A social enterprise is an organization that promotes social and environmental issues as its core business. They serve society in many ways. These help solve social and economic problems such as poverty and unemployment, among others. We can also support local, state, and national government activities.
Over the past decade, an increasing number of such companies have been established in many countries. South Africa is also seeing a rise in social enterprises.
But running a social enterprise is not easy. They must pursue social motives and at the same time strive to remain sustainable with little funding.
This often means that structures, processes and leadership acumen are needed for both operational success and sustainability.
Challenges facing social enterprises
The performance and operations of social enterprises can be affected by a lack of resources. Therefore, the failure rate is very high.
So what can help them?
We conducted a study to answer this question. We focused on what capabilities social enterprises need to operate effectively.
Our research shows that networking capabilities and strategic planning are key to improving the performance of social enterprises. Addressing these challenges will help owners and managers respond to the challenges facing their businesses. At the heart of this is addressing the challenges of financing and sustainability. Social enterprises rely primarily on donations.
On-site experience
We conducted our research in the Eastern Cape province of South Africa. The region is one of the poorest in the country, with high unemployment and continued social dependency. Industries on which the region’s economy depends are in decline.
Our research focused on 147 social enterprises in the region. One company focused on poverty alleviation efforts. They implemented empowerment projects in local communities, particularly those in black residential areas.
Social enterprises in the second group of our sample were dedicated to improving community livelihoods through agricultural support mechanisms.
Finally, the third group focused on helping communities respond to health challenges such as HIV/AIDS, the COVID-19 pandemic, and tuberculosis.
Some of the questions we asked in the survey were about how each social enterprise made strategic decisions. The relationship between social enterprises and their networks. And companies continue to create value even in the face of challenges. Next, we ran the model to see how these three issues related to performance.
The results showed that three key competencies are needed to improve the performance of social enterprises.
The first was strategic planning. This includes defining the company’s short-term and long-term direction, what it is trying to accomplish in terms of goals and tactics, and how the company will achieve all of this.
Social enterprises need to be deliberate and intentional when setting up their strategic planning structures. They need a clear horizon, goals and duties. These help drive day-to-day operations.
The second need was a strong network. Network building involves continuous interaction between social enterprises and their stakeholders. Networking capabilities allow social enterprises to remain relevant to other key players in the community.
Finally, our research points to the need for social enterprises to remain focused on their core business: the social imperative of value co-creation. The continued exploration of this social dimension requires the continued involvement of social enterprises and their relevance to the community. Our findings regarding value co-creation, or social enterprises partnering with other stakeholders and community members to achieve social goals, are important here.
Recommendations
We encourage social enterprises to actively work on improving their internal processes and structures. This can be achieved through continuous efforts to improve from the bottom up. This means that not only management but also employees will be driving change. By being deliberate and intentional, social enterprises can improve their operations and achieve better outcomes.
We also use financial and non-financial resources, such as tangible assets (land, buildings, vehicles, equipment) and intangible assets (patents, goodwill, intellectual property), to support strategic planning, network capabilities, and value co-creation. We recommend that you direct your efforts to . This means we must continue to carefully seek funding that can support our core activities.
In terms of non-financial resources, this includes investing in the training of people who run social enterprises. These non-financial investments support the internal development of three capabilities that our research has identified: a focus on strategic planning, building strong networks, and a continuous quest for all stakeholders to create value together. strengthen social enterprises through
Companies also need clear channels to share critical information with stakeholders, including communities, to help achieve the company’s social goals.
Formal network structures need to be established to enable social enterprises to build, maintain and renew strong relationships with stakeholders.