To put it simply, social enterprises are businesses whose primary mission is to advance social or environmental causes. They contribute to society in numerous ways. They have the potential to ameliorate a wide range of societal and economic issues, including poverty and unemployment. Additionally, they can aid in bolstering the efforts of state, regional, and federal governments.
A large number of these businesses have been established in a variety of nations over the past decade. There has been a boom in South African social businesses as well. However, managing a nonprofit organisation is challenging. They have a social mission but limited resources and must balance the two.
This usually necessitates the presence of systems, procedures, and skilled leadership to ensure long-term survival and productive operations.
Difficulties Encountered by Nonprofits
Lack of funding can hurt the success and functioning of social enterprises. This means that they have a quite high rate of failure.
What Could Help Them?
We researched to try to figure this out. Our research centred on identifying what institutional capacities are necessary for social enterprises to function successfully.
Network capabilities and strategic planning are crucial, according to our findings, for social companies to improve their success. Owners and managers can better respond to the challenges their businesses confront if these issues are addressed. The issue of funding and long-term viability is fundamental to this. Donations are the primary source of revenue for social entrepreneurs.
The Eastern Cape province of South Africa was the site of our research. Among the highest rates of unemployment and longest periods of reliance on social services, this area is one of the poorest in the country. The region’s economy is suffering from the demise of key industries.
We looked into 147 local nonprofits and social businesses. Efforts to reduce poverty were the emphasis of one group of businesses. They did community empowerment projects, primarily in black neighbourhoods. Our second sample of social companies was focused on agricultural assistance methods to better community livelihoods.
A third team worked to aid communities in combating health crises like HIV/AIDS, the COVID-19 epidemic, and tuberculosis.
We surveyed social enterprises to learn more about their decision-making processes, connections to other groups, and ability to keep producing value in the face of adversity. The relationship between these three factors and performance was then modelled.
The findings indicated that three key capabilities were necessary to improve the effectiveness of social enterprises.
The initial one was preparing for the future. As part of this process, businesses must determine their long-term and short-term missions, along with their strategies and methods for achieving those missions.
Strategic planning regimes for social enterprises need to be established with care and forethought. They need to have defined goals, timelines, and responsibilities. These should serve as the basis for how they conduct business each day.
Reliable connections were required. The social enterprise must maintain communication with its constituents if it is to succeed at network building. The social enterprise’s ability to maintain connections with other influential members of the community ensures its continued viability.
Our findings highlight the importance of the social company not losing sight of its core mission: the co-creation of social value. This persistent interest in the social dimension calls for sustained community engagement and relevance on the part of the social enterprise. This is where our research on value co-creation comes into play. A social enterprise can only realise its social mission when it works in tandem with other stakeholders and community members.
We advise nonprofits to take the initiative to enhance their internal operations and management. This can be accomplished through management’s commitment to continuous improvement as well as bottom-up initiatives to enhance working conditions for all employees. Social enterprises can enhance their operations and provide better outcomes if they act with purpose and intention.
Strategic planning, networking abilities, and value co-creation are all areas where we believe financial and non-financial assets like land, buildings, motor vehicles, and equipment, as well as intangible assets like patents, goodwill, and intellectual property, should be channeled. This means they need to keep actively seeking money so they can keep doing what they do best.
In terms of in-kind contributions, this includes funding the education of those responsible for managing the social enterprise. Such in-kind expenditures fortify the social enterprise by encouraging the growth of the three characteristics identified in our study: a focus on strategic planning, the establishment of robust networks, and a persistent drive to produce value jointly by all stakeholders.
For the business to accomplish its social mission, it must have well-defined avenues for communicating key information to its many constituencies, including local communities. The social enterprise must set up formal networking structures to facilitate the development, maintenance, and renewal of its strong relationships with its stakeholders.