Managing a social enterprise is not an easy task since unlike a traditional company, the social or environmental impact component that the social enterprise tries to address adds an extra layer of complexity to the management. It is for this reason that social entrepreneurs often feel confused and do not know how to lead their organizations.
One of the main challenges facing social entrepreneurs is to determine the best leadership approach for their organization, whether one focused on impact or one focused on business. Usually, these types of leadership do not go hand in hand and usually create tensions within the organization since those members who work with a business-focused style tend to minimize the importance of the impact and prioritize income generation, while Impact-focused members give priority to impact over income generation.
Which is the right leadership approach?
The truth is that the 2 approaches are necessary for a social enterprise to scale its impact and be successful since each one has advantages for the organization:
Focus on business
The focus on business makes the organization more attractive to investors, generates more economic resources and has the potential to scale much faster.
Focus on impact
The impact approach, on the other hand, gives the organization a better understanding of the problem they are trying to solve and allows them to generate new ideas to maximize and scale the impact of the organization.
The key is then to strike a balance between the 2 approaches so that the social enterprise takes full advantage of both.
To achieve the balance between the 2 leadership styles, social enterprises must:
Be guided by a clear mission
A clear and concise mission statement will allow the social entrepreneur to better guide their teams regardless of the approach they work with. In a paper Onyx and Maclean mention how several studies on the motivation of individuals working in nonprofit organizations have shown that volunteers, paid collaborators, managers and presidents perceive themselves as means to achieve a greater collective goal. This means that when all members of the organization understand the mission of the organization and how their work contributes to it, it is easier to deal with the tensions that may arise between the 2 approaches since all the team members will be aligned by the common factor of achieving the mission of the organization.
Establish impact and business indicators
Another key element to achieving the balance between the 2 approaches is to establish impact and business indicators that not only allow to measure performance but also help to communicate the accomplishment within the organization and demonstrate the contribution of each approach to the achievement of the major goal.
A good example of a social enterprise that has achieved a balance between the 2 leadership styles is SolarInti, an Argentine organization that provides energy and economic autonomy to rural and low-income families through ovens and high-performance solar devices. To scale the impact of the organization, its founder Pierre-Yves Herrouet understood that it was necessary to leverage the mission with a focus on business, so he incorporated a team of professionals with commercial experience who joined the organization. Today, the organization has a mixed team of collaborators, some focused on impact and others focused on business, but all the members of the organization, regardless of their approach, are committed to the mission and understand the scope of their work through the complete set of indicators with which SolarInti measures the performance of its projects which include environmental, health, product, participation, and service indicators, among others.
Finding the perfect balance between the 2 approaches is not something that happens overnight, social enterprises must allow themselves to experiment with different iterations of leadership approaches, starting with small projects that allow them to analyze how the internal teams of the organization react and can determine the challenges and opportunities of the approach.