We need good organisations, not just good products

What if your social enterprise provides a great product that helps lots of people, but also has some unintended negative consequences? Anton Simanowitz, who helps businesses to become more effective, and communications specialist Katherine Knotts argue that organisations must examine all of their systems and process to ensure that the best results are always achieved.

“From day one, I was in debt. Two years on – I’m still behind on my payments, and really struggling to find my feet with my finances.”  

This is what we heard when recently talking to a tenant of a housing association. Taking up a new tenancy had thrown him into unmanageable levels of debt – a direct and unintended consequence of one social enterprise’s failure to see the big picture. 

No one can dispute that the housing association delivers social value in its core product – low-cost homes for vulnerable people. But a housing association is also a business; in these days of austerity there’s financial pressure to keep properties filled, in order to avoid lost income.

The man we spoke to had been in private (furnished) rented accommodation; he was on the housing association waiting list; he was newly-married; he had just paid a month’s rent in advance. One day he received a call with the good news that a flat was available, and instructions to come to the housing association office the following day with a deposit to pick up the keys.

If he failed to do so, he was warned, the flat would be offered to the next person on the list. So with only one day’s notice, he paid the deposit for the new (unfurnished) flat and moved in.

With his limited funds, he first bought gas and electricity cards; he then borrowed money (at high interest) to purchase a bed, a fridge, and a cooker. So straight away, this vulnerable individual found himself in debt, all because of an organisation that was trying to help him improve his situation.

So why did this happen? These types of stories about unintended consequences are worryingly common. 

Social enterprises seek to create a positive impact on the people they serve and the wider world around them, by tackling the failures of the market (and the public sector) which overlook the needs of poor and excluded people. But in our work over the past 20 years, we see a surprising problem emerging. Organisations too often experience a gap between theory and practice – which either, at best, limits their effectiveness at delivering social value, or, at worst, actually puts their clients at risk. 

We all begin with good intentions – but good intentions simply aren’t enough. Fortunately, we have seen in practice that small changes to how these organisations work can lead to dramatic positive changes in their impact.

How difficult, for example, would it be for the housing association to recognise that it’s not simply delivering a product (in this case, a low-cost flat) that matters, and to consider how to support the person through that transition – to provide in this case a pool of white goods or furniture that could be rented or borrowed; to allow more time for a new tenant to move in? 

Our proposition is this: delivering on good intentions requires social enterprises to move beyond a focus on delivering good products, and instead build good organisations. Products that meet clients’ needs are important, but we also need to focus on the operations of how we deliver these, all the while learning from what works – and what doesn’t.

This is one insight in our recently published book, The Business of Doing Good, that explores the journey of AMK, a microfinance organisation serving over 370,000 clients – half of whom are below the poverty line –  through a network of branches reaching more than 80 percent of villages across Cambodia, making it the national market leader in outreach. 

Managing what matters

Much like the housing association, AMK has good products that meet clients’ needs (in this case, small loans to help clients invest in farming or micro-enterprises). But its thinking about impact doesn’t end there.

It recognises that when it comes to translating good design into good outcomes, the devil is in the detail about how products are managed and delivered. In the product design phase, there are key elements built into a product to create benefits and protect clients from harm. But where staff don’t understand these elements, don’t see their value, or aren’t motivated or don’t have time to follow through on them, they will be overlooked in the name of simplicity or efficiency.

AMK once ran into problems with how staff dealt with loan appraisals – involving time-consuming process that includes a visit to the clients’ home. This is meant to give staff a window into clients’ lives, and be sure that the client isn’t taking on too much debt. But when staff caseloads went up, they started cutting corners on the home visit to serve ever-greater numbers of clients. A “zero tolerance policy” to missing home visits was quickly introduced, supported by the internal audit department.

Similarly, AMK recognised that reaching poorer clients in more far-flung rural areas is difficult – and while its incentives encourage field staff to achieve high client portfolios, it makes adjustments where staff work in more remote areas, where clients are harder to reach, and where they’ll be able to reach fewer of them as a result.

The end of “command and control”

The final point about good intentions is this: we can achieve great product design, and avoid the “reality gaps” wrought by misaligned incentives, or poor quality control – but there’s always space to improve on the work we do.

While it might be nice to think that organisations can be run by pulling levers from the centre, and the lives of our customers or beneficiaries can be changed in a foreseeable, formulaic ways – the world is not ordered and predictable as we might like to think.

In addition to the “hard” side of building the organisational processes and systems to deliver value, the “soft” side of the organisational culture and how staff engage with the purpose of the organisation, reflect on what they are doing, contribute to learning and improving practice is also critical.

AMK learned this: where the reality that staff face on the ground is actually different to the theory enshrined in their training and manuals, this needs to be communicated up to top management, so that AMK can improve what it does. 

Building an organisational culture to engage staff in an organisation-wide conversation around what matters for clients is a key part of AMK’s success. Having your staff on your side in terms of their understanding of what you are trying to do, focusing on delivering your intent (and not just the letter of their job description) and learning and improving is key part of being effective.

Connecting with the bigger picture of their work (and actively contributing to the improvement of that work) is hugely motivational – especially when that work is difficult, as it so often is for organisations in the business of doing good.

The insights emerging from AMK’s experience demonstrate how a deeper understanding of “social value” can better harness the force of business for good. Delivering the right products matters: products that people want, and products that meet their needs.

But going beyond the product, we need to think about the systems and processes for delivery, and ensure our staff engage in thinking about where we may be doing harm or where small adjustments in our services (or how they are delivered) may enhance our impact. To us as organisations, those small changes might be “low-hanging fruit” – but to those we serve, they could make all the difference.

Business of Doing Good

 

To find out more about The Business of Doing Good, click here.

This article was co-written by Anton Simanowitz and Katherine Knotts. Katherine is a writer and strategic communications specialist, who works with microfinance and other social purpose organizations to help them analyse what’s working (and what’s not), distil lessons learned, and package those lessons for other practitioners through written and film media. 

Header photo credit: Anton Simanowitz