Not-for-profit can still be a business

There are different types of social entrepreneurs: grassroots activists mobilising for social change; relief workers; grantmakers; and even corporate teams who work on social responsibility issues.

The value of their work, however, is often undermined because of poor leadership and organisation, which leaves them struggling to cope with changes driven by technology and increasing social complexity.

In a changing world, social entrepreneurship is essential for the future sustainability of NGOs and non-profit companies.

Social entrepreneurship sounds like another free-market concept to some and, indeed, does borrow threads from business-school ideology. But it is aimed at instilling a way of thinking about organisation, rather than changing the motives that are its reasons for existence.

Running organisations along market-oriented business principles often creates a natural tension with their goals of pursuing objectives for the political and public good.
Non-profit organisations are naturally wary of intrusions into their culture of profit-making, because they are perceived as contradictory to their reason for existence.

However, the use of sound managerial and organisational tools does not translate into ideological assimilation and the adoption of the profit motive. There is also a lot that can be transferred from the business world about effective accountability and governance.

Leadership failures and crises within the non-profit sector in South Africa have been precipitated by a range of factors. The South African non-profit sector has had to operate increasingly without generous subsidies in the form of core funds, competing as it does with the state for foreign donor funds, and dealing with competition within its own ranks.

The South African non-profit sector also faces issues of credibility after a spate of incidents of bad governance, corruption and maladministration. Some of these incidents point to a lack of knowledge of best practice, informality and poor-discipline within the management of some organisations.

Studies by the Harvard-based Hauser Centre for Non-Profits show that the most successful social entrepreneurs succeed largely because they pursue a clear vision, servicing a niche with a strong social demand, and being able to build an effective team and organisational capacity, which can implement an idea in various forms and permutations.

The founders come from different classes, disciplines and ideological backgrounds — but what is common among all of them is the capacity to adapt and work effectively with a range of constituencies.

Many of the founders, quite surprisingly, have pursued their vision and a career lasting for 20 to 30 years. The relationship between sustainability and the longevity of leadership in non-profit sectors is not fully understood, but clearly good management is essential and a lack of it comes at a costly premium.

In the corporate world there is a debate at present — given the high turnover of CEOs — as to whether leaders are given enough time to nurture the growth of the company. Some attribute the success of General Electric’s (GE) Jack Welsh to his 20-year run as head of that company. It takes some time for CEOs to learn from exper- iments and new ideas that can be integrated into an organisation and spur its growth.

Failures in leadership are represented in a loss of focus, mission creep and a failure to adapt to the changing needs of society. These failures can be attributed to a culture of the “past success syndrome” — past successes are glorified without recognition that things have changed, and so the organisation needs to change. The role of a leader is to renew constantly rather than to suppress.

In a climate of increased competition for resources, NGOs are told that they must be sustainable — which means many things to many people. Sustainability measures are highly contested and differ from policy think-tanks to service-oriented organisations. There is no one-size-fits-all approach to such measures.

Sustainability is often attained when the organisation recruits enough people skills and knowledge and puts in place reliable infrastructure and operational systems, which will allow them to cope with the challenges created by changes in their working environment.

Small organisations seem to be better off when they have enough capacity to weather storms because they are more flexible. Larger organisations seem to perform better if they have clear roles for management and decentralised cost and operating centres.

In South Africa, given the nature of the philanthropic market, small organisations are more likely to succeed and adapt to change. In an uncertain environment it is perhaps better to stay small and tight, relying on partnerships and networks to achieve the same goals as a larger organisation.

NGOs are still attractive to young talent and are often quicker in innovating than larger govern- ment agencies and non-profit companies when it comes to filling in the gaps in some types of public service.

The government and private non-profit companies often find it difficult to manoeuvre uickly because of the nature of their mandates and structure.

Social entrepreneurship is ultimately about innovation and rarely about money. Social entrepreneurship is about a particular attitude, culture and approach to social delivery and the creation of an environment, both internally and externally — that allows organisations to function effectively.

Saliem Fakir is the director of IUCN-SA

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