Social Enterprise and the Role of the Board of Directors

Social Enterprise and the role of the Board of Directors

While there is much written about social enterprise and the role of Management teams, there is little written about the role of the Boards of Directors. As a board member, one’s role is to direct and protect the organization. While there are different types of boards, the role of a board member is to govern and to manage the risk level of the organization while ensuring its ongoing operation. In many ways social enterprise directly challenges the role of a board member. It creates new organizational risks. It is a departure from the known model of operation into something which may be completely new. It merges traditional public and private sector roles and the “grey” area that it represents in both tax and the law may leave more conservative boards of directors uncomfortable.

Boards, like organizations, are a spectrum. They can be ultra-conservative, to completely open and unorthodox, from structured to relaxed. The culture of a Board goes a long way to determining the culture of the organization. It will determine the latitude given to an Executive Director and team to experiment with new ideas, their aversion or openness to risk, and their ability to challenge the status quote. In short, the culture of a board can determine an organization’s success with social enterprise.

If an organization wants to be successful at social enterprise, they have to create a board and organizational structure that is conducive to this operational structure. All facets of the organization must be organized to support social enterprise activities, from reporting to financial statements, to team roles and responsibilities.   This is because social enterprise is a radical departure from traditional not for profit and charity work. It means adopting market principles and embracing risk, encouraging innovation, design-thinking and a private sector attitude. In spite of all of this, social missions sit at the heart of most organizations and balancing social mission with business principles can oftentimes leave board members confused at best.


What is a board member or Executive Director to do? Use the following principles as a starting point for establishing social enterprise in your organization:


  1. Establish your mission. What is it that you stand for? If money was no object what would your organization do?


  1. Establish social enterprise vision and long-term goals. Why do you want to enter the social enterprise space and what do you want to accomplish?


  1. Let your mission and goals guide your strategic discussions. These two items are your compass and map. They will be your “why” you do what you do, and will give you the path to get there.


  1. Decide what you sell or do. Most organizations are already businesses. The funders are the customers, and what funders are willing to pay for changes over time. Rather than suffer from mission drift, you have to ensure your organization “sells” something or provides a service that stands the test of time and is fundable by someone.  Social enterprise is simply saying, let’s turn the problem on its head. What do we do well, and what can we offer the public/government that is of value? Why do we exist as an organization should be the principal question driving your discussion.


  1. Develop a constraints matrix. Every organization is limited by constraints. If you do not know what those constraints are, you cannot effectively deploy your resources in a way that will bring you the best returns. Ensuring everyone knows the constraints, makes it easier to dedicate resources to particular causes


  1. Make your resource inputs match your desired outcomes. I have seen organizations involved in community development focus all their energy on doing a community event. The intended benefit is community building, but entire days and weeks of planning might be involved for an event that could have been organized in few short hours by an experienced event manager. The ideology behind this is that it empowers those involved to learn how to do something through self-discovery, however, the reality is that most of us learn best in teams and particularly if those teams are led by an experienced individual that can guide the project. People in turn, will learn by observing and participating. As they gain experience, they can then, take on additional responsibilities. If the focus is social enterprise, then a proportionate amount of energy has to be put into developing the project compared to what their desired outcome is. Programs can only run if the organization itself exists. Therefore, if social enterprise is the focus, then all activities must connect to social enterprise on some level and drive that mission forward.


  1. Change your financial reporting- I cannot tell you how many not for profits give Board Members line by line reporting, copies of bank statements, and transactional level information. A board member, with the exception of a treasurer does not require a copy of every transaction, but rather high level information that will help them see the big picture. Executive directors cannot give a list of expenses to a board and then wonder why the board wants to micro manage.  Give your directors information to match the level of involvement you want them to have.


  1. Give them tools to compare. Give them a basis of comparison so they can have standards to make decisions by. How is success measured in your industry and what are examples of other businesses that have achieved success. By giving them a basis of comparison, it makes decision making easier for them.


  1. When presenting, don’t give them problems. Give them solutions.  A solution oriented ED is focused on saying–this is the challenge I faced, and this is the decision I made, rather than always seeking board permission. It is easier to start a conversation around the words “what I did”, rather than “what I propose”. What i propose suggests you are seeking their permission. A strong ED, is not afraid of making mistakes, and so does not seek permission, but rather makes decisions and recommendations. I remember once telling an ED that it was easier to beg forgiveness than seek permission. While this is not something I recommend, it is important to remember that being assertive and bold in social enterprise will get you farther than being meek. This does not mean acting irresponsibly, but rather making informed decision and having the courage to stand by them.


  1. Do not fear failure. Understand it, calculate it, and then find ways to mitigate it. Always be aware that failure is a reality of any business venture. By definition it is inherent in everything we do.  Focus your energies on fighting and preparing for failure, and you will be farther along than most when it comes to ensuring the success of your venture.

While entire books could be written on this subject, I hope this begins to guide your discussions on the importance of boards and social enterprise  and over the coming issues, we will continue to look at different ways boards can support social enterprise in your organization.