Unexpected Findings: What Businesses Can Learn from Social Enterprise

The following is a guest post by 2010 Farber Intern, Janet Zhou. Janet was one of the seven outstanding “Farber” MBA interns contributing time and talent to REDF and the social enterprises in our portfolio this summer. Janet will receive her MBA from Harvard Business School in 2011, and completed a BS in Management Science from MIT. She managed four projects for REDF this summer, including a feasibility analysis of ‘acquisitions’ as a way to scale social enterprise, and building a contract bidding tool for REDF portfolio group Buckelew Programs. Janet and her Farber intern colleagues added tremendous practical value to REDF and our portfolio, and all of us will continue to benefit from their work over the coming years.

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Unexpected Findings: What Businesses Can Learn from Social Enterprise
By Janet Zhou
Farber Intern, 2010

I often like to ask people in social enterprise what skill MBA students should develop to be effective in social enterprise. One summer in venture philanthropy doesn’t make me an expert, but my time at REDF has given me some food for thought on this topic.

Use the language of your audience

At REDF, you can be sitting in a KKR Board room one morning and taking a tour of urban housing projects the next. Business school prepared me well for the board room, but I found myself floundering in my presentation to the crew of a recycling social enterprise. I was knee deep in explaining my “break-even analysis” when one of the crew members interrupted to ask, “Are you talking about making money?” That was exactly what I was talking about, but I wanted to call it “break-even” because that was what I had learned. This young man was (politely) reminding me that what I had learned was only as valuable as my ability to help others understand.

Business school teaches a language designed for board members, customers, and investors. Yet, true leadership requires articulating a case that is compelling to a broader audience of employees, politicians, and community members. For those of us who believe business can be an engine of social change, it is critical that we learn to persuade from a diverse set of perspectives and go beyond the language of business to make our case. There won’t always be a young man in the audience to prompt me to explain myself better, but I’ll remember what he taught me when I’m in front of my next audience.

Know the boundary between doing better and demanding better

Like many MBAs, I wondered if social enterprises struggled primarily because they didn’t have the right incentives for efficiency. My observation from this summer is that incentives are not the biggest problem. Instead, real, structural barriers exist, and they require an endless amount of creativity to circumvent. By way of example: one of the enterprises I worked with was charged a fee of almost 50% by their payroll administrator because of the population they employ. That’s about twice what normal payroll fees would be. Because this is a labor intensive industry, that 50% fee amounts to a 50% tax on the enterprise. I don’t know many small businesses that could turn a profit with that kind of burden! For many social enterprises, optimizing prices or benchmarking productivity can only move the needle so much. Outside of that, our energy should be spent changing the rules of the game, which is why advocacy is a critical piece of the puzzle. Some of the answers that this field needs will not come from doing better on business, but demanding better business conditions for our social enterprises.

Embrace the blank slate

In business school, we are rewarded for being prepared. We’re taught to read ahead, think fast, and be ready with our opinions when our name is called. At times, all of that preparation makes it hard to hear anything but our own thoughts, and we internalize the message that leadership is about having answers.

I realized how misconceived this notion was when I ran a meeting with senior staff for one of my projects. I came into this meeting armed with a framework and a list of carefully prepared questions. Ten minutes in, I realized no amount of preparation would allow me to unpack the richness of a conversation that started long before I arrived and will continue long after my summer is over. So, I listened. In the end, that meeting – seemingly unorganized, discursive, and without input from me – proved to be my most valuable guidepost for understanding REDF and the challenges that social enterprises face. It’s scary to walk into the room as a blank slate, but I hope my career will be filled with many opportunities to be just that.

Ask not what business can do for social enterprise, but what social enterprise can do for business

In some ways, my summer experience has been about unlearning my business school mentality. Talking to non-business audiences, looking outside of business for solutions, and embracing not having answers are not the bread and butter of MBA curricula. What strikes me, however, is that many of these ostensibly social enterprise lessons are ones that could make businesses better too. Would the financial crisis have happened if the banking system had been forced to make the case for CDOs in plain-spoken English to all the stakeholders involved? What if businesses approached issues like climate change as a blank slate and listened to the conversation taking place between scientists? I came to REDF thinking that I would use my MBA skills to maximize value for social enterprises, but what I will take away from this experience are the skills I learned in social enterprise to maximize the value of my MBA.