Toby Johnson
20 January 2015

Policy lessons in growth

Historically, much policy interest in social enterprises has focused on the start-up of new businesses in order to address the problems of unemployment and exclusion. Employee buyouts by worker co-operatives have also been a vehicle for avoiding the closure of businesses when their owners retire with no successor – in such cases it is the employees who stand to realise the greatest benefit from staving off redundancy, and owners often prefer to see their businesses continue in safe and practiced hands. More recently, social enterprise have been seen as a solution for public services which are under stress from rising demand coinciding with reduced budgets imposed by fiscal austerity. In such circumstances social enterprise is seen as way of introducing entrepreneurial attitudes and innovative service delivery methods. New social enterprises can thus come into being as new starts, through the takeover or conversion of existing businesses or spin-outs from the public sector.

Social enterprises employ more people than private firms on average, and have also proved more resilient to downsizing in the current economic crisis. Their growth and development is thus a matter of public interest as well as in the interest of the enterprises and their members. However their growth dynamics have some specific features. While some employ thousands of people, in general social enterprises prefer to stay at the human scale, and to grow through replication, that is by spawning new sister enterprises to exploit new business opportunities. The fact that they are generally organised into networks that share values, operating methods and information assists this process.

Strategic partnerships

Public policy to boost the growth of social enterprises should thus support those networks, consortia and support organisations which perform this organising function. A number of governments have seen the advantage of forming strategic partnerships with the representative bodies of the social enterprise sector, through which they can jointly promote growth. Such partnerships offer an effective channel for two-way communication of priorities and constraints which greatly increases the take-up of government policies and programmes.

Training

Building some of the skills needed for growth – for instance marketing, financial manage­ment, exporting and information technology – can be done through relatively conventional training. Similarly, support for investments in premises, plant and machinery can be assessed using generic business criteria. Other competences, such as leadership skills, are best acquired through sector-specific training institutions such as social economy schools and academies, which can give more scope to peer learning and mentoring by experienced practitioners.

Public procurement

Because of their value base and roots in citizen movements, social enterprises have long worked with public authorities to deliver high-quality social services, but there is considerable scope for increasing the share of public spending which goes to social enterprises. The 2014 revision of the EU’s public procurement directive emphasises the possibilities that public authorities have to kill two birds with one stone by selecting contractors on the basic of the social benefits they create, and the UK’s 2012 Social Value Act goes a step further in this direction. To maximise the outcomes of this opportunity, governments need to transpose the new broader purchasing methods into national law, and public authorities generally should support training for procurement officials and capacity-building for social enterprises. This capacity concerns not only skills, but the achievement of efficiencies of scale through the formation of consortia. Private companies also need to be made aware of the win-win possibilities of cooperating with social enterprises

Social franchising and consortia

Consortia are secondary co-operatives which can represent their members in bidding for large contracts, and then organise delivery by dividing the workload among their constituent co-operatives. They are one good way of expanding markets for social enterprises, and social franchising is another. This is a technique through which an existing successful business is used as the model for new sister businesses in other locations. Is above all a process of the transfer of know-how and values. Public support is very valuable for this process, particularly in the intermediate stage of codifying the success factors of the original business and providing an operating manual and quality standards.