On sustainability – part one

“What do we want? Sustainability. When do we want it? Soon.”

If public agencies and major grant-funders were a group of protesters walking along the road chanting their philosophies for delivering social change in the UK, that’s the sort of thing they’d be chanting. In most cases, the slightly less snappy follow-up chant would be:

“Whose money do we want it to be paid for with? Someone else’s.”

Sustainability is the current holy grail for the voluntary sector in the UK. The government’s Big Lottery distributed, Transition Fund, awarded cash to organisations to enable them to find ways to survive without lost government funding. For many organisations, social enterprise is one of the suggested routes to that holy grail but clearly both social enterprises, and socially enterprising activities carried out by others, are also themselves mostly still in pursuit of sustainability.

According to the team working on the Sustainable Funding Project at the National Council for Voluntary Organisations (NCVO):

‘Sustainable funding’ is not simply a question of simply getting better at fundraising or locating one ever-lasting source of income.

We promote an approach that encourages organisations to explore income opportunities across a spectrum of opportunities; from charitable donations at one end of this spectrum, through grants, service level agreements and contracts, to social enterprise activity, trading goods and services. This not only spreads risk, but ensures organisations are best placed to take advantage of emerging trends and opportunities and are able to safeguard their financial future without sacrificing independence or mission.”

The emphasis on diversifying income sources is clearly a sensible one but it’s also one that has the potential to create at least as many problems as it solves.

A couple of these problems are:

  • alternative income opportunities are also alternative opportunities to losing more money than you were losing before
  • the focus on generating income can often often be at expense, both theoretically and literally, of failing to consider ways to deliver similar outcomes while spending less money (discussed in part two).

I’d really like to have a pound for every local voluntary sector employee or volunteer who has excitedly told me about their plans to fund the activities of their organisation through some form of community café or related catering business. Collecting pounds on that basis would definitely make a more useful contribution to my ‘spectrum of income generation’ than actually opening a community café.

I don’t know whether voluntary sector organisations are unusually bad at running cafés but I do know that cafés are, in a general sense, difficult businesses to make a profit from if you’re not operating either at great scale or with a high degree of specialism. In that context, not knowing what you’re doing and being emotionally committed to running a day centre definitely don’t make things any easier.

I think the, apparently insatiable, drive to open cafes is mostly due to the fact that – when faced with the need to find new sources of income  through trading – people in the social sectors (myself included) tend to alight on activities that are (or seem to be) easy to understand and involve people paying for things that are seemingly easy to provide.

We can all make a cup of tea and tea bags are really cheap so we can all run a successful business selling lots of cups of tea. Ours will be even better because we’ll have willing volunteers to make delicious homemade cakes for us in their spare time.

It’s thinking that’s comforting, internally logical and – if you can be bothered to do it – liable to be entirely demolished by conducting a straw poll of your closest friends and immediate family asking the question of whether they’d choose to buy their tea and cake in your community centre rather than Starbucks (other chains are available).

If your friends and family like you enough to tell the truth, your reassurance that your beverages will be 25% of the price of Starbucks’ and that your organisation really needs the money will not change their answer.

Based on the costs of making the services available and likely income generated, it makes far more commercial sense for the owners of struggling independent cafes to attempt to subsidise their activities by getting some training and offering counselling services in a room at the back, than for charities providing counselling services to subsidise their activities with a cafe.

There are clear exceptions here that I’m not talking about. One is those voluntary sector organisations who do a very good job running cafes and catering businesses as part of their social mission that deliver opportunities for people to take initial steps (back) into the job market – and are cross-subsidised with grants, donations and government funding. What these aren’t are ways for the organisation to generate a surplus which can be spent on doing other work.

The other exception – which crosses over with the first – is situation where people do actually know how to run cafes (restaurants such as Fifteen or catering businesses) and set out to run them as proper commercial businesses that deliver a quality service while delivering a profit for social causes and/or social change for employees in the process.

Cafes are the most obvious example but the mistake being made is the attempt to diversify income by delivering a trading activity – it could, equally but probably less expensively, be web-design or knitting jumpers – as add-on to what you really do.

A more sensible but – in terms of initial thinking, at least – more difficult route to sustainability is working out whether it’s possible to diversify your sources of income from things that you either already do, or that you could do based on your track record and the skills, resources and existing partnerships within your organisation. Ideally, things that are more specialised than making a cup of tea or baking a cake.

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5 Comments

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5 responses to “On sustainability – part one

  1. David, You’re describing financial sustainability in social enterprise. The Guardian has a sustainable business network where sustainability means the environmental kind. Is anyone thinking of both?

    Now suppose your social enterprise was front ended by a sustainable revenue source which was also environmentally sustainable and back-ended by a social purpose business. A model like the Community Benefit Society for instance.

    Lets go further and think about the post growth scenario which could transcend production and profit maximisation, displacing it with economies of local energy and food production with distributed manufacturing.

    http://forestofdean.socialgo.com/magazine/read/the-case-for-local-sustainable-enterprise_38.html

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  2. Alisdair Cameron

    Splendid stuff, David.Those of use who specialise in, and might be thought to have a degree of expertise in, say, health and social care should seek to maximise income, and diversified sources of it within that sector with which we are familiar. That’s not to deny exploring cross-over,innovative work, but to recognise that that is typically best done via partnerships, with people who know the other areas/sectors with which one might hope to cross-over. There are few things worse, both from a business and from a customer/purchaser point of view than someone, no matter how well-meaning and well-intentioned, who doesn’t know what they are doing in an enterprise, ,i>and such blunders discredit the soc enterprise sector, giving the impression of amateurism.

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  3. Beanbags admin

    Yes, and it also – in most cases, entirely inadvertently – shows blatant disrespect for people who are actually skilled professionals in the sectors that charities and social enterprises misguidedly attempt to moonlight in.

    The implicit suggestion is that, while we’ve chosen to bestow our talents on the social sectors, running cafés, designing professional-standard websites and making clothes in profitable volumes is so easy that we can do it at the same time as a real jobs as a profitable after-thought.

    As you say, though, that’s not to discourage partnerships between organisations (and businesses) who specialise in doing different things. That’s a good thing.

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  4. If anyone has been watching the Village SOS TV episodes, any thoughts of competing with Starbucks at a quarter of the price would soon evaporate. I heard justifications made, even with volunteer staff, that sustainability depended on maintaining these ‘market’ prices.

    What of the NHS? When I joined the local UNISON protest several months ago, we then accepted the invitation from Gloucestershire Care Services CIC to join their public meeting. I asked if this was really an outsourcing operation, which was flatly denied.
    When I asked whether they aimed to collaborate with other social enterprises in their supply chain, the response indicated that it wasn’t something they’d thought about. Their answer was that they’d look favourably at suppliers who were CICs. I wasn’t convinced they knew that much about the sector. A local healthcare CIC created by Tory councillors and doctors has created much public distrust after it was discovered that they’d borrowed from council tax funds to pay a consultant. He just happened to be a former director of Atos Healthcare.

    I know from the experience of trying to tender for IT development, my own area of expertise, with Gloucestershire PCT, that they wouldn’t respond when asked for an explanation of our not being invited to tender.
    What I see evolving is a real can of worms, with quangos being spun off as faux social enterprise. It gives the impression of a ‘Big Society’ devolution of power, but behind these quangos, councillors and their cronies will be found on the boards. .

    I asked recently why the NHS in general isn’t using social enterprise in the supply chain, pointing as an illustration to the £12.7 billion expenditure with EDS on a patient records system that didn’t work.

    It was a bit disappointing to observe from the SEUK perspective that Peter Holbrook had reservations about NHS delivery only when a private supplier was selected in Surrey., while perhaps being unaware of the authenticity of those branding themselves as such.

    It’s one of those quangos. Gloucestershire First who are in my cross hairs now. I’m raising a complaint about public funding being used to compete with us and intend to raise a malpractice case with the Local Government Ombudsman.
    .

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  5. Pingback: On sustainability – part two | Beanbags and Bullsh!t

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