10 Jun Managing a Nonprofit as a Social Enterprise

By Jackie Sue Griffin, MBA, MS

Many nonprofit organizations are exploring social enterprise business models as a way to enhance their programs and services, deliver on their mission more effectively and generate new revenue that allows them to stabilize and diversify their funding bases. With this approach, nonprofits are developing innovative ways to meet social, environmental and cultural needs.

There are eight essential features of organizational development that enable you to successfully launch and manage a nonprofit as a social enterprise.

If your nonprofit is considering a social enterprise, be aware that your organization must have:

1. Clear Vision and Mission Statements: The organization’s board and staff must understand the values upon which your vision and mission statements are based.
2. Strategic Plan: You must have a specific strategic plan by which your organization has identified risks and opportunities and can respond and adapt as needed. The board and staff also have to review the plan periodically.
3. Process for Managing Internal Change: Your organization has to have the capacity to manage change in a positive manner. If your organization values innovation and allows the staff to provide their input into planning and operations, you will create a pioneering organization with the capacity to respond to existing and new opportunities.
4. Internal Conflict Management: Your organization has to have the ability to deal constructively with conflict and foster a nonthreatening atmosphere for communicating challenges and issues.
5. Robust and Transparent Financial Management: Your organization must be aware of its financial position and develop a credible economic scenario for two to three years. The plan must define the likely risks and opportunities and your organization’s intended responses to them.
6. Operational Sustainability: You must consider cost-effectiveness when your organization evaluates its services and programs. If your organization already practices this, you can more easily manage it.
7. Personnel: Your staff is your key resource. Your organization must have explicit personnel policies, with clear job descriptions and lines of responsibility and authority. It also must have a culture that encourages staff to be creative and take risks.
8. Learning Organization: Your organization must be committed to constant learning. This applies to both board and staff levels.

Business Models of Social Enterprise

Social enterprise business models allow nonprofit organizations to diversify funding sources and build sustainable financial support for mission-based work. There are three main business models:

• Product Business Model: Utilizing this model, nonprofits can generate a tangible product that addresses a gap in the local market. The products can be sold either directly to community members or other local businesses.
• Service Business Model: This model involves providing a service such as healthcare, education or financial resources to communities. Like the product business model, services can be sold directly to the community or local businesses.
• Marketplace Business Model: This operational paradigm allows nonprofits to match producers of products or services with their buyers. Access to the marketplace is typically free for the buyer, but the producer has to pay a fee for each product sold through the market.

Social enterprise activities are an excellent opportunity for nonprofits to generate earned income, which provides steady cash flow to further the organization’s mission. The benefits of social enterprise activities for nonprofits range from reputation enhancement to increased management and overall business capacity.