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Profit For A Good Cause 5 Reasons Why We Should Embrace Social Enterprise

Expert Article By: Ridzuan Ashim

There is a difference between the charity model and the social entrepreneurship model, or sometimes referred to as the social enterprise model operations. Wikipedia defines Social Entrepreneurship as,

"Social entrepreneurship is about developing social innovation through entrepreneurial solutions. A social entrepreneur takes notice of a social problem or need, decides to passionately pursue it, creatively innovates new solutions and entrepreneurially addresses the issue through an organised ?business plan? approach, thus allowing the social entrepreneur to address the issue of sustainability of the social venture undertaken."

How does this differ from charity? In charities, we have organizations lobbying for funds that are then trickled down to the beneficiaries. This is fine, really. The problems comes when there is an assumption that charities are run from the kindness of ones heart. This translates to the expectation that charity workers are volunteers and thus are paid only a token amount for their services.

This leads to several problems. 5 key areas that I believe the social enterprise model will address are these:

1. Talent Retention

With regards to workers being underpaid, this again is fine if you were simply paying volunteers. But a bulk of staff in charity based organizations are not simply volunteers but they are also normal individuals who have other responsibilities such as the supporting of their families(which includes, increasing utility bills, home loan repayments, kids, etc?) Many thus contribute time and energy for a short period of time before leaving the service to find a job in a more financially supportive environment. He, or she, is then replaced by someone new who will re-learn the dynamics of raising funds, managing donations, etc?There is a loss of talent. This leads to a range of long-term problems which I feel can only be addressed if ?social services? were run with a mix of profit-based business practices.

By pegging their pay to private sector standards, individuals will have an incentive to, not only stay, but also to continually develop themselves as individuals. But the greater benefit is that talented individuals(the ones with private sector CEO quality talent) would have a reason to stay. They?d know that their expertise can be fully utilized for leading the enterprise while at the same time receive a commensurate amount of salary.

2. Sustainable Support to beneficiaries

Many charity based organizations have a to raise a certain amount of funds each year to continually operate their facilities. This so-called ?revenue? is unpredictable. Through the enterprise model, you actually operate like business ? complete with the need to have reserves as well as have to power to keep these reserves locked in investments that would increase the organisation?s financial assets. Yes, there is risk. But like a business, if managed properly, it will be able to gain itself as sustainable source of revenue(be in terms of providing a service, a form of entertainment, etc..) and this would ultimately prove to be beneficial to the beneficiaries in the long-run.

3. Mutual Benefit

Let?s face it, that assumption that people will donate out of goodwill is good. But it doesn?t maximize that objective of raising as much funds as possible. By adopting a social enterprise model, the organization would offer some form of service, or even product, it would be a win-win situation for both the ?donor? and the ?organisation?. That would give people more incentive to part with their money wouldn?t it?

Sure, cost will have to be used to offset that higher pay that I suggested, plus cost of the provision of whatever service the organization is providing, but if we?re providing a tangible service, one that directly adds value to the ?donor?/?customer?, wouldn?t it mean that there would be spike in the number of people buying?

( Here, the enterprises are expected to come up with real products/services/initiatives that are of business quality of course. I?m not suggesting that an enterprise sells tissue paper and expect to work.)

4. Growth

Just like any other business, the organization would be focusing on growth. Now, I?m going to bring up the example of the NKF. It grew from a measly dialysis centre to a full fledged service that catered to thousands of kidney patients. As much as there is a controversy over TT Durai?s management of funds, wouldn?t that growth to an organization worth over 200 million dollars justify his 600k pay and first class flights?

With growth, an organization would not only be able to service more needy people, but they may also spend more into growing the list of needs that they may cover.

Is that a bad thing?

5. Sustained Organisational Development

This really is one of the ingredients for growth, but I thought it?s worth mentioning as a separate point. With all the focus on enterprise practices, the organization would be forced to develop proper internal systems and protocols that would continually develop their human resource and work practices. This would lead to more effective workers in the long haul who are not only paid fairly but also allow them growth opportunities. Good for everyone, no?

Ok, all that having been said, it means that these social enterprises might lose the privileges that non-profit based organizations enjoy. But hey, if it means more overall good comes out of this, wouldn?t it then be a better way to go?

What do you think?

About The Author

Ridzuan Ashim is a 22 year old student-cum-aspiring-entrepreneur who spends much of his time trying to improve the things around him. For more of his articles and entries, please visit http://www.xsmatter.com


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