Social Enterprise – A Promise Worth Pursuing

Steven L. Dawson is a leading practitioner in the cooperative and social enterprise fields. He founded PHI (Paraprofessional Healthcare Institute), the nation’s foremost authority on the direct care workforce; was instrumental in building New York-based Cooperative Home Care Associates, the largest worker cooperative in the U.S.; and is also a Visiting Fellow at the Pinkerton Foundation. Steven recently wrote a thought-provoking piece on the promise and potential pitfalls of employment-based social enterprise entitled “Social Enterprise: Proceed, with Caution.”  After 20 years investing in these type of social enterprises, it was invigorating for those of us at REDF to read Steven’s assessment – grounded as it is in his deep experience as a successful pioneer of the field.

Naturally we agree with Steve’s overall premise – that social enterprise offers great promise for helping people who otherwise would have a hard time gaining a foothold in the workforce, and that creating and running a successful social enterprise is a challenging undertaking not for the faint of heart. In fact, that’s why REDF, in addition to providing capital, also supports our grantees with hands-on, specialized advisory services to help their businesses, and the people they serve, succeed.

A recent blog post series hosted on REDF’s website, “The Business of Social Enterprise” features some leaders from our national portfolio who bring many years of business experience to their work, speaking about the unique challenges and opportunities they face in running a double-bottom-line business. Their eyes are wide open.

In terms of some of the other points Steven makes, it may be a bit overstated to say that “the workforce development field is really embracing enthusiastically the idea of creating social enterprises to employ low-income job-seekers”.  However, we do see a number of very hopeful signs:

1. The hundreds of social enterprises that have applied to REDF for resources over the past two years via several national competitions;

2. The hundreds more that have joined our learning communities via REDFworkshop.org and SE4Jobs (more welcome!);

3. The traditional government workforce systems in Los Angeles and San Diego that are leading the way by investing in social enterprise; and lastly

4. That the predominant social mission among Social Enterprise Alliance members – a broad trade association – is employment.

And while I do agree that the field can be “thick with over-promise”, REDF sees more entrepreneurs and enterprises today embracing the hard-nosed business practices Steven cites—money, management and market—while also being clear about social impact.

Steven notes that classic business profitability is a challenge for social enterprise.  Is it reasonable or even appropriate to expect that a social enterprise providing jobs to people overcoming very significant barriers will ever generate a profit—i.e. cover both their business and their “social costs” with earned income.  As REDF’s VP of Investment & Advisory Services, Nicole Simoneaux notes in her on-line comment on Steven’s paper, while we don’t think it’s impossible – of course there are outliers – we do believe it’s highly unrealistic.

Show us an employment social enterprise that is running a profit and we’ll show you a social enterprise whose long-term outcomes suggest they are not investing enough in employee supports and training.   The conversation with funders needs to move from “When will you be profitable?” or “We don’t fund social enterprises because they earn revenue”, towards “How could our philanthropic funds leverage better outcomes for the people you serve?” The Mathematica Jobs Study of REDF’s portfolio that Steven mentions demonstrates the powerful SROI of social enterprise – an effectiveness and efficiency rationale for additional investments.

At a time when the nation is particularly troubled that ‘forgotten Americans’ are not in the workforce or earning enough to support a reasonable standard of living, we need exponential growth of these practices that have demonstrated results.

Final point.  Steven says “You will have truly advanced a workforce mission only if your enterprise creates net new jobs,” – particularly if you hire a more diverse workforce, or improve job quality.  I disagree, and instead would say that you have indeed advanced a workforce mission whether or not you create net new jobs, as long as the people you’re hiring are more diverse, or your job quality is better – and most especially if, without social enterprise, your employees would otherwise face too many barriers to get or keep a job.  From my perspective, the mission you are advancing by creating net new jobs – a worthy objective – is economic development. More than semantics is at stake as public and private funders assess how to have an impact on the workforce, and the economy.