Measurement and scale: the social entrepreneur 16 years on

As oxymorons go the social entrepreneur has not done badly, especially considering its modest beginnings” – so begins Charles Leadbeater in his contribution to Twenty Years of Ideas, a collection of essays to mark 20 years of the thinktank, Demos.

More than any other thinktanker, it was Leadbeater who first brought the term ‘social entrepreneur’ to the attention of politicians, civil servants, journalists in the UK. His 1997 Demos pamphlet The Rise of the Social Entrepreneur is, even for those of us who disagree with many of its key arguments, both a seminal text and, as 16-year-old think tank reports go, a surprisingly good read.

Responding to his former self in honour of Demos’s 20th, Leadbeater reflects on what he now feels he got right and wrong in 1997, and also outlines two key challenges for social entrepreneurs going forward. He says: “What we got right, mainly, was our timing. Social entrepreneurship had developed in the margins: small organisations and slightly oddball people working in marginal communities… Demos managed to put a name to an emerging practice, which then took off.

He adds that: “The right idea at the right time can help name and shape a movement, but only if it becomes common property, used in many different settings by many people. That is what has happened to the idea of the social entrepreneur.

On the other hand, Leadbeater now accepts that he got a couple of things wrong: “The first was that the report accepted, rather uncritically, that social entrepreneurs were heroic, lone individuals. The truth is more complicated.

As I’ve said elsewhere, along with many others, the ‘heroic entrepreneur’ idea is one that’s sent policymakers and social enterprise supporters off down plenty of blind alleys over the last 16 years. It seems to me to be an an American idea (ultimately rooted in Hollywood) that translates particularly badly to the UK but people working in the US social sectors may find it just as annoying as we do. Either way, the result has (in some cases) been too much support for overly self-confident hot air merchants and not enough respect or support for people who quietly get good stuff done.

Equally interestingly, for Leadbeater: “The second mistake was to pit the lonely, heroic social entrepreneur against the clumsy, clodhopping state, as the enemy of change.

He adds: “There are many more people working in public services, at all levels, from head teachers to council chief executives, who see themselves as civic entrepreneurs. They increasingly adopt many of the methods of social entrepreneurs outside the system: spotting needs and opportunities; and trying to mobilise resources from inside and outside the public sector.

Leadbeater is right to identify this as an error in late-1990s social enterprise thinking although, while most of us have rejected the heroic entrepreneur model, the idea that social entrepreneurs are axiomatically cleverer, more innovative and even morally superior to boring old public sector workers is a misapprehension that many in the social enterprise movement continue to labour under.

Like any sector, the public sector employs plenty of passionate, creative people determine to find new ways to deliver positive social change (while, like any other sector, also employing some people who are neither passionate, nor creative, nor particularly interested in social change but capable of doing some things competently) but the system they operate within places extreme restrictions on their passion and creativity.

Dismissing public sector employees as clodhopping jobsworths alienates both the people who think there’s nothing wrong with the public sector, and the (possibly millions of) people who know there’s something wrong and are doing everything in their power to change it.

Leadbeater is right to point out that: “The reality is that there is no alternative to working with the public system and forming alliances with people inside it.

That was always the reality but the 2013 reality is very different to the 2003 reality. In 2003, ‘forming alliances’ meant social entrepreneurs and enlightened public sector employees working together to tackle common problems and both getting paid to do so. In 2013, it’s more a case of social entrepreneurs working with the public sector to take on contracts and/or to find entrepreneurial ways to fill gaps that have emerged in place where the public sector used to be. The principle’s the same, though.

Leadbeater concludes his essay with two challenges for social enterprise and social entrepreneurs moving forward: “Two challenges in particular stand out. One is scale and growth.

He notes that: “Almost two decades after the social entrepreneur burst onto the scene we are still not much further along in understanding the different strategies for how social enterprises scale.

There’s been plenty of good work done on scaling – from Nick Temple’s Social Franchising Manual, to research from TSRC and The Young Foundation, amongst others – but Leadbeater is right that the ever-growing desire for scaled-up social ventures from policymakers and social enterprise leaders hasn’t been matched by ever-growing numbers of scaled up social enterprises.

Leadbeater reflects that: “This is only partly an issue of funding and investment. Even if that were available, the skills and understanding to scale social enterprises successfully are still in short supply.

While he may be right about funding and investment being the biggest issues, there’s no reason to assume that there’s a particular combination of skills and knowledge that, if gained or discovered, would provide a blueprint for scaling-up businesses called social enterprises.

More likely, is that – in the absence of an explicit decision by government to actively discriminate in their favour in public service markets – relatively few of the kind of public service-focused social enterprises Leadbeater focuses on will ever reach scale (in the sense of £25million+ turnover) as commercial entities by any means other than ‘spinning out’ of the public sector itself.

That doesn’t make scaling any less of an issue, though, and leaves the question of scaling up enterprising social innovations – as opposed to social enterprises as organisations – in even greater need of answers.

Leadbeater’s second challenge: “is metrics and measures. A lot of work has been done to create measures of social return on investment and blended value. Yet the truth is that too many social enterprises still sell themselves mainly on anecdotes and stories rather than well-grounded numbers and evidence.

This is undoubtedly true. It’s partly down to the fact that there remains a mighty chasm of confusion separating the worlds inhabited social impact measurement industry and most social entrepreneurs. The median turnover for UK social enterprises is £187,000. That’s not an excuse for having no meaningful way of explaining the positive social change you deliver at all but, when it comes to measurement systems, most social entrepreneurs don’t even have time to understand what SROI is, let alone implement it in their businesses. There’s a gap in the market either for off-the-shelf impact measurement package that’s applicable to small (most) social enterprises and/or some really good suggestions for how we can demonstrate impact without one.

That’s not the big problem, though. The big problem is that most social enterprises currently have no commercial incentive to measure what they do – there are very few customers for measurable social impact. In real life, beyond the rhetoric, very few social investments are based on a contractual connection between financial and social returns. As reported here, you don’t get a better deal from a social investor by proving that you’re delivering positive social outcomes.

There are signs this may be changing but it’s a change that’s only beginning to take place on the margins (that’s the margins of the ‘specialist’ social investment industry). Similarly in public sector procurement, it’s currently mostly only through specialist pilot projects funded by Social Impact Bonds that there’s a clear, direct link between social enterprises demonstrating social impact and getting paid.

The Social Value Act is likely to have some effect but public sector agencies have as great a need as small social enterprises to find viable models of measuring social impact without vastly increasing the costs of procurement and monitoring at a time when budgets are shrinking.

Leadbeater is right to flag up these challenges, which both need considerable further unpicking. He’s also right to reflect with satisfaction that: “The Rise of the Social Entrepreneur helped to kick off a wave of change. Social entrepreneurship has become a global movement involving hundreds of thousands of people.

That movement has plenty to do.


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4 responses to “Measurement and scale: the social entrepreneur 16 years on

  1. dancarins

    Excellent post. From my experience in the Black Country, plenty of social enterprises simply expect public sector contracts and grants by virtue of being a “social enterprise”, rather than because of the social or environmental impacts they can certifiably deliver: as a result, their collation, analysis and dissemination of data remains undeveloped.

    Being able to call a company a “social enterprise” should be demonstrable through data, not just by the wording on its articles of association.


  2. Ours quite a different world to the social enterprise I know, We’ve concieved and shared business models, researched and designed development strategies including franchise models, invested our own funds and taken a stand for economic and human rights.
    That influence may be hard to quantify in financial terms but then we’ve always said that “profit is redefined in human terms rather than pure quantitative analyses that remove human and social concerns in the name of profit”
    What Leadbeater and other salaried wonks missed was the fragility of the fractional reserve banking system which led to the 2008 crisis. They also missed our warning that it would lead to uprisings.
    You may have read recenlty that Pope Francis has castigated the idolatory of money in the capitalist system. that he wants to see a person-centered approach to economics. I know a lot about this in a practical context


  3. In reponse to ‘There’s a gap in the market either for off-the-shelf impact measurement package that’s applicable to small (most) social enterprises’,

    Watch this space. Exciting, potentially disruptive work going on at HACT…


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