Expert view: What charities can learn from social enterprises about nurturing leadership talent

With social enterprises focusing on the ability to generate revenue, the strength and resilience of their leaders as much as social impact, Nicole Etchart, co-founder and co-CEO of NESsT, explores how this might inspire the charity sector’s approach to leadership.

By definition, whether for profit or non-profit, a social enterprise sets out to find innovative and entrepreneurial ways of serving social needs and, critically, of ensuring sustainability.

Whereas charities focus mainly on the cause or mission of their work, for social enterprises the organisational structure, sustainability and leadership skills are equally as important. The lens is angled towards the feasibility of the business model, its ability to generate revenues from the sale of a high quality product or service, and the strength and resilience of its leadership as much as its social impact.

For both social enterprises and charities, there is always the danger that an emphasis on serving beneficiaries results in a situation where internal structures and staff play second fiddle and do not get the support they need to develop. A shortage of funding and human resources can make this an even greater challenge, not least when it comes to attracting leaders and nurturing talent. Plus, there is typically far greater opportunities to secure project funding than to invest in the core.

In a world that seems to be moving ever faster, where there is greater social need, funding cuts and an increasingly tough climate for attracting public donations, it has never been more important that organisations explore a range of income sources and that they look after their people and inspire them to develop and upskill.

It is often social enterprises that attract the most dynamic leaders and shape leadership talent of the future. But why is that?

Leadership in a social enterprise context

Leaders of social enterprises will likely identify as entrepreneurs themselves. Typically, their focus will be on growth and sustainability of the organisation, their impact in the local community and they won’t want to be heavily reliant on donor funding. Conversations in the board room will be driven by performance (of the team, the organisation and its impact) and by identifying new opportunities to diversify. To succeed, social enterprise leaders will need to be resilient, willing to take risks and have a real commitment to be market-driven.

Kek Madar restaurant launch event

A great example is Kék Madár, a family and disability friendly restaurant, led by Andrea Mészáros and run by people with disabilities in the Szekszárd, Hungary. At NESsT, we provided start-up capital and Andrea did a fantastic job in setting up the restaurant and training up people with disabilities to run it. Further down the line, although she’d been offered EU funding to extend the business, this wouldn’t come through at the front end of the project so we provided soft loan capital to develop a catering arm of the business.  Most recently we helped her to get in front of several investors for funding to replicate the successful model in Budapest. Andrea has since become a hugely successful and influential leader in her own right. She can now help and guide others based on her experience.

When we make the decision to invest in a social enterprise, we focus primarily on impact; the organisation has to have a strong concept and the ability to achieve clear social change. But we look just as much at the individuals and leaders shaping the organisation as we do their mission and their ability to become market driven and grow their impact, asking: What skills and leadership experience do they have? Is the business model viable? What employment opportunities will the enterprises create? How will the organisation grow and transition to become a scalable business? What will happen when our funding stops? And what additional support do they need in order to create a strong team and achieve impact?

Identifying talent, leadership skills and potential is a key part of the process. Some people are natural leaders, while others will evolve and develop the skills they need to reflect, learn and grow. We also have to recognise that there are some – no matter how passionate they are for the cause – who are unlikely to become the strongest leaders and they will need good leadership strength around them if their organisations are to succeed.

Growing the entrepreneurial spirt of charities

Charities too are becoming more and more entrepreneurial, developing new approaches to income-generating and entrepreneurial activities, seeking to diversify their funding base and, perhaps more importantly, to further their mission impact. This is an exciting shift that has the potential to expand the reach of charities to new stakeholders, and enable them to carry out important ongoing mission-related objectives that donors are not always willing to support in perpetuity.

So what can charity leaders take from the social enterprise model to strengthen their leadership and maximise impact?

Above all, there needs to be recognition that the team is key and this requires strong leadership and the right systems in place to support it. Having a well-structured, supported team will allow the organisation to grow and achieve real impact.

At an individual level, strong leaders need to be forward-thinking and have a clear vision, but also need to be able to respond to what is happening around them; new opportunities and needs, as well as having the ability to reassess what they are doing. They need to have the ability to motivate their people not only through the power of the cause, but by having input into the decision-making.

Nobody can do everything and a successful leader will recognise this, with the ability to let go and delegate certain things, trusting team members to do their part, giving them the support and opportunity to learn new skills and develop. At the same time, leaders must also be willing and keen to learn; seeking advice from mentors – often from people in the private sector or fellow social enterprises – and to encourage scrutiny from those who won’t be afraid to ask the hard questions. And in a fundraising capacity, entrepreneurial leaders will always be looking to expand their network, build new partnerships and diversify funding sources to help them grow.

Let’s face it: having social impact is important but growing that impact and making it sustainable in the long-run is even better.

Nicole Etchart

As co-founder and co-CEO of NESsT, Nicole leads the organisation’s strategy, growth and impact worldwide to provide dignified employment to lift people out of poverty in emerging markets. (Find out more about Nicole on Linked In.) NESsT achieves its mission by raising philanthropic and patient capital to invest in and develop social enterprises that create employment and viable income opportunities for the poorest communities facing isolation, discrimination, lack of job skills and poor education. To date, NESsT has trained over 14,000 entrepreneurs and charities and conducted due diligence on over 1,000 enterprises.  It has invited 182 social enterprises to enter its portfolio providing them with an average of four years of support and investing more than US$18 million in capacity building and direct funding. Though this investment, NESsT has contributed to creating more than 51,000 dignified employment and sustainable income opportunities improving the lives of over 650,000 people.