Managing and Measuring Social Enterprises

Rob Paton

• Publisher: SAGE Publications Ltd
• Year: 2003
• Print ISBN: 9780761973652, 9780761973645
• eBook ISBN: 9781446233856
• Edition: 1
• Topic: Business
• Subtopic: Nonprofit Organizations & Charities
• Index: Business

`Its emphasis on performance measurement affords rare insights into some innovative techniques. Moreover, institutional and other theories are deployed to explore the reasons for innovation.... The book should be a prized resource for postgraduate students who seek a deeper understanding of social enterprise measurement and management practices. It covers extremely and topical issues, while the case studies offer a perspective on the complexities of real social enterprises? - Prometheus

`Recent years have seen the voluntary and social enterprise sectors embark on a tentative love affair with performance measurement. We should, it seems, be measuring, monitoring and reporting our performance for a variety of reasons - accountability, continuous improvement and self-motivation, to name a few. But has anyone stopped to consider the realities if implementing the range of tools on the market? Author Rob Paton does just this? - Voluntary Sector

Managing and Measuring Social Enterprises examines the question of what happens when performance improvement techniques originating in the private sector are applied to public and nonprofit organizations.

Managing and Measuring Social Enterprises looks critically at a range of performance measurements and improvement methods, including:

· Outcome measurement

· Using financial ratios for performance comparison

· Social audit

· Process benchmarking

· Externally accredited standards (like `Investors in People? and ISO 9000)

· Diagnostic models and other tools from the quality movements

· `Balanced scorecards?

Rob Paton offers a measured critique of the naïve realism and rhetorical excesses of the performance management movement but also shows why many of its critics are unduly pessimistic.

Through a combination of theory and research, the book provides practical guidance to the problem of performance management outside of the private sector.

This is an essential text for those interested in public and social enterprises, particularly MBA and Masters students in public administration/public management and non-profit management.

1 The Challenge of Social Performance

How good are we at doing good? This book is about managing organizations that exist in order to make a difference to lives and societies. It is about the challenges of running projects, activities and collaborations in pursuit of high aspirations - and doing so at a time when public trust in those who profess social ideals and motivations has declined. It is about those situations where it may be hard to know how much good the organization is really doing, and how well it is run. In these cases how can those responsible find better ways of doing things and how can they give a meaningful account of their stewardship of resources? In particular, this book considers one solution that has been urged for more than a decade – becoming more business-like, by adopting measurement and other modem management practices. It examines what happens when this is done.

Why social enterprises? There has never been a satisfactory collective term for the independent agencies, campaigns, foundations, self- help federations, semi-detached public bodies and socially-oriented businesses through which individuals, groups and societies have shared their concerns, provided services voiced dissent and pursued vocations. This 'loose and baggy monster' (Kendall and Knapp 1995) has grown rapidly in size, significance and sophistication over the last decade. All the major social changes and challenges of our time – Aids, the environment, an ageing population, urban decay, drugs and crime, the new information technologies, globalisation – have seen the emergence of new initiatives and new forms of social action. And the standing of social enterprises has increased. Often they have what governments and corporations seek - credibility, expertise, public support.

Like an old friend we have not seen for a while, this sprawling terrain is both familiar and changed. The term social enterprise, as used in this book, may not be perfect, but it reflects some of these developments – the innovation and dynamism, the spread of business perspectives, the emergence of hybrid organizations and inter-sectoral partnerships. Moreover, the term is both positive and virtually self-explanatory – more than can be said for the 'nonprofit', 'voluntary', 'charity' and 'third' sector labels. It is also broader, encompassing co-operatives and socially-oriented businesses, even if they do not have a nonprofit or charitable legal form. Chapter 2 considers the scope of the term further, in particular, where social enterprise leaves off and more traditional public administration begins.

In pursuit of performance

Unquestionable successes.... The contribution of social enterprises over the years has been enormous – and enormously diverse. As innovators, as expressions of new social movements and concerns, as society's rapid response expressions of new social movements and concerns, as society’s rapid response force for new issues, social enterprises have made a societal difference, again and again. Here are three examples of the very different forms that enterprising socially oriented organisations can take:

1. When the dictator Pol Pot was driven from power in 1979, Cambodia was in ruins and the already near-starving population faced imminent death. Legal and geo-political diplomatic complexities meant any response by the international community would be even more belated than usual. In this situation Guy Stringer, Deputy Director of Oxfam, flew to Singapore and set about taking food, seeds and equipment to Cambodia. He had chosen to work for Oxfam after earlier careers as a soldier and a businessman and he drew heavily on these experiences in the critical weeks that followed. He negotiated large purchases of grain, hired a barge and a tug, and set off across 600 miles of the China Sea. He set up the first relief operations in time to save hundreds of thousands of lives – and shamed an international community made heartless by preposterous cold war realpolitik. This may be a particularly striking example of successful social enterprise in the field of international relief, but it is only one of many.
2. In the US in the late 1970s many Christians (and others) became deeply concerned by the dismantling of federal food entitlement and welfare programmes. An important safety net between poverty and outright hunger was being removed. The response was extraordinary – but completely unplanned. Over the following years a complex, sophisticated and extensive system of food gathering and distribution sprang into existence. Many of the initiatives had an accidental quality, started on impulse when individuals were appalled to see large quantities of good food wasted and wanted to make it available to those in need instead. Similar schemes sprang up independently in different places. Networks were formed. Word spread. Business leaders became involved. Governments contributed – through seed com funding, tax breaks and the removal of legal obstacles. Of course, one can regret the circumstances that gave rise both to this need and the response. But the scale of the achievement was remarkable. By the early 1990s hundreds of millions of pounds of fresh, frozen, cooked and dry foods were being gathered and distributed annually through a two-tier system of warehouses (food rescue programmes, food banks) and food outlets (food pantries, food kitchens, domestic violence refuges, etc). For example, Second Harvest Gleaners Food Bank of West Michigan, is one of 185 regional clearinghouses for donated surpluses from the food industry. By the end of 1997 it was operating through seven warehouses, serving 975 church and charity agencies across an area the size of Scotland, and providing 60,000lbs of food per day.
3. For 50 years the Scott Bader Company and Commonwealth have been a beacon for industrial reformers and those pursuing greater corporate social responsibility. Scott Bader is a UK-based chemical company, specialising in polymer resins, that was founded in 1919, but progressively given away by its founder, Ernest Bader, to the Scott Bader Commonwealth – a democratic association committed to partnership in industry, community service, peace, international understanding and stewardship of the earth’s resources. Only those working for Scott Bader are eligible to apply for membership but unlike worker cooperatives or other forms of employee ownership, the constitution of the Commonwealth tried to prevent members from taking advantage of the company’s resources for their own benefit – profit distribution is strictly controlled for example. Hence, the Commonwealth is a framework for collective trusteeship by the workforce of the business for which they work, for boldly progressive purposes. The governance processes that integrate this democratic association with the management structure of the company it ‘owns’ are distinctive and somewhat arcane, but what was originally a modest family firm, is now a small multinational company employing more than 600 people in Europe, Africa, the Middle-East and America. It has given away millions of pounds to charitable causes, often those in which members of the Commonwealth are personally involved or interested. It has a reputation in its industry for integrity in its business dealings. Clearly, social enterprises can take many very different forms – and whatever performance is, we know it when we see it...

...And demonstrable failures. Unfortunately, social enterprises do not always succeed. Here are three cases to illustrate some of the ways in which they can ‘go wrong’.

1. In 1967 Nigeria was plunged into civil war as its Eastern Region of Biafra declared independence. Predictably, the civilian population faced the usual dangers and depredation of war especially in Biafra as Nigerian government forces gradually closed in on the rebel territory. In the hope of preventing what looked increasingly like a humanitarian disaster, aid and church agencies in the UK and Europe began running relief operations in Biafra. Unfortunately, these operations introduced considerable amounts of foreign exchange into the rebel territory, and this was immediately used by the Biafran government to buy weapons, as its leader subsequently admitted. It is now clear that the attempt to save lives prolonged the conflict and helped create what became an appalling famine. Unfortunately this is not an isolated example. In recent years many development professionals have become increasingly concerned that humanitarian efforts in ‘complex emergencies’ have had the effect of institutionalising conflict. For example, in order to reach refugee civilian populations, relief workers often have no option but to pay a tithe of their supplies to local warlords – thus sustaining military groupings that would not otherwise be viable.
2. In 1993 Second Harvest of West Michigan was being offered high quality food by the food industry at seven times the rate that the agencies and pantries they supplied were giving it out to needy people. On investigation, it turned out that the food pantries had evolved a shared set of policies and procedures about how much and what sort of food it was considered appropriate to make available to poor people, and in what ways. In consequence, food pantries did not call for many items stocked by the food bank (they were not on the approved list); and they went out and purchased at considerable cost the items that were not stocked by the food bank. Food from these two sources was then bagged up in standard packages, and made available under screening policies designed to protect the system from ‘cheaters’ and ‘abusers’. Even leaving aside the humiliation and resentment such arrangements engendered, they were breathtakingly inefficient: recipients regularly threw away up to half of the contents of the pack provided. The Executive Director of Second Harvest in West Michigan calculated that in Grand Rapids the food pantries were spending $4,000,000 per year on efforts which fell woefully short of meeting the need for food – but that this need could be met for less than $500,000 if practices changed. The key was a different model of food distribution based on client involvement and choice from the full range of supplies available. Though a proven success, the food pantries were highly resistant to this new approach. As the Executive Director put it:
   
   But over and over again I have been admonished that such a model and approach is much too simplistic, that people like giving cans instead of money, and that the food bank’s food (a roll of honour of the nation’s favourite foods) is the wrong food, and that those who are hungry simply cannot be trusted to make reasonable decisions. And so in agency after agency and community after community they keep buying food and giving it out in woefully inadequate amounts, and I continue having to refuse readily available goods at a rate of 3.5 million pounds per month... (Arnold 1998)
   
   
3. If one asks ‘what is the social return on the (say) £100 million of assets held by the Scott Bader Commonwealth?’ no clear answer is available. Of course, it still gives some money to charity every year (recently, about £150,000/annum) – but then the constitution requires that any bonus paid to employees out of profits is matched by charitable giving, a situation in which most people would show some generosity. Over the years any number of initiatives have been launched to ‘make the Commonwealth mean something’. But in practice, the vision of a new form of self-management or industrial partnership has been reduced to employee representation on the company’s (non-executive) board of directors, a code of conduct, and protection from take-over. Senior managers have no great difficulty in preserving their autonomy (through control of information, the meeting before the meeting, the discreet exercise of patronage) but they have not pursued a social agenda of any consequence, either internally or externally, and nor have the leaders of the Commonwealth. Indeed, the Commonwealth was, until recently, in breach of its own constitution, having for many years withheld the right to membership from employees of overseas subsidiaries. Attempts to reform the labyrinthine and contradictory constitutional documents have repeatedly failed, bedevilled by distrust between various groupings within the Commonwealth and company. The consensus among outsiders who have been involved either as consultants or ‘nominated Trustees’, is that the social performance of the Scott Bader Commonwealth has been disappointing. Some Commonwealth members, and presumably those employees who do not bother to join, agree.

Unravelling performance. The contrived presentation of these examples illustrates a number of points about the notion of performance in relation to social enterprises, and about the way the term tends to be used. First, it is easy to project a fine tale on the basis of uplifting purposes and selected information. In a similar manner, it is easy to belittle and denounce on the basis of a particular mistake or period of difficulty. Second, the issues addressed by social enterprises are frequently complex and the consequences of their interventions uncertain. None of the cases introduced – international relief, emergency food aid in the US and the Scott Bader Commonwealth – supports simple, sweeping claims about performance or non-performance. Third, the more ambitious social enterprises are regarding their missions, the more problematic their performance is likely to appear. Our judgements about the food pantries are very different depending on whether we see them as an expression of concern never intended to be more than a stop-gap for those in the most extreme need, or as a means of alleviating poverty and restoring social solidarity. Fourth, our judgements about performance derive in the end from narratives about what is going on and what has been achieved. Rhetoric can only take you so far; in the long run such narratives are usually more convincing when they encompass evidence, analysis and comparisons. Whether or not one agrees with his position, John Arnold’s calculations about the inefficiency of the food pantries as a way of providing needy people with food make a very telling point. Which is, of course, where measurement enters the picture. Nevertheless, one should not expect too much of facts: they seldom speak for themselves – or at least, they may say different things to different people. The ‘insurmountable opportunities’ that social enterprises often take as their missions involve complex and contested issues bound up with different values and ideologies (as John Arnold’s experience also shows). If you think that Médécins sans frontières is a vehicle for rescue melodramas whose resources would be far more productively used as (say) Sanitations sans frontières, then no amount of measurement is likely to change your mind about its performance.

Performance as a social construct. These observations point towards a central issue running through the book. For social enterprises (particularly), performance is not some underlying attribute that exists and can be known independently of the people centrally involved in and concerned about that organisation. Performance is what those people more or less agree, implicitly or explicitly, to be performance, what they have in mind when they use the term. Hence to say an organisation is (or is not) performing is to say that one has (or does not have) confidence in the accounts offered for what it has been achieving. Does this mean performance is not a ‘real’ issue, that it is all a confidence trick? Hardly. We know that organisations, like individuals, can become ‘locked in’ to beliefs that others find unconvincing, and become committed to ways of doing things whose effectiveness well-informed observers doubt. First World War generals are the classic example, but arguably each of the three cases discussed above shows some signs of this happening. In such situations, the people concerned will still, in all likelihood, offer positive accounts of their performance, an...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• Tables and Figures
• Key Words
• Acknowledgements
• Preface
• 1 The Challenge of Social Performance
• 2 Performance Management As Government Policy
• 3 Taking Measures – Lessons from the Literature
• 4 The Performance of Measurement
• 5 ‘Best Practice’ Benchmarking – Why Everyone Does it Now
• 6 Do ‘Kitemarks’ Improve and Demonstrate Performance?
• 7 Using Quality Models for Self-assessment
• 8 Towards Practice: Choosing a Suite of Measures
• 9 A More Measured Management?
• Notes
• Bibliography
• Index