Although “profit” is sometimes a dirty word in the world of social impact, growing evidence shows that for social entrepreneurs looking to scale impact, priority must be placed on financial results. A recent Harvard Business Review article by Linda Rottenberg and Rhett Morris explain why this is the case.
Rottenberg and Morris highlight the unique challenge social enterprises face: fulfilling two missions. Social enterprises must be both financially viable and create social value for those they serve. Consequently, entrepreneurs who lead social enterprises have to make tradeoffs between social and financial goals, and the approach used to make these tradeoffs is a critical factor in determining the degree to which their companies will grow. The data show those who prioritized financial goals over social ones were more likely to grow their social enterprises and achieve greater impact. It may sound counter-intuitive, to take the weight off of the social impact side, but one entrepreneur from the study explained, “For long-term sustainability, you need to value business first and make sure that all of your actions have business case to support them.”
Ultimately, to avoid choosing between social impact and financial sustainability, social entrepreneurs should reduce the total number of tradeoffs that need to be made. So how is this done? Entrepreneurs should consider business models that are built to scale and align financial and social goals as closely as possible to minimize friction.
Alternative staffing agencies are great examples of enterprises aligning financial and social goals. By leveraging an established for-profit model, alternative staffing agencies are able to solve real labor market issues and provide jobs to people who face labor market barriers. Plus, the contingent labor market is growing—according to the American Staffing Association approximately 15% to 25% of the total workforce will be contingent by 2020, up from 10% currently—ensuring that the ‘financial viability’ side of the equation is covered.
At DePaul Industries we use the alternative staffing model to employ thousands of people with disabilities each year. This model is able to reduce the number of aforementioned ‘tradeoffs’ that need to be made, and encourages the “51% money and 49% mission” approach—ensuring neither the social mission nor the business value that sustains it are neglected.
Interested in learning more about our staffing model? Get in touch with us.