Avoiding the fatal embrace

“Resource dependence theory assumes that people shape their organizations to attract resources; the more heavily dependent on government they become, the more likely it is that they will eventually look and act like government.”

So says Stephen Goldsmith in his book, The Power of Social Innovation. Goldsmith, a former Republican mayor of Indianapolis, who was appointed chair of the US Corporation for National and Community Service during the presidency of George W Bush.

He goes on to describe this risk – that community organisations, in taking on government contracts, assume many of the practices of the in-house public providers they’ve replaced – as the ‘fatal embrace’.

In my recent myth-buster column for The Guardian‘s Social Enterprise Network, I disputed the myth that social enterprises are inherently innovative. Underlying this myth is that fatal embrace. Public sector bodies look at those social enterprises who are finding new and better ways of delivering positive social change and think, quite rightly, ‘we want some of that for the people who depend on the services we fund.’

The problem is that often the reason why innovative social enterprises (and charities) are operating innovatively – either out of active choice or economic necessity – is that they’re not delivering services according to the prescriptions of public sector agencies.

As I mentioned in my Guardian article, The Once and Future Pioneers, a longitudinal study into the innovative capacity of voluntary sector organisations, led by Stephen Osborne of University of Edinburgh, reported that the % of surveyed organisation engaging in innovative activity dropped from 37.9% in 1994 to just 19.1% in 2006.

As the study points out, the voluntary sector (including social enterprise) doesn’t exist solely to deliver services in new and different ways – in many situations, it may be equally useful for organisations to deliver specialist services on an ongoing basis while making incremental improvements to the way they’re delivered – but these figures do demonstrate the significant impact of government policies on the way that voluntary sector organisations operate. As government shifted from funding innovation in the voluntary sector to funding target-driven efficient service delivery, the voluntary sector shifted from away innovative activity towards delivering target-driven public sector-style services.

Stephen Goldsmith illustrates the big dilemma facing community organisations when they ‘face serious challenges in feeding and housing people in crisis, and more resources mean that they can reach more of their hurting neighbours‘.

He concludes that: “Understanding when those resources undermine results and innovation will remain difficult, so nonprofit boards and their executives must vigilantly balance tradeoffs and opportunities.”

You need more money to do more good stuff but what if you can only get more money by spending it on doing other stuff that gets in the way of doing good stuff.

Number 14 in the pop-up social enterprise thinktank, popse!’s list of 100 social enterprise truths is: “All money comes with strings attached; that’s fine as long as you know what they are”. That’s probably true but when it comes to the public sector supporting (or allowing) innovative approaches to services delivery, it may be that people giving out funds may not even know what strings they’re attaching – and the consequences of attaching them.

As we move deeper into an era of ‘more for less’, will it be possible for government to risk funding organisations and ideas that might actually deliver that?



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3 responses to “Avoiding the fatal embrace

  1. LucyFindlay

    Absolutely David, and the sector has got so used to working within these confines that it does not question whether this approach is the best way to deliver outcomes for its members /communities.


  2. jeffmowatt

    Feeding and housing people in crisis has been a major focus in the work of P-CED, since 1999 when work began in Siberia.

    A later example in 2002, focus is on a repatriated and largely homeless community in Crimea and the social enterprise approach is to reason for a lower cost strategy in terms of development aid. We reduce projected costs of re-housing from 300 to 40 million dollars by giving the community the means to self empower and self build.


    It’s an approach which carries forward to subsequent work in the UK and childcare reform in Ukraine. We don’t attempt to be government, or run public services but nudge them toward more enterprising policy.

    In the case that was argued for business with social purpose, as an alternative to traditional capitalism, we also drew attention to the limitations of the not-for-profit approach, suggesting that an earned income strategy and a Community Funding Enterprise (CFI) would allow freedom to invest for social benefit. This is how we describe it now.

    “This is somewhat similar to non-profit in the US, except we can conduct any business we see fit according to normal business rules without restrictions that bind non-profits or charities. We pay company and personal taxes according to usual business rules. Profits are not shielded in any way from normal taxation that any for-profit business has to pay. Whatever is left over is invested in the social purpose or purposes of our own choosing. That way we can do business in the normal, traditional way, changing only one thing: the output, what happens with profit.”


    • jeffmowatt

      Some good and bad news on innovation as I speak.
      First a new book which recognises that enterprise can be take further than patching up problems caused by conventional business:

      “The Responsible Entrepreneur sees that any business can be carried out responsibly and that, in fact, responsibly is the way a good business runs. It makes life better by how it does business and in all of its endeavors works consciously in ways that foster a better natural and social world. Responsibility is committed to cleaning up all business, not simply to having social entrepreneurs solve problems created by other, less than responsible ways of doing business.”


      On the down side, Muhammad Yunus expresses his fears that social business, founded on what seems much like the UK guarantee company model, will be hijacked by government and it’s constitution and beneficiaries altered.



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