Social enterprise and the UK economy: bar chart or venn diagram?

[file:field_file_image_alt_text]

I recently asked a group of postgraduate students researching social enterprise in the UK to devise a diagram that illustrated how the social enterprise sector fitted into the UK economy. The great majority produced bar charts, with the private and public sectors, and social enterprises represented as unconnected silos. When asked to explain and justify their thinking, the answers were consistent, ‘the public sector commissions and procures from some social enterprises, and a few social enterprises supply the private sector, but they are not connected.’

As Lee Atwater the (not exactly admirable) late American political consultant said, ‘perception is reality’.

But is the perception of some bright and informed young people right, and is that the way it is going to stay?

As Pioneers Post launches, I think it is useful to review the current state of social enterprise in the UK, and to think about what it could look like in the near future. If my thoughts provoke informed comment – good!

There are some excellent social enterprises operating in the UK today, delivering best in class services and winning business in competitive markets against private sector opposition. I am in awe of what Bryson Charitable Group, the Care Plus Group, NAViGO, and Sandwell Community Care Trust do. And there are many, many other social enterprises I could have mentioned. However, let’s face facts, the majority of social enterprises are small, not over-equipped with management capacity, and struggling.

In many ways I think the social enterprise sector has over-sold itself over the past two years. Look how few social enterprises have spun out of the NHS, see how many social enterprises struggle to win procurement contracts (and I know the arguments about financial bonds etc) and how few really supply goods and services to the private sector (Goodwill Solutions being an honourable, but rather lonely exception).

I can see why the postgraduate students drew the diagrams they did.

What diagram will they produce in five years’ time I wonder? My guess is that they will draw a Venn diagram, clearly showing the inter-connectedness between the three sectors. In fact, my bet is that it will be increasingly hard to discern three sectors at all. So, what is going to change? The answer is growth and new entrants to the sector.

Let’s look at growth. If social enterprises are struggling to get contracts from the public sector because they are too small or don’t have the financial reserves to satisfy commissioners’ approach to risk-minimisation, then the logical response is for social enterprises to form consortia to bid for specific contracts and to merge to get the scale they need. The good news is that consortia are already being formed, and mergers have successfully taken place.

Obviously, I can’t say who is doing what at the moment because of confidentiality issues, but anybody who wants to find out more about how social enterprises are joining their strengths – fully or for specific opportunities – should certainly come to the Growing Successful Social Enterprise: Lessons and Opportunities conference in March. There are going to be some fantastic case studies of how to do it – get the scale necessary to compete - presented. Consortia and mergers are not the only way to grow of course, organic growth based on excellence is a valid model. However, to compete effectively in the time scale the social enterprise sector needs to be operating at, merger and consortia seem to me a logical – albeit not problem free – response.

What of new entrants then? Here I think the models will be public sector spin-outs and large corporate initiatives based on the CSR agenda. The spin-out model is too well known to need me to say much. However, one effect of the funding crisis facing local authorities (and I am deliberately omitting the NHS, the ‘blue light services’ and education) is that whether they want to or not, councils are going to have to devise new ways of delivering services and social enterprise models will be a large part of the response. What the social enterprise sector needs to do is devise and deliver the support local authority managers will need to spin out services quickly, effectively and with maximum social impact.

More novel will be, I predict, the arrival of new entrants into the social enterprise world from the private sector. Whether companies do it for genuine or publicity reasons I don’t know (or care) but the private sector devotes huge resource to its corporate social responsibility objectives. I think it will not be long before large corporates set up social enterprises of their own (probably as non-profit making subsidiaries, managed by high-fliers on fast-track management development schemes). These enterprises, with the financial muscle of their CSR budgets, will be able to compete successfully for contracts as well as supplying products and services direct to the public. The Asda NEET apprenticeship scheme providing training and employment and services to the social care sector? The Vodaphone ex-offenders scheme providing environmental services in Britain’s woodlands? Why not?

If my analysis is right (and we will know in 2018) then postgraduate students of the future will devise diagrams that are not anything like the bar charts produced by their 2012 counterparts. The links between the private, public and social enterprise ‘sectors’ will often be hard to discern. The picture they draw will be a Venn diagram, or even just a great big blob!