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How to Assess a Social Enterprise

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A friend transitioning from the corporate world to the social enterprise space recently asked me how to assess a social enterprise. How do we really know when an organization is doing quality work we should rally behind and having a real, positive impact, versus just using the right buzzwords?

The short answer is you can never really know. But there are a few aspects of a social enterprise, beyond their mission and approach, that you can critically examine before deciding to join or support one.

How do they talk about impact?

There are numerous ways to measure impact, and entire firms dedicated to doing so. There is no one "right" method, but the way a social enterprise talks about their impact may be an indicator of their operations and worldview.

Let's say there's a social enterprise that uses all the popularly accepted words about sustainable and holistic community development. And then when they talk about their impact they say, "We've built 100 schools in five countries in the past 10 years." Maybe they have a video or slideshow of "people whose lives they've changed," but not much more than general statements, and certainly nothing to prove sustainability or transparency. Maybe it's just another case of Three Cups of Deceit. Or maybe they're revolutionary, but how are we to know?

There is nothing wrong with statistics. They're great. Here is how Educate!, a social enterprise operating in Uganda, talks about their impact:

2014-02-19-ImpactChart800Pixels.jpg

It's not necessarily enough information, but it's a start that shows they are thinking about pre- and post-Educate! experience and impact. And it's much better than simply saying "X number of student's participate in our program."

Social enterprises should also know that qualitative measures of impact are critical to success, and identify that they are measuring the right things for their theory of change.

Now, let's go back to the first example. I would feel much more comfortable trusting a social enterprise's impact if they said:

We've built 100 schools in five countries in the past 10 years. Of those 100 schools, 80 have scaled by an average of 200 percent in the number of staff and students, and 60 demonstrated improved test scores in math and reading compared to other local schools. We shut down 20 schools that weren't proving impact, conducted in-depth analysis as to why those schools were failing, and incorporated lessons-learned to improve the remaining 80 schools, such as hiring more local teachers. We are also creating an evaluation mechanism to track alumni, as a measure of success for our educational program is that alumni show economic growth and career development compared to their family's socioeconomic status. Stay tuned for the results of our initial alumni study.

As another example, UnLtd India, an incubator for early-stage social entrepreneurs, worked with Dalberg to measure their impact, and shared the report on their website, with indicators of success as well as challenges and areas of improvement. That's the kind of transparency impact measurement requires.

Are they "award-winning?"

Awards are booming in this space. There are too many to keep track. But a social enterprise winning five business-plan competitions means nothing. Mulago Foundation's Kevin Starr even argues in Stanford Social Innovation Review that the prizes cause more harm than good.

Maybe the social enterprise you're looking at is an Echoing Green or Ashoka organization. Great! That doesn't mean they're perfect, but it's a good sign that they've been critically evaluated by a respected and knowledgeable community of social innovators.

Or, the social enterprise in question has been to every social enterprise pitch competition you can name, has maybe won a few times, but hasn't seemed to make much progress. That's something to think twice about. If they are supposed to be a revenue-generating organization, that's even more concerning because it could mean that they aren't selling to enough customers and need to rely on the $1000 they win from the local college business plan competition. If it's really early in the organization's launch, these awards and competitions are a start-off point. If they've been around for a while and they're always on the pitching track, don't take those awards as a signifier of anything other than a good PowerPoint deck.

And maybe they haven't won any awards. That doesn't mean they aren't a great or reputable organization, so don't ignore them just because they were busy building their business.

What's the founder's story?

How did the organization start? Why? What is the founder like to work with? Is this a case of founder's syndrome? These are all critical questions to consider.

For example, if the founder is working with a local or marginalized population, does the founder have experience actually working with the population before and while starting their social enterprise? Drive Change's founder Jordyn Lexton taught youth on Riker's Island -- New York's main jail complex -- and then worked with food trucks before starting her own food truck social enterprise employing and mentoring formerly incarcerated youth. She researched and understood the issues and communities for years before deciding to launch her business. And her founding team, and not just the truck employees, includes formerly incarcerated youth too.

If the founder read about a problem with health and cookstoves in South Asia, flew over and visited for a few weeks, and is now building their organization from the comfort of their home in San Diego, don't disregard them, but do research them further.

And don't forget to look at the rest of the team the founder chose. Are all the team members Harvard or McKinsey buddies? Are they diverse or global? Are they full-time or part-time? What's their previous experience and connection to the mission?

Where's the money?

Examine the business model of the social enterprise. Traditional non-profit fundraising? For-profit with social mission? A hybrid? Each model has their unique pros and cons, and all models should be considered in light of whether they are they filling a market-gap.

If the social enterprise is selling a product or service, does it have paying customers? Be wary of free pilots skewing customer numbers. Just because a company has a product that they offered for free to a large number of customers, with plans to receive payment in the future, does not indicate financial success down the line. Look at what happened to EduComp in India.

One other thing to look at is who funds the social enterprise. There are some well-known foundations and venture funders who have a history of backing incredible successes. Those funders are easy to identify, and for the most part, trust. If you find the list of funders, and it's just a few angels, a crowd-funding campaign, and or one foundation or corporation, that might be something to consider. Dependency on just a few funders, or one revenue-stream, is unsustainable. Of course in the earliest stages of the organization funders will be more limited, so this is only a potential red flag if the organization has been around for some time. That's a sign to ask more questions about funding and plans for growth.

Dig Deeper

Every social enterprise's situation will be unique, so use these questions and suggestions as an opportunity to investigate further, not just disregard the organization at first glance. And if you are looking to be employed by the social enterprise, the standard job search rules also apply -- consider organizational culture, fit of the role, and if you're truly passionate about the mission.

What assessment measures have I missed? Did I get something here wrong? Share your thoughts in the comments.