Social enterprises should pull rank in the race to competitiveness

Social value is rising up the political agenda, but Paul Henry from Inspire2Enterprise argues that social ventures are not doing enough to convince commissioners of their competitive edge.

There is no doubt that social value is rising up the political agenda, with the introduction of the Public Services (Social Value) Act 2012 and an increased focus by government on embedding social outcomes in public sector contracts. The purpose of the Act is to ensure that public bodies consider how the services they commission and procure might improve economic, social and environmental well-being.
There has been a long held view that the public sector places too much emphasis on price rather than considering the broader social impact of services they purchase, intensified over recent years as they move away from the role of service provider to purchaser and resultantly budgets are reduced. Many within the social enterprise sector feel they are being unfairly penalised as their social impact is not being taken in to account during the procurement process, leaving them unable to compete with those providing services or products at the lowest price.
There is still a very long way to go but progress is being made by the public sector. Improved legislation, a greater recognition of ‘value’ and not just cost, the introduction of market initiatives such as Bold Procurement and Commissioning and new approaches to service delivery. However, as with most things, there are two sides to this story. A substantial element of the procurement process is the management of risk, and finance plays a key role in this. Those responsible for procurement are less likely to buy a service from an organisation that is unable to accurately outline its financial position. Similarly ‘social value’ can only be taken into account if it is effectively recorded, measured and reported.
I was recently asked by a public body to participate in a panel to assess bids for a small fund they were managing. The purpose of the fund was to assist existing Civil Society Organisations (CSOs) in developing and piloting new social enterprise ideas. In days gone by the word ‘pilot’ often meant the rapid spending of some left over cash before the end of the financial year, with no long term outcomes expected. However in this case the public sector organisation in question was looking to the social enterprise sector to come up with new ideas and services to improve delivery provision and impact in its area of operation. The funding would provide pump prime funding which is often so very important when CSOs try to develop a new service or way of working.
The application process was clear, uncomplicated and merely asked for an explanation of the service that would be provided, the impact it would make and the provision of a simple financial plan. Aimed purely at existing CSOs, you would think that these questions would be relatively easy to answer. The reality was that I came away from the assessment panel feeling deflated and somewhat depressed. Why do organisations with a primary social purpose find it so hard to measure what they do and then demonstrate the resultant social value?
When sitting on this type of panel the one question you want a definitive answer to is: “If we give you the money, what will success look like and how will things be different as a result?” Astonishingly nearly 80% of the applications assessed by the panel failed to answer (or demonstrate) this to any meaningful or measurable level. And to compound matters further, the financial data generally provided was woefully inadequate, being incomplete, inaccurate or impossible to analyse.
The entire process left me more than a little frustrated. Public money is a precious commodity, even more so in these times of austerity, so if social enterprises are serious about what they want to achieve then they are going to have to put a lot more work into their understanding and approach in order to secure contract opportunities or funding. Otherwise these organisations are not only short changing the taxpayers but also their beneficiaries, as it is the latter who will particularly suffer if the organisation doesn’t secure the contract or funding, or worse still; the organisation ceases to exist as a result.
I am not suggesting the need for complicated financial management reporting or complex social impact measurement processes, merely the ability to prove that an organisation has a basic understanding of its enterprise. In other words in addition to capability, capacity and the track-record to actually make a positive difference, at a fundamental level an organisation needs to understand both its finances and the social value it achieves. I had no doubt that the vast majority of the applicants for the fund I referenced above were good people, working very hard to help others. However they needed to be able to convince a funding panel, which the majority singularly failed to do.
Much is being asked of the public sector to change the way it operates for the better. Surely now it is time for social enterprises to support this legislative change by rising to challenge of opportunity by getting their own houses in order?