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Two Lessons Social Entrepreneurs and Nonprofits Need to Learn

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So you think you want to be a philanthropist or a social entrepreneur, to use your hard-earned talents to make the world a better place.

This is your cold shower.

Doing good requires more than good intentions, money, an idea, and a perceived need at the bottom of the pyramid. You need to think through all the consequences of your project, develop an operation that is sustainable for the long haul, and learn from those you hope to help.

Stefano Funari has all of the above; he's taken his cold shower. Having observed that good intentioned, foreign-led projects can have unintended consequences and that what we think people need may not be what they really need, he's moving slowly into the world of social entrepreneurship.

His primary lessons -- learned from working in the slums of Mumbai -- are that all staff of his eventual enterprise must be paid wages sufficient to sustain a decent lifestyle and that the actions of his organization -- whatever form it takes -- do not create new problems while solving old ones.

It's easy to lose sight of both these goals when you are idealistic and full of more energy than experience. Funari is an idealist but a pragmatic one. He has been an entrepreneur, a corporate executive, and worked for a foundation vetting projects for grants.

Now he's gaining a different kind of experience, as Chief Operating Officer of CORP India, which operates programs for women and children at 20 locations in the Mumbai slums. The organization provides self-help groups and job training for women; nursery, preschools and schools for children; and shelters for street children. Working as a teacher in the schools and, sometimes, spending the night on the concrete floor of a shelter, he is learning what it's like to live at the bottom of the pyramid, what matters when you're down there, and what you've got that can make your life better.

Among the clearest lessons are two: You can't build a business plan, whether for a nonprofit or a social enterprise on the idea that well-qualified people will be willing to work for a long time without realistic compensation and be careful of unintended consequences.

Nonprofits and social enterprises must pay market salaries.
Staff, including local staff, must be paid a living wage, one on which they can support a family and live a decent -- not luxurious but decent -- life. Some of the teachers in the programs run by his organization weren't able to provide good schooling for their own children. He has set aside slots in CORP India schools for the children of staff and includes their families in events.

Unintended harm may offset the good you do.
Funari is adamant that social services, whether nonprofit or social enterprises, are essential, especially in countries like India where the government has failed to provide a social safety net. But good hearts can cause unintended harm.

He recalls a program designed to create jobs to rural India by bringing tourists and their money to remote areas. One plan was to have tourists stay with local residents, to get an authentic experience. The unintended side effect: If women lived in the host household, their reputations could be ruined if a male visitor spent the night.

Talking with the neighbors of CORP India shelters for young boys, he realized that the facilities created some resentment among slum dwellers whose own children could use help. So he joined forces with another nonprofit to create a Toy Library. For two hours, two days each week, any child in the area can play with any toy in the library. Now the shelter is a resource for everyone, not an exclusive haven for a few.

Funari's beliefs focus on benefiting a whole community rather than the few workers needed to produce whatever it is that his future enterprise produces. Instead of above-market wages, offer market-rate wages and support a community center or school, for example. Whatever you do, don't create divisions and envy within the community.

Funari is an entrepreneur through and through. He looks at the world in terms of supply and demand: What do these slums have a supply of that we can create a demand for? How can we differentiate a product and create a competitive advantage? The women trained in CORP India programs to use sewing machines need something to sew. Fabric from old saris is abundant. He challenged fashion-design students in Milan, Italy, to come up with designs, using the sari fabric, that could be sewn by women with basic sewing skills in the slums of Mumbai.

With partnerships, sponsorships, and reaching back to old connections, he is bringing new resources to the economy of the Mumbai slums without breaking up the social network that their residents value above money.

He's had his reality check.