How can we create sustainable paths out of poverty and chronic homelessness for the most vulnerable populations? What types of social-purpose businesses generate sufficient revenue to cover both operating and social costs? How do we define “social enterprise” and to what extent does a definition advance – or hinder – the field? These are some of the questions that I grappled with during the summer of 2012 when I interned with REDF.
I couldn’t answer those questions during my 10 week internship and two years later, I still don’t have the answers. However, during my internship, I learned some valuable lessons that I’ll take with me in the next phase of my career.
Lesson 1: Get comfortable with all three sectors. Some people vilify the private sector as capitalistic and greedy and the public sector as inefficient and disconnected. However, incremental changes in either the private or public sectors can make a big impact in the social sector. One of my projects was to help develop a strategic partnership between REDF and a global private equity firm. We believed that some of the private equity firm’s portfolio companies would be interested in sourcing some of their products from REDF’s social enterprises. A small shift in the portfolio companies’ sourcing strategies would have helped REDF’s social enterprises to diversify their revenue streams, achieve broader scale, and ultimately employ more people facing significant barriers to work. One of my other projects was to work with a group of organizations, including REDF, on policy recommendations to the California State Assembly on ways to improve the regulatory environment for social enterprises. Similarly, a minor policy shift could have helped to level the playing field for REDF’s portfolio organizations by allowing them to compete for more public contracts and ultimately employ more people. As I navigated between these projects, I learned the importance of leveraging the resources of the private, public and social sectors and of learning to feel comfortable within each one.
Lesson 2: Learn to calculate the “true costs” of a social-purpose business. During my internship, I did a feasibility analysis of a construction social enterprise. I recall making a financial model that took into account the standard costs of a start-up business. I shared the model with a REDF staff member who informed me that my model didn’t reflect the “true costs” of running a social-purpose business because I had neglected to include the core social costs that the social enterprises can incur. For example, most of REDF’s target demographic lacked access to transportation and the social enterprise would need to provide that free of charge. Others would need extra training if they had no work experience. The business would need a lower supervisor to employee ratio since many of the workers would need more guidance. When I calculated the costs of reaching REDF’s target demographic – or the “social costs” – the true costs were twice as high as I had initially projected. The lesson that I learned is that when we neglect social costs, we fail to understand the breadth of resources that are needed to build a successful social-purpose business. By not including these costs in our analysis, we risk building social enterprises that have little chance of success.
Lesson 3: Step away from the computer from time to time. One of my more memorable experiences came during an afternoon at the Center for Employment Opportunities (CEO), a REDF portfolio organization that offers comprehensive employment services to people with criminal records. A fellow intern arranged for us to conduct mock interviews with CEO’s clients as they began their job search. It was a tremendous opportunity to hear the clients’ stories, see how hard they were working, and support them (even in a very small way) in their goal of finding a job. It was also a reminder of the need to step away from Excel and PowerPoint to speak with the people whose lives we are working to improve. The more time we spend out of the office and talking to people, the better equipped we’ll be to build strong organizations with effective social missions.
Marcus Haymon is in his final year of dual MBA/MPA degrees at the MIT Sloan School of Management and the Harvard Kennedy School of Government. Previously he served as a Peace Corps Volunteer in rural Morocco, worked at a community development financial institution in Boston and was a Farber Intern at REDF. In September, Marcus will begin work as a consultant with Dalberg Global Development Advisors.
This is part of REDF’s Farber blog series.