From a social enterprise leader’s perspective, the mission-versus-profit balancing act is like a never-ending circus performance. In order to do our work, we need both. But in what combination? Do we have flexibility in the way we define our mission when it comes to our businesses? And what exactly does profit mean in our world?
At Chrysalis we operate two social enterprises. Chrysalis Works provides professional street cleaning and maintenance services to Business Improvement Districts throughout Los Angeles. Chrysalis Staffing, as the name implies, provides temporary staffing services to a variety of employers, but its primary customer base is in the affordable housing sector. Together the two businesses employ about 225 Chrysalis clients at any given time and generate about $7 million in revenue each year. And yes, on an operational level, the businesses are profitable. But the point of these businesses is not profit—it’s all about our mission – creating a pathway to self-sufficiency for homeless and low-income individuals by providing the resources and support needed to find and retain employment.
Each year Chrysalis provides services to over 3,500 clients. Most of them find success in their job search through our core program that consists of our curriculum, workshops, access to computers and phones, and, most importantly, intensive one-on-one case management services. However, annually about 500 of our clients are chosen to work in our businesses because their particular barriers to employment mean they are unlikely to find success through our core program, and we believe that a twelve-month transitional job experience in our social enterprises will change that.
Both of our businesses compete with private-sector service providers to win contracts. While our customers may feel good that they are helping men and women get back into the workforce, their main objective is to ensure their sidewalks are cleaned on-time and on-budget, and that their front desks are staffed with courteous, well-trained personnel. And of course all of this must be delivered at a fair price with exceptional customer service. If we did not manage our operations to satisfy these customer needs, our businesses would not exist.
Our budgeting process must recognize the extensive additional supports, training, and supervision that our social enterprise employees require. While on an operating basis (revenue less direct labor and materials costs) our businesses are nicely profitable, most of that profit is used to provide the additional supports our employees require. For example, we estimate that approximately 20% of our supervisor’s work week is spent on coaching, counseling, and other activities that are over and above similar activities done by a traditional employer.
While we plan for our businesses to essentially break even when these additional expenses are considered, if we were to fall short on the bottom line, we would still be proud of the impact we’ve had on the lives of our clients and tell that story to our funders. I’m confident that they would support our work and fund our deficit, if needed. There’s no shame in building a social enterprise business plan that relies, in part, on philanthropy for long-term sustainability. There is shame in failing to plan properly for this, and not understanding the complex interaction between mission, profit, and sustainability.
We are often asked whether we plan to grow our social enterprises. Usually the question is framed in the context of adding a new business to our portfolio. Like any good entrepreneur, we are always on the lookout for additional business opportunities. But it’s not as simple as finding a business that pencils out financially. For us, the evaluation of a new business must start with our mission. How will a new business help us to advance that mission? What is it about our current businesses that don’t help us achieve particular programmatic objectives? Although we’ve considered over ten new business concepts over the past five years, we’ve added none of them to our portfolio, because while they might have contributed profits, they would not have advanced Chrysalis’ mission.
I’ll close with a good news/bad news story. Recently we learned that one of our staffing customers plans to offer permanent, full-time employment to a large number of our Chrysalis Staffing employees. This is fantastic news! Since our mission is to help our clients get on the path to self-sufficiency through employment, we will celebrate this important achievement with our clients. Oh, but wait…this means that we will lose a significant portion of our staffing revenue in 2015…and the profit that goes along with it. Like any small business, this stings and we’ll have to find a way to deal with the budget impact. But unlike the CEO of most other business, there’s a smile on my face. This exemplifies why Chrysalis exists and how our social enterprises support our mission.
– Mark Loranger is the President and Chief Executive Officer of Chrysalis, a nonprofit organization dedicated to creating a pathway to self-sufficiency for homeless and low-income individuals by providing the resources and support needed to find and retain employment. Prior to assuming his current position in 2009, he oversaw Chrysalis Enterprises, the organization’s transitional jobs businesses, for two years. Mark has a diverse skill set developed over 30 years as both an entrepreneur and a corporate leader. He is a frequent speaker on the topics of social enterprise, homelessness and employment and is a contributing author to the book Succeeding at Social Enterprise: Hard-Won Lessons for Non-Profits and Social Entrepreneurs.