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Unexpected Findings: What Businesses Can Learn from Social Enterprise
By Janet Zhou
Farber Intern, 2010

I often like to ask people in social enterprise what skill MBA students should develop to be effective in social enterprise. One summer in venture philanthropy doesn’t make me an expert, but my time at REDF has given me some food for thought on this topic.

Use the language of your audience

Janet Zhou, 2010 Farber Intern

At REDF, you can be sitting in a KKR Board room one morning and taking a tour of urban housing projects the next. Business school prepared me well for the board room, but I found myself floundering in my presentation to the crew of a recycling social enterprise. I was knee deep in explaining my “break-even analysis” when one of the crew members interrupted to ask, “Are you talking about making money?” That was exactly what I was talking about, but I wanted to call it “break-even” because that was what I had learned. This young man was (politely) reminding me that what I had learned was only as valuable as my ability to help others understand.

Business school teaches a language designed for board members, customers, and investors. Yet, true leadership requires articulating a case that is compelling to a broader audience of employees, politicians, and community members. For those of us who believe business can be an engine of social change, it is critical that we learn to persuade from a diverse set of perspectives and go beyond the language of business to make our case. There won’t always be a young man in the audience to prompt me to explain myself better, but I’ll remember what he taught me when I’m in front of my next audience.

Know the boundary between doing better and demanding better

Like many MBAs, I wondered if social enterprises struggled primarily because they didn’t have the right incentives for efficiency. My observation from this summer is that incentives are not the biggest problem. Instead, real, structural barriers exist, and they require an endless amount of creativity to circumvent. By way of example: one of the enterprises I worked with was charged a fee of almost 50% by their payroll administrator because of the population they employ. That’s about twice what normal payroll fees would be. Because this is a labor intensive industry, that 50% fee amounts to a 50% tax on the enterprise. I don’t know many small businesses that could turn a profit with that kind of burden! For many social enterprises, optimizing prices or benchmarking productivity can only move the needle so much. Outside of that, our energy should be spent changing the rules of the game, which is why advocacy is a critical piece of the puzzle. Some of the answers that this field needs will not come from doing better on business, but demanding better business conditions for our social enterprises.

Embrace the blank slate

In business school, we are rewarded for being prepared. We’re taught to read ahead, think fast, and be ready with our opinions when our name is called. At times, all of that preparation makes it hard to hear anything but our own thoughts, and we internalize the message that leadership is about having answers.

I realized how misconceived this notion was when I ran a meeting with senior staff for one of my projects. I came into this meeting armed with a framework and a list of carefully prepared questions. Ten minutes in, I realized no amount of preparation would allow me to unpack the richness of a conversation that started long before I arrived and will continue long after my summer is over. So, I listened. In the end, that meeting – seemingly unorganized, discursive, and without input from me – proved to be my most valuable guidepost for understanding REDF and the challenges that social enterprises face. It’s scary to walk into the room as a blank slate, but I hope my career will be filled with many opportunities to be just that.

Ask not what business can do for social enterprise, but what social enterprise can do for business

In some ways, my summer experience has been about unlearning my business school mentality. Talking to non-business audiences, looking outside of business for solutions, and embracing not having answers are not the bread and butter of MBA curricula. What strikes me, however, is that many of these ostensibly social enterprise lessons are ones that could make businesses better too. Would the financial crisis have happened if the banking system had been forced to make the case for CDOs in plain-spoken English to all the stakeholders involved? What if businesses approached issues like climate change as a blank slate and listened to the conversation taking place between scientists? I came to REDF thinking that I would use my MBA skills to maximize value for social enterprises, but what I will take away from this experience are the skills I learned in social enterprise to maximize the value of my MBA.

During his State of the Union message, President Obama outlined incentives for small businesses to hire more workers, and for investors to provide more capital. But the next day when the President was asked in a Tampa, Florida town hall meeting about job opportunities for one woman’s brother, who had been in prison, he did not mention social enterprise. He did talk about the Second Chance Act – an important federal program that does provide some resources to local communities that can be used to help parolees. But it’s a small program, and unlikely to grow given the limits on domestic spending the President just laid out.

The President added, “If we can find a program that works, that breaks that cycle, it is a good investment for our country.”

It struck me that social enterprises are that ‘good investment’. They are job-creating engines that can be relied upon to hire locally those people who have suffered from unemployment rates three to five times that of other Americans in the best of times. These people – high risk young adults, parolees, people who have been homeless or struggle with addictions or mental illness — are taxpayers when they work; but when they are unemployed cost taxpayers for emergency services and public safety programs.

Nonprofit-run social enterprises earn revenue while creating jobs for the people who are at the bottom of most hiring lists. Once they get that first chance at a job, most move on into the mainstream workforce, reducing homelessness and crime – and the accompanying costs to taxpayers. A triple threat set of benefits – job creation, cost reductions, sustainable nonprofits that solve problems. And they and their employees contribute payroll taxes, along with needed goods and services to the local economy. Investment in this kind of innovation is the kind of good investment the President talked about.

On a practical note, if you want to help, REDF is looking for a great person experienced in business and wanting to spend a year in the social sector to work full time as a Farber Fellow at one of the outstanding social enterprises we support in the San Francisco Bay Area.  If you are one or know one, please check out the job announcement.

Outstanding leadership is a central factor that distinguishes any successful enterprise; this is certainly true in the social sector.  REDF started its signature Farber Program a decade ago to provide hands-on experience in job-creation social enterprises for MBA students and graduates who want to contribute and learn through summer internships and one year fellowships in the social sector.

More than one hundred people have now participated in REDF’s selective Farber Program.  It combines the excitement of project-planning and product development for social enterprise with a professional development curriculum that includes meeting with REDF’s Board of Directors and exposure to the sector’s seminal ideas and tools.  The Farber Program honors the memory of Mike Farber, an early social entrepreneur who was a leader at Rubicon Programs, a signature member of REDF’s early portfolio.  Stephen McCann was one of a class of six MBA interns this year who joined a proud group of Farber alumni now working in some our country’s leading philanthropies, nonprofits, and private sector companies.
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MBA Student, Interrupted
Stephen McCann
Farber Intern, 2009

Coming to the Haas School of Business at UC Berkeley, I was no stranger to working in the social sector. Ever since undergrad, my goal has been to combine my business knowledge and experience to contribute to the betterment of society; after all, if we don’t use the best of our abilities to leave the world better off for having us in it, what else are we here for? Prior to business school, I helped start up Deloitte Canada’s first pro-bono consulting practice dedicated to serving local nonprofits, and while at Haas, I spent the majority of my free time advising the Alameda County Foster Youth Alliance. These were only part-time roles, though, and for my summer internship, I really wanted to dedicate all of my time to working “on the front lines” and fully immersing myself in the sector. Working as a Farber Intern allowed me to do that, and so much more.

Stephen enjoys a walking tour of San Francisco-based social enterprises

I was matched up with one of REDF’s portfolio organizations, The Society of St. Vincent de Paul of Alameda County (SVdP, for short), a fantastic organization that provides assistance to needy men, women and children. Rich with history, the organization has a Special Works community campus in downtown Oakland that provides for peoples’ basic needs (e.g., a free dining room, a food bank) as well as supports their first steps towards achieving self-sustainability (e.g., educational classes, job training). This campus is supported by social enterprises that not only help to subsidize the organization’s services, but also offer job training for the poor and works to keep the community green. Last but not least, SVdP coordinates over 600 volunteers who perform community outreach, offering access to food, clothing, temporary shelter and financial assistance to those who need it the most. Needless to say, there was no better organization for exposing me to a diverse array of models for assisting those in need.

I was tasked with developing an “organizational dashboard” for SVdP’s Board and Management. If you’re unfamiliar with dashboards, they are easy-to-read, highly visual one-page summaries of how an organization is performing against its key financial and social goals. Just as with the dashboard on your car, at a glance, you can quickly get the information you need to help you on your way to meeting your objectives. REDF and SVdP hoped that this project would help SVdP’s leadership become even better informed, increase the amount of quantitative data utilized in decision-making, and aid all departments in becoming more accountable for their results.

I was excited about this project, as SVdP had all of the ingredients needed for success. SVdP’s staff was completely behind the project and fully participated in offering input and guidance, and there were already systems in place to collect the data that the dashboard would report on. One concern we had, however, was whether SVdP would have the capacity to continue producing the dashboard each month after my internship ended. For a dashboard to be sustainable, the staff time required to develop it each month could not outweigh its benefits, or it would likely be dropped in favour of more pressing needs.

I am happy to report that the project was a success; I developed an organizational dashboard that SVdP uses and continues to update to monitor its ongoing performance against critical goals. I trained all key stakeholders on what they would need to do each month, put appropriate controls in place to ensure timely completion, and documented the process such that as SVdP’s key metrics of success change, they can update and adapt their dashboard accordingly.

Dashboards can be immensely helpful tools for nonprofits, but unfortunately many organizations do not have the time or resources needed to build one on their own. This is one of the reasons that REDF established the Farber Program, which matches MBA students like myself who are interested in social enterprise with REDF Portfolio organizations in need of business assistance. In this way, REDF is able to bring its experience and resources to help find talent for strategic projects that might otherwise not get done.

I have been asked many times about my choice to work in the social sector for the summer, and about the “opportunity cost” or tradeoff of doing so – after all, it is no secret that MBA’s can make more money working in the for profit sector during their internships. I don’t see it this way, though, as this only measures the immediate financial consequences of my choice. For me, the greater cost would be to work in an organization whose mission I did not believe in or was not passionate about, and whose work I did not find meaningful. A professor once told me, “If you always focus on your passions, you will be able to look back on your life and be content. Your resume may not end up being neat and linear, but you will at least be proud of what you have achieved.” Working with REDF and SVdP for the summer was not only incredibly meaningful, but it changed my outlook on my career permanently, and for the better.