sector insights
15 f 2016

Charities and Not-For-Profits: Doing Social Enterprise Right!

Having been exposed to hundreds of budding Australian social entrepreneurs and their enterprises one thing is for sure: there is no one way to undertake or define social enterprise. Social enterprise or social business can take many forms beginning at one end of the spectrum with traditional charitable structures and stretching all the way to propriety-limited structures that are not solely 'for profit' but rather 'for purpose'. This makes for an exciting and burgeoning social marketplace of business models whereby traditional delineated views of the first, second, and third sectors are being dashed to pieces. This evolving market is blurring boundaries between company structures, financial capital sources and capital uses, and creating a never-before-seen milieu of social business.
Although by no means new, one particular segment of this market seems to be taking root. Perhaps as a result of funding shake ups such as the NDIS, hyper-growth of charity competition, and the need to be less reliant on government funds, many traditional charities and NFPs are turning to social enterprise business models, either in part or entirely, to meet external pressures and increased customer demands.

One such example can be found at Fairhaven Services located in West Gosford, NSW, with Jim Buultjens, CEO and non-voting Director, leading the charge. Founded in 1962, Fairhaven operates a range of social enterprises including the training and employment of people with disabilities in their laundry service, organic food packaging, and café businesses. Fairhaven's success with this business model is remarkable. Their laundry services successfully compete in a largely commercial marketplace, and Mr Buultjens and his team have achieved a near 50/50 revenue split between sales and government funding. Whilst the jury may still be out on how to precisely define a social enterprise, everybody knows that such a ratio is a sure-fire hallmark of success.
According to Mr. Buultjens, central to Fairhaven's success is their ability to clearly differentiate from other businesses. Offering opportunity, advocacy, and independence to people with disabilities while simultaneously competing on price, quality, and customer service harmonises business competiveness with genuine social impact to create a meaningful differentiation that appeals to their market.

Endeavour Foundation is another exemplar organisation that epitomises the optimal blending of business savvy with strong social impact. As Australia's largest employer of people with disabilities, this independent, not-for-profit organisation has successfully developed enterprises ranging from food and pharmaceutical packaging to PPE and safety equipment, as well as timber product supply and recycling solutions at over eighty locations across QLD, NSW, and VIC. Sales from goods and services have exceed an outstanding $57 million per annum and have allowed Endeavour Foundation to help people with disabilities achieve their individual goals, like increasing community participation, enabling independent living, pursuing qualifications, or finding a job. Endeavour Foundation's Business Solutions division contributes $128 million per annum to the Australian economy by way of payments to people and businesses and provision of goods/services for consumption. The recycling arm of the organisation, which has seen success in local government procurement and social procurement initiatives, now runs twenty-five different Council recycling sites. These sites, in tandem with other Endeavour Foundation recycling ventures such as e-waste, material recovery, confidential document destruction and paper recycling, process over 50,000 tonnes annually. This diverts waste from landfills and achieves environmental, economic, and local employment outcomes.

Obviously these commercial ventures are successful in their own right, but what makes Endeavour Foundation unique is their ability to integrate their key disability client group throughout their entire value chain without compromising their mission. Endeavour Foundation directly employs 2,350 people with disabilities based on the belief that employment can offer a sense of purpose, an opportunity to contribute and gain skills, and improve confidence and self-esteem. Their model carefully crafts social and competitive strategy together. NFPs who execute social enterprise without proper planning and tact can easily fall into the trap of chasing every money-making rabbit down its proverbial hole and find themselves over-diversified and suffering severe mission drift.

Doug Taylor, Director of Strategic Engagement, Uniting Care NSW/ACT, and Director at the School for Social Entrepreneurs propounds a likeminded view. Mr. Taylor suggests that those 'organisations seeking to enter the social enterprise space must first have a clear understanding of what it is they are trying to achieve before embarking on the journey'. He adds that 'the duel demands (being business competent and socially focused) placed on social enterprises makes them inherently more difficult to manage, emphasising the need for organisations to be explicitly clear on their objectives, mission, and milestones before embarking on any new venture'. Mr Taylor also points to the need for organisations not only to have a clear mission and differentiated business model but also the requisite staff capabilities to deliver on these aims.

Despite being an attractive proposition to innovative NFPs, creating a genuine, self-sustaining, and on purpose enterprise is incredibly difficult. These examples provided coupled with the multitude of other NFPs succeeding at social enterprise would indicate strongly that many if not most NFPs at some point in the future will operate a mode of social enterprise. Therefore, the intrepid cohort moving in this direction may benefit from examining some of the apparent markers NFP Success has observed to be present in all of those who are achieving their intended aims. These markers include:

• Articulating and clearly linking purpose with enterprise activities, outputs, outcomes, and impact
• Possessing strong business acumen coupled with operational and financial efficiency
• Creating value chain synergies, i.e., launching ventures in areas the business is already strong in
• Possessing and cultivating cultures that are open minded and encouraging intra/entrepreneurism
• Hiring and retaining talent with a blend of business and social expertise
• Utilising external sources of expertise rather than doing everything internally
• Competing by leveraging good will but not solely relying on it
• Being pragmatic and initiating enterprises based on solid market data as opposed to being overly opportunistic
• Diversifying based on social value created not just income projections
• Being transparent to stakeholders about aims, results, and funds utilisation

Whether your NFP is establishing a new social enterprise or well down the path towards a diversified business model, these tenets of success seem to be non-negotiable when it comes to doing social enterprise right.