those front of mind as you get started could really get you a step ahead maybe than if you hadn’t realized that those things are really important right from the get-go.

Jill: I really think so, Danielle. The nice thing about them is that most of them, if we are aware of them, there are things that can be infused into our organization. The awareness of the complexity and they’re interrelated, aren’t they? I mean, their awareness of the complex environments means that when we are looking at leadership, we need to be really cognizant of the fact that we need that duality, that there has to be the industry piece and there has to be the social piece. People who really have an understanding of both environments, we need to be really clear of the purpose because that also affects how people are aligned and how people support the organization.

If we have that entrepreneurial culture, if we don’t have an entrepreneurial culture, that also will affect our choice of social enterprise, that maybe we start small. Maybe we start with something with very low risk and very small scale at the outset so that you’re starting to infuse more entrepreneurship into the organization.

What I said at the conclusion of my thesis and what I often will say to people is that not every organization should start a social enterprise. However, every organization has the opportunity to look at how it might become more entrepreneurial.

Danielle: That’s fantastic, I like that, because it’s a spectrum, too, right? It’s not an all or nothing game, it’s kind of growing into a mindset and looking for these opportunities, as you mentioned earlier. Even that first step can make a big difference in your organization.

Jill: Absolutely.

Danielle: Great! Thanks for sharing all of those good tips with us. I wanted to ask next, to find out, I’m curious if you’ve seen any mistakes and I would say when we say mistakes it could always be a learning opportunity, the glass is half full, but really mistakes do allow us to learn. Mistakes or failures, we obviously have more information after than we did before so we can take that into account as we move forward.

I’m wondering if you could share, have you seen any common missteps that organizations might take when preparing to start a social enterprise and then maybe that will help some of our listeners be aware of those potential pitfalls as they go forward.

Jill: I would talk about organization readiness probably across the board, regardless of legal structure. One of the things though that I’ve seen specific to non-profit organizations, I’ll maybe speak a little bit to that. Social enterprise has become something that is on the lips of many, many people throughout the sector and beyond. We’ve talked about how it can be seen as a panacea, as a solution to the financial woes within an organization.

Danielle: A silver bullet maybe.

Jill: Exactly. I think that’s a shame because as I said, not every organization is meant to start a social enterprise and there are so many other ways to be entrepreneurial within your organization and there are so many other ways to extend the reach of your social mission, which after all is the goal of a non-profit organization.

Danielle: Yes.

Jill: So what I have seen a few times is organizations that have programs that have the potential to generate some revenue. For example, it might be a program where people are volunteers, for example, come together and they make things, they create things, whether it’s some form of craft, whether it’s—whatever the case may be, they’re creating something that could actually have a value in the marketplace.

Organizations see that and they say, “Fantastic, we already have a social enterprise.” What’s interesting in that case though, is that while there may be some opportunity there for revenue generation, organizations have to be really careful and again, it’s looking at that purpose piece and understanding that sometimes a program is just that, it’s a program. While there may be some opportunity to generate revenue from that program—say for example you’ve created blankets, we’ll just say. Maybe there’s an opportunity to sell those blankets and generate some revenue for the organization to go to where it’s supporting the mission of the organization. We have to be careful about saying that we can turn that into a business. If volunteers come together for the purpose of creating something that could be then sold to generate revenue for the organization, there’s something that they will gain from that experience. They’ll gain perhaps the community, creating with other people. They’ll gain from the opportunity for a creative outlet where they can come together and express their creativity by making these blankets or whatever it is that they’re actually making.

When we turn it into a business, all of a sudden we’re looking also at the market side of things, so what’s the actual demand for this? They might find that the demand is such that we no longer want green blankets and so the volunteer who really, really likes making green blankets no longer has the same opportunity for that creative expression or to be part of the community in the way that resonated for him or her initially.

The other thing is that we pay our employees, so that’s part of being a business. All of a sudden organizations say—or the other piece is, organizations often have supplied the materials for these things to happen. When you start to look at okay, this is generating $5,000 for the organization on an annual basis already, so we have a social enterprise, but if you dig a little bit deeper, we haven’t really taken into account the costs to the organization of generating that revenue.

Remembering the revenue is unequal to the profit is another important piece for organizations to look at, so how much staff time was involved? Where did they do it, what is the overhead of creating those blankets? What is it that it would cost if the organization were to pay the people who were creating the blankets? What about marketing? What about distribution? So those other pieces, if you were to scale up a business, what would that look like?

Danielle: And does it still make sense or it might take kind of the essence or the joy out of the process if you try and change it into solely revenue.

Jill: Exactly. That’s what I’ve seen happen in some cases. It’s important to remember why you have the program in the first place and if the program was—well, I guess I’ll call it a program—if the program was developed to generate revenue for the organization, then it will be set up in a different way than if the program was established to decrease social isolation, to provide people with a sense of self-confidence and a sense of accomplishment, given what it is that they are creating. You really do need to go back to what is the purpose and then remembering also, how do we measure the revenue that we’re generating? How does that look from a financial perspective relative to both sides of the balance sheet?

Danielle: Yeah, definitely, because as you mentioned, if you’re receiving donations in terms of your supplies, and you’re trying to build the revenue stream out of that activity and the donations dry up, I mean, this is what we’re trying to mitigate when we look at our social enterprise strategies but yes, so then obviously you need to take those extra costs into account to move forward.

Jill: Remembering in that instance, that absolutely if there is an opportunity to generate some revenue, that could potentially have some wonderful outcomes for the people who are involved in that program and maybe that will offset some of the costs of delivering the program and those are really good things. That’s a wonderful opportunity, potentially. Maybe there’s an opportunity also for people within the program to build some of that confidence. For example, if English as a second language to be out at farmer’s markets selling some of these products, there are some wonderful opportunities that exist around that earned revenue piece, but a business that does not necessarily make.

Understanding what that differentiation is and again, going back to what are the goals of this program and how might they be extended or expanded but without losing sight of the social side of it.

Danielle: Great, good point to remember. I would also love to hear from you, can you tell us about a time when there is a key shift in the strategy or approach that an organization, the path that they decided to go down? Specifically because some of the social enterprise readiness work that they might have done in terms of considering our four success factors or whether it be leadership or something like that, do you have an example of a time when thinking about those things actually did shift the direction that an organization was going?

Jill: When we enter into the development of a social enterprise, we need to be prepared for those shifts. It would be very unusual to come up with an idea and hopefully, I mean, the saying is that the best way to have a good idea is to have a lot of ideas and that is absolutely true and for all of us who have started businesses, as you can attest to as well, what we originally started with may not be what we end up with. That openness to that shift is critically important and again, that works into that original organizational readiness piece, that understanding that all right, we might be starting at this stage with this idea, but we’re going to go out and we’re going to test that idea. We’re going to test it in the marketplace and we’re going to see what this response to this idea is as we test it and we might test it initially through a small pilot, we might test it originally through interviews, we might test it in a number of different ways.

What we will likely find when we go out and test that idea is that it’s not quite right just yet and that we might need to make a pivot and we might need to shift the approach that we’re taking and so in answer to that, yes, absolutely. Is there sometimes a shift in strategy or shift in direction or approach? Absolutely.

Danielle: I love that you mention all those things because a lot of that we cover in the Boost Course in terms of the idea of having an idea is great, but let’s think of a million more first and then narrow it down because we might surprise ourselves with something really creative or innovative and also the testing and talking to the people that we would be working with to get their opinions and feed back, really it’s going to change the minute you talk to somebody who would be impacted by whatever you’re thinking of implementing, so that’s a great thing to keep in mind is to stay flexible and receptive to the feedback that you’re getting.

Jill: Absolutely, Danielle. You know, we’re lucky to be living in an era where design thinking has moved into the mainstream. We understand the importance, also of when it’s moved to such a place where audio, for example, has introduced the concept of human-centered design, putting the person that we’re designing for at the center of our design, at the center of our development of that idea is absolutely essential.

The best organizations that I’ve worked with are the ones that really understand that. It can be difficult. It can be difficult to know how to do that, but the impact is substantial and they can help you to make that shift in your business model and in helping you to understand. Even different channels, even different ways of getting to the audience.

Danielle: Or what messaging resonates with them, you know?

Jill: Exactly.

Danielle: You can describe your service or product with eight different words and then somebody might say, “Well, I didn’t really know what you were talking about till the last one, now I get it.” So next time you can start with that.

Jill: Exactly.

Danielle: So you can learn so much.

Jill: Absolutely. What we’re seeing now is, my experience has been that we are seeing a shift with funders and I hope we’ll see an even greater shift as well. Funders that are being supportive of that shift in direction and that are acknowledging that while an organization might apply for funding for a business plan to build out X-idea, by the time that non-profit moves down that path of exploring the idea, they realize that they do have to shift. That’s not a failure.

Danielle: Yeah, that’s a great thing, it’s validation.

Jill: That’s a wonderful thing, exactly. That provides the opportunity to build something that’s more relevant and that will resonate better with the target audience, which in turn should potentially translate into greater revenue for the organization as well.

Danielle: Right. That’s great. You’ve given so many great ideas and things to think about. I just love all this insight that you shared with us today. I was wondering, do you have any last advice or words of encouragement to offer to those who are maybe just getting started on this journey, which we know can be a windy and eventful one, but what would you like to share on that note?

Jill: One of the things that I would really like to leave with, groups that are starting a social business, social enterprise, is how does this further, the social purpose that you are attempting to further. For non-profit organizations and charities, how does this further your mission? Keeping that in mind as you are working out what your business model might look like, whether it’s a direct or an indirect social enterprise, and some of those other pieces are things like really investing in that organizational readiness piece. Understanding that what’s being introduced is a significant change within your organization and organizations are understanding so much more about changing management these days and how critical that is, but if you have an existing non-profit organization that you are attempting to introduce a social enterprise into, that’s a really significant change that affects all kinds of stakeholders within your organization. So how are you going to address that specifically?

Look at your leadership team, look at your culture and then consider how the work that you are doing is an extension of your mission, an extension of the work that you are already doing.

Danielle: Fantastic. That’s great. Thank you so much, Jill, for sharing all this. I feel a bit more inspired myself today and love that you touched on so many things that we are discussing in more detail in the course and actually in day-to-day conversations. The more conversations we have like this, the more everybody can maybe avoid some of these pitfalls and improve their chances of success with this term of social enterprise that is in a lot of conversations these days.

Jill: Well, thanks to you, Danielle, for allowing me the opportunity to talk about one of my favorite topics and to have this conversation and also for what you are doing with theSedge.org. I am so excited to continue to follow the progress that you are making and watching you engage people in the conversation from all over the world, I think it’s tremendously exciting. Congratulations and continued success.