Social Enterprise and Meritocracy: My Response

Posted on 14. Mar, 2013 by in Social Enterprise

I find myself baffled by the nonprofit sector establishment’s occasional hostility to social enterprise. The way people sometimes talk, you’d think that someone out there is purporting that social enterprise will save the day, that it’s a fit for every single solitary organization, and that it’s just a cinch to do.

I don’t know ANYONE involved in social enterprise who says or believes any of these things.

There’s also a myth that the social enterprise space is dominated by Ivy League MBAs or other business types who have little to no real experience in the social sector. A recent article by Jon Huggett, originally carried by the UK-based The Guardian and reprinted with permission by Nonprofit Quarterly, is a case in point. In Huggett’s alarmingly titled column, “Social Enterprise and Meritocracy: Watch out for the Blindspots,” he makes the following contentions:

  1. We push small enterprises to scale up when sometimes a spread of smaller organisations would have more impact.
  2. We spend more time on capital than on revenue.
  3. We favour our own.

Let’s take them one by one.

First, on the “push to scale” contention — I’d love to know how he reached this conclusion. If you look at some of the most well-known and well-respected organizations out there, they are working in many of the poorest regions of the world on micro businesses. Is there an effort to help organizations and businesses grow their sales and revenues? Of course there is, as there should be. But the people running these organizations — think Acumen Fund, Endeavor Global, the Schwab Foundation — are far more in-tune with and experienced in the regions of the world and the social problems people are facing than your average foundation officer (who would presumably be called upon to provide additional funding if not for the social enterprise strategies). And they fully understand that there are many ways to spread social impact.

Endeavor Global’s “multiply” strategy, for example, says nothing about growing companies to a certain predetermined level. Rather, they take an approach much more focused on changing society as a whole: “we highlight our entrepreneurs as role models, helping to transform social norms around entrepreneurship and to inspire future generations to innovate, take risks, and “think big” – the multiplier effect.”

But beyond that — social enterprises are hardly unique to the developing world. In my experience, many of the most vibrant, successful enterprises here in the U.S. were created as a direct response to a community need by people who don’t always have the connections to deep-pocketed individual donors or foundation program officers. Social enterprises tend to be scrappy, looking for opportunity where others see only problems, seeing the silver lining where others in the community may only see blight. The idea that we can have either “meritocrats” (whom Huggett defines as “people with achievements from different walks of life”) or “local solutions” is a ridiculous false choice.

Second, on the capital/revenue question, I’m confused by Huggett’s claim that “most social enterprises have little revenue, or any chance of it, and become charities addicted to gaining more donations.” This is a giant misunderstanding of the term social enterprise at its most basic level.  The very point of operating a social enterprise, rather than a traditional charity, is to become less dependent on donations. This is why I originally got involved in social enterprise. Serving as a Peace Corps volunteer in rural Honduras, I became disgusted with the international aid scene and the often self-righteous attitudes of international donors and aid organizations who were continually coming to our town with their own ideas and plans for “fixing” us. The social enterprise computer center I helped to start, side by side with many community members, was our chance to address a community-identified need on our terms. Since there were no philanthropic funds available, we had to figure out how to ensure that the organization made money while serving its mission. That’s just what we did and it outlived all the other internationally-funded aid projects by a long shot.

On his third contention, Huggett continues wading into ridiculous waters. In social enterprise,  he writes, “we favour our own. Meritocrats in government and philanthropy give support, contracts and capital to those they trust. Trustees are usually well spoken and well healed.” Is he talking about social enterprise or traditional philanthropy and government contracting? Couldn’t this very easily be said for the way many foundation grants are currently made? Yet he seems utterly unaware of the contradiction in his own words when he follows this very statement by describing his two dyslexic friends who struggled at school, but are now great social entrepreneurs.  Um, so how does that prove that social enterprise has a blindspot for meritocracy?

Finally, and perhaps most stunning of all, is Huggett’s belied, and troubling, assumption that meritocrats can never themselves be of the community. He says, “Those who have lived the problem may have better solutions than meritocratic entrepreneurs. Good people doing smart things may have more impact than smart people doing good things.” I agree with this last sentence 100%… but what about good people who have experienced a problem in life….and who also happen to be smart? Incredibly, these two characteristics seem mutually exclusive to Huggett – yet it’s precisely this mix that brought so many of the world’s great social entrepreneurs to launch their ideas. It’s smart people working the grind who see an opportunity and run with it, convinced that they can make things better for their community.

No one is saying that social enterprise is a panacea, anymore than we say that an individual donor base will solve all your fundraising woes or that a fat government contract is the way for every organization to achieve financial stability. It is one of the financial tools out there that organizations should consider. Let’s stop demonizing it as some sort of “elite” strategy that is at odds with the traditional nonprofit sector (which can itself be quite elite, indeed).

Because, let’s face it: Those of us who care about addressing the world’s biggest problems need all the help we can get. Acumen Fund has written perhaps most eloquently about this:

Poor people seek dignity, not dependence. Traditional charity often meets immediate needs but too often fails to enable people to solve their own problems over the long term. Market-based approaches have the potential to grow when charitable dollars run out, and they must be part of the solution to the big problem of poverty.

I’m all for human dignity over dependence. I’ve seen entirely too much of the latter.


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