Tan Suee Chieh, Business Times 30 Jul 08;
SOCIAL enterprises have existed for at least a century, but remain a relatively new concept to the man-in-the-street. Invariably, there will be some who confuse it with a charity, trade union or grassroots political organisation.
The key difference between a social enterprise and a commercial business is the social purpose of the former. This often revolves around providing essential goods and services for the masses, job creation for the socially disadvantaged or positive change in the environment.
While the distinction between the two is clear, the irony lost on many is that a social enterprise has to acquire many of the characteristics of a commercial business to thrive.
Throughout the world today, outstanding and successful social enterprises are run like any other commercial business, under sound and professional management practices, with a view to being sustainable for the long term.
There is a crucial difference between organisations with a social purpose and commercial businesses with a strong corporate social responsibility (CSR) programme. What basically separates the two is their core reason of existence, i.e. their purpose and philosophy.
Social enterprises put people at their heart of their decision making, with capital as an important and indispensable secondary. The reverse is true for businesses that count rewards for capital first - even for those with acclaimed achievements in CSR.
In other words, it is labour that hires capital at social enterprises, rather than a case of capital hiring labour for commercial enterprises.
Social enterprises trace their origin to philanthropic industrialists in the 19th century, who were called social entrepreneurs to acknowledge their genuine commitment to employees' welfare.
Over the years and over the world, technology, competition, globalisation, consolidation and heightened governance requirements have required social enterprises, especially those in the financial sector, to transform. Otherwise, they perish.
Notable examples such as Grameen Bank and British retailer John Lewis have stayed the course by adopting their respective industry best practices without compromising their social purpose.
The same cannot be said, however, for countless other ventures that floundered by downplaying the importance of sound management practices and capital management.
In his book Good to Great and the Social Sectors, Jim Collins used what he termed the Hedgehog Concept to explain how social enterprises could achieve the best long-term results. This is a model based on his research of the most successful social enterprises, premised on the notion that the best ones aligned themselves to what they were deeply passionate about, what they could be the best in the world at, and what drove their resource engine.
The latter comprises three basic components of time - how well the organisation can attract people, money, sustained cash flow, and brand, how well it can cultivate goodwill and support among its stakeholders.
These three attributes are reflected as three intersecting circles, whose point of intersection represents what social enterprises should ideally focus on.
The emphasis is not how much money the social enterprise can make, but how it can become sustainable to deliver superior performance relative to its social mission.
To succeed, Collins argues, social enterprises need to focus on their Hedgehog Concept. This would help them achieve superior results, which in turn would attract more resources and commitment they can use to build a stronger organisation. The latter would of course deliver even better results, creating the momentum for a self-perpetuating cycle of excellence.
The changes affecting many social enterprises around the world, as they transform and adapt to changing times, mirror those taking place at NTUC Income today.
As a homegrown social enterprise, we recognise the need to stay relevant and successful by modernising and professionalising the organisation, so that we can continue to attract both talent and customers. These measures include investing in professional systems and management tools for better decision-making, a more meritocratic career path for a more energised, motivated and professional workforce, and adopting more professional approaches and global best practices to strengthen our governance standards.
Our transformation is sometimes misunderstood as the commercialisation of NTUC Income and a betrayal of our social charter. The truth of the matter is that we remain ardently committed to place people, instead of capital, at the heart of our decision making. We just plan to do it more professionally, systematically and objectively.
Social enterprises that aspire to be truly great organisations need to have focus, discipline and the right processes in place.
But nothing can be more important than the values and purpose that guide them, and this will continue to be a key differentiating factor between social enterprises and their commercial counterparts.
The writer is the Chief Executive of NTUC Income
