indev308 class 8 - managing for social impact

INDEV 308: Introduction to Social Entrepreneurship

Class 8: Managing for Social Impact

Monday, June 27, 2011

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Instructors: Norm Tasevski ([email protected]) Karim Harji ([email protected])


Agenda

•  Rockefeller Foundation •  Managing for Social Impact •  Preparing your investment pitches •  Next Week

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Managing for Social Impact…

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Two Main Responsibilities as a Manager of a Social Enterprise…

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Achieving social goals

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Achieving financial goals


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Achieving Financial Goals

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Key Concepts •  Focus on your mission •  Know when to say “no” •  Build a business independent of yourself •  Test (prototype) often, and fail fast

The Market or the Mission? (Brinckenhoff)

•  The market is always right •  The market is not always right for you •  The mission should be your organization’s ultimate

goal

Achieving Social Goals…

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Achieving Social Goals Remember…how is social entrepreneurship different?!

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Motivation

Innovation

Resourcefulness

Risk Taking


Achieving Social Goals !

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1.  Identify your social goals –  Theory of Change (defining your social value) –  Embed them within/across your operations

2.  Measure the social value created –  How do you measure your goals? –  Address the common challenges in measurement

3.  Communicate your impact –  Know what to say and who your audience is –  Be creative around your message


Step 1: ID Your Social Goals !

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•  What Social Benefit are you creating?

•  How do you decide?


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Remember what motivates The Social/Environmental Entrepreneur?

“…it was an epiphanal experience…” Ray Anderson, Interface Carpets

“I heard the same story again and again. Someone had experienced an

intense kind of pain that branded them in some way. They said, ‘I had’ to do

this. There was nothing else I could do.”

Jody Jensen, Ashoka

“I was teaching in one of the universities while the country was suffering from a severe famine. People were dying of

hunger, and I felt very helpless. As an economist, I had no tool in my toolbox to fix that

kind of situation.” Mohammed Yunus, Grameen Bank

“…that made a real impression on me…”

Jeff Skoll, eBay, Skoll Foundation, etc.


The Management Challenge

•  To ensure that the motivations of other people in your organization align with your personal motivations (as a founder or manager)


Theory of Change TurnAround Couriers!

Goals Hire couriers and office

administra2ve staff from disadvantaged youth popula2on

Provide transi2onal work experience to enable youth to develop employability skills, a resume and a support network

Enable youth to access the mainstream job market

Enable youth to stabilize life situa2on, begin a career path and leave the shelter system

Metho

ds

Recruit youth from youth shelters and youth serving agencies across Toronto

Provide a real job, not a job training experience

Establish a suppor2ve management environment

Assist youth with planning and making next steps regarding housing and employment

Metrics Youth are able to get

out of shelter system and into independent housing

Youth meet or exceed job expecta2ons

TurnAround helps youth secure next job and establish a career path

Youth are able to get off and stay off government financial assistance


Embedding “Social” across the Business Model

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Step 2: Measure the Social Value Created !

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Why Measure, and for Whom? •  Management

–  Performance management (meeting needs/objectives)

–  Organizational sustainability, attract new investment –  Demonstrate the value created by organization

•  Social Investors (inc. funders) –  Impact of grants, mission alignment –  Accountability measures –  Assess organization value, relate to risk/return (of

investment) •  Government Programs/Policy

–  Make the case for investment in organization/approach

–  Accountability measures


The Measurement Landscape !

18 18 Source: Clark et al. (2003) “Double Bottom Line Project Report: Methods Catalog”


Objectives, Approaches, Application!

19 19 Source: Clark et al. (2003) “Double Bottom Line Project Report: Methods Catalog”


Why is Measurement Important? !

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“Not everything that can be counted counts, and not everything that counts can be counted”

“You can’t manage what you can’t measure”


Challenges in Measurement !

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•  Outputs vs. Outcomes •  Attribution vs. Contribution •  Qualitative vs. Quantitative •  Prove vs. Improve •  Rigour vs. feasibility

“Metrics and evaluation are to development programs as autopsies are to health care: too late

to help, intrusive, and often inconclusive.” (Trelsad)


A Note on SROI!

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•  Discounted, monetized value of the social value that has been created, relative to the value of the investment.

•  Pioneered by Roberts Enterprise Development Fund (REDF) and Jed Emerson

•  Various uses for, and approaches to, SROI

•  Despite “hype” around SROI, it can be resource-intensive, and issues around feasibility, replication, reporting still remain.


SROI Snapshot: TurnAround Couriers!

Avg Change in Societal Contribu2on (Target Employees): $9,391

Average Number of Target Employees: 10

Current Year Cost Savings to Society: $93,910

Cumula2ve Cost Savings (prior to Y5): $191,170

Total Cost Savings to Date: $285,080 Cumula2ve Societal Payback Period: 1.8 years

Cumula2ve SROI: 285% Note: ini2al SCP investment = $100,000

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Overview of Target Popula2on (sample) • 38% recruited directly from shelters • 23% female • Average age: 21 • 100% unemployed at 2me of hire • 54% receiving social assistance at hire • 54% been involved with jus2ce system • 54% did not complete high school

Employment Outcomes (sample) • Increased target/non-‐target staff ra2o to 83% • 69% con2nue to work at TAC (9) • 15% moved onto mainstream employment in window cleaning industry (2)

• 8% went on to post secondary educa2on (1)

Sustainable Livelihood Outcomes (sample) • 89 youth in total have been hired over 5 years

• 100% target popula2on recruited from shelters able to get out of shelter system and secure independent housing within 6 months of employment at TAC

• 85% who relied on income support through social assistance at 2me of hire able to get off and stay off


Acumen Fund: social performance measurement in the investment process!•  Due Diligence

–  Literature review: state of practice

–  Estimate # of people served over the life of the investment

–  Assess how delivery of those “outputs” compare (more or less favorably) to the “best alternative charitable option”

•  During Deal Structuring –  Conversations on how to think about performance management

over the life of the investment, not just “mandatory reports”

•  Post-Investment –  Quarterly reporting – performance, capacity, strengths/weaknesses

–  Semi-annual “forced ranking” across portfolio against investment criteria - financial sustainability, social impact at scale, breakthrough insights, and high-quality leadership - as well as actual performance to date and the investment’s potential for impact in the future

•  Closed Investments –  Short “exit memo” looking at results generated, financial return, and

lessons learned

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Simple Measures for Social Enterprise: Lessons from the Acumen Fund!

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•  Culture matters far more than systems –  Tolerance for / learning from failure

•  If you build systems, start with a pencil and paper –  Start simple; technology is an enabler not the solution

•  Think on the margin –  Performance is always relative to what you had been doing

before (past), to what your competition did over the same time period (peers), and to what you should have done (projections)

•  Count outputs and then worry about outcomes –  “the conclusions you can draw from these outputs may not be

made with scientific rigor, but they can inform businesslike decisions and raise important policy questions”

•  Don’t confuse information with judgment –  Balance qualitative and quantitative –  Use informed judgment, hold oneself accountable (to them)


Step 3: Communicating Your Social Impact!

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How?


Social cost

•  SCP: 5 factors that have an impact on profitability in a “purpose built” social enterprise

–  The inherent business capacity of the social enterprise

–  The complexity of the business

–  The size and nature of the employment barriers of the people being hired

–  The skills/training gap which is the difference between the skills of the people being hired and the skills required to make the business successful

–  The degree of emphasis on the social mission in the day to day decision making process 27


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Break

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Your Investment Pitches…

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Elements Important to the “Social Investor”

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•  Overview and mission •  Management and

Advisors •  Problem

–  social issue being addressed

•  Size of the problem –  how big is the social issue

•  Solution –  Here’s how it works…

•  Value proposition –  Inc. social benefit

•  Business model •  Competitive advantage •  Collaboration/

partnerships •  Marketing and Sales •  Financial projections •  Financial requirements


Elements Important to the Angel Investor

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•  Overview and mission •  Management and

Advisors •  Customer problem •  Market opportunity/size •  Solution

–  Inc. social issue being addressed

•  Value Proposition •  Competitive advantage •  Where the solution fits

•  Business model •  Marketing and sales •  Financial projections •  Financing requirements