TEXT SIZE  

 

Running a business is never easy but the measures of success are clear: profitability; customer satisfaction; a growing customer base; employee engagement and satisfaction; and your satisfaction all come to bear on your success. However, assessing performance is even more difficult for businesses that exist to make money and make the world a better place. Are you and your customers clear about your company’s social purpose? Is your company making a meaningful difference with respect to the social change its hope to achieve? Have you achieved the right balance between profit and purpose? As the number of social purpose businesses continues to rise, these questions are becoming more material. A 2013 study by Georgia Levenson Keohane for the McGraw Hill Financial Global Institute shows social entrepreneurship of all kinds are increasing significantly in the United States. In the United Kingdom, a 2011 study by the Policy Research Group at the University of Durham revealed that there were approximately 68,000 social enterprises in the United Kingdom, an increase of more than 400% since 2004. Are the social entrepreneurs who run these enterprises up to the task of running a business with purpose? Bill Drayton, founder of Ashoka and widely considered the father of modern social entrepreneurship, has said that the kind of social entrepreneurs he was seeking — passionate, resourceful, system-changing innovators who could fix static social, political and economic equations — are extremely rare. It’s easy for social entrepreneurs to be lured into a false sense of possibility by what large corporations are doing. For example, PepsiCo has “Performance with Purpose,” but it is also a large profitable corporation whose success doesn’t depend on its social mandate. Most social purpose businesses are small and new and, to be successful, their owners need to maintain a sense of purpose even when they’re laying awake at night worrying about cash flow. TerraCycle, founded in 2002 by Tom Szaky, is a company with a social purpose: eliminating the idea of waste. The company collects difficult-to-recycle packaging and products and repurposes the material into affordable, innovative products. It built a reputation as a world leader in the collection and reuse of non-recyclable, post-consumer waste and in February, North America’s largest waste management company, Progressive Waste Solutions acquired a 19.9% interest in the company. Decision-making for social purpose businesses is complex. In what ways does a decision drive social change and build business value? What are the social consequences of making more money? How should the return on investment be measured? The paradox of social purpose businesses is that the most important measures of success are rhetorical. In 2001, when I launched Impakt, I had four interrelated priorities that were the foundation of the business I wanted and they are still the criteria that inform how we measure performance: 1. Only do work with purpose and have the courage to walk away from opportunities that pay the bills but compromise the calling; 2. Work with people (employees and clients) you genuinely like and respect; 3. Compensate people fairly; 4. Have fun. In the past 13 years, I’ve found out that profitability is qualitative Impakt is profitable when we have approximately equal results in each of these areas. I’ve also learned that it’s really hard not to apply conventional approaches to an unconventional business. For example, most companies are able to pinpoint how much revenue and profit they envision and work backwards to operationalize these objectives. Applying the same approach to a social enterprise simply won’t work because more profit may not deliver more purpose and more purpose isn’t necessarily profitable. It is possible to be profitable and loose your sense of purpose; it is also possible to be widely successful and not be profitable. Social entrepreneurs need to define their own measures of success and stick to them.