Social enterprise glossary

I’ve designed this glossary to help social enterprises and non-profit organizations in South Africa think clearly about their strategies and business models.

Strategic clarity involves clear thinking, and clear thinking requires clarity of language. Many of us also rely too much on jargon, which clutters our minds and encourages lazy and fuzzy thinking.

Here is some of the terminology that I regularly use in my consulting practice and lectures, and my short descriptions of what each term means in simple English.

Charity and philanthropy need to work hand in hand

Charity is seen as a virtue by humanists and all major religions. But it has also been polarising. Some people believe strongly in it and feel that it reflects the inner heart of humanity, while others believe that it cultivates weakness and dependency amongst the underserving. Even the ancients grappled with the very practical implications of charity.

Nowadays, the news is full of stories of philanthropists who have given their fortunes away to help others and for the betterment of society.

This article explores the concepts of charity and philanthropy, the similarities and differences, and when each is appropriate. It is not a deep dive into these topics, but rather a high-level review.

This has been one of the hardest articles for me to write. I’ve thrown out two earlier versions, started from scratch and done more research and thinking. Even though I’ve been in this field for 22 years, I’ve realized how my passion for social entrepreneurship had obscured my appreciation of charity. I’ve also learned when charity is the only moral and appropriate response to a situation.

Donors 10% overhead requirements do more harm than good

In the effort to be a good custodian of their philanthropic funds, some donors impose a cap on overhead expenditure (i.e. indirect costs). This amount is typically somewhere between 10%-20% of total grant value.

These organizations, and much of the public, believe that by limiting such expenditure, they will be getting more value-for-money; that the endeavour will be more moral. This belief is based on a superficial view of how non-profit organizations achieve impact.

While there may be contexts when this rule is appropriate, its blind application can easily harm good organizations.

Justifiably, this method of funding is frequently referred to as the “starvation cycle”.

This article will explain what is meant by the 10% overhead cap, how it can easily do more harm than good, and how donors can use much better measures to judge the merit of their philanthropic investments.

Setting up a side business: it is not the “holy grail”

I strongly believe that non-profit organizations should strive to cultivate additional income streams, including earning revenue from social enterprise activities. This helps to fund operations, build reserves and manage risk.

Some non-profit organizations choose to earn revenue from a “side business” – an undertaking which is distinct from their core offering.

While I support this sentiment, I believe that organizations tend to make two mistakes in how they implement these ideas. The first mistake is to underestimate the complexity, time and costs to achieve this. The second mistake is for organizations to embark on such a venture before they have strengthened their operations and improved their thinking. The third mistake is to neglect opportunities to earn an income which are more readily available.

This article discusses this second and third mistake. It suggests that the establishment of a side business should be the result of a journey and not the first step. It encourages organizations to improve their functioning and attend to weak areas, before they start looking outside of themselves for solutions. It also reminds organizations to thoroughly investigate opportunities to earn an income that may be closer in reach.

End-of-year reflection for 2017

The end of the year is approaching once again. Time seems to be “accelerating” recently.

I strongly believe in the value of debriefs at the end of a calendar year, and at the end of a difficult project which did not go as expected.

Formal reflection or debriefs also provide value to non-profit organizations and social enterprises. They help to accelerate learning. I’ve recently facilitated several end-of-year reviews for my clients, and the sessions have proven insightful. I encourage you to schedule time to reflect before this year ends.

Here are some extracts from my review before I took leave on 15 December 2017 for a much-needed break. It sheds some insights into my work with non-profit organizations and social enterprises in South Africa.

How to become a sustainable non-profit organization

This presentation investigates the meaning of “financial sustainability” and why non-profit organizations are feeling the pressure to become “sustainable”. It also highlights the importance of getting stakeholders to embrace these changes that are sweeping through South Africa’s non-profit sector, and the risks of not doing this properly.

The presentation shares 12 practical shifts or tactics that I’ve seen non-profit organizations use to improve their financial sustainability. The presentation ends with an outline of how you can develop your own sustainability strategy.

I developed this presentation for a “masterclass” on financial sustainability that I facilitated on 1 December 2017. This formed part of the Drivers of Change Awards, which were hosted by the Southern Africa Trust.

Ten characteristics of a social enterprise mindset

This one-page Strategy Brief identifies 10 characteristics of successful social enterprises, and demonstrates how all non-profit organizations and businesses can learn how to behave and think in this way. This brief also differentiates between the mindset and business model of a social enterprise.

What do we mean by “organizational sustainability”?

Non-profit organizations and social enterprises in South Africa are desperately striving to become “sustainable”. I believe that organizations should have a broader view of “sustainability” and be precise when discussing it. This will make it much easier for these organizations to develop “sustainability strategies”.

This short article explores 10 facets of “organizational sustainability”.

Thinking about income generation and profit in a non-profit world

Non-profit organizations and social enterprises that wish to design sustainability strategies need to have clarity around the concepts of income generation and profit, and how to achieve them.

This article aims to debunk some misconceptions around income generation, equity investments, loan finance, and the profits or surpluses that these organizations may generate or receive.

It explains that income and profit emerges from how an organization transacts with its customers. This approach will require organizations to learn new skills, practice new habits and adopt a different mindset. Although embarking on this process may feel intimidating at first, the benefits of being in a stronger strategic and financial position should make it worthwhile.

Strategy Rethink: Find a renewed sense of clarity and purpose

It is time for many organizations to rethink their strategies and learn the new rules for success. Those that are able to will thrive; those that don’t may be required to close their doors.

Kate Clayton and I have developed the Strategic Rethink in August 2013 to enable organizations to re-examine their strategies and discover what they need to focus on. Kate Clayton is a brand and marketing strategist that I’ve worked with over the years.

This Strategic Rethink is a six session programme that covers Business Strategy, Brand Strategy, Marketing Strategy, Marketing Plan and Strategic Debrief.

Read more about the Strategic Rethink and how it can help your organization on its journey.

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