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By Robin Low
Expert Author is Mr. Robin Low
Many people mean well and want to contribute solutions to local and global needs. People often want to act for the sake of “doing something”. Often this means poorly thought out ideas that are often unsustainable, or have little measurable social impact. Are these efforts actually helping? Are they solving problems or creating new ones? What are pitfalls a concerned giver should watch for ?
Social Enterprises – Really that Social ?
When a new and shiny concept came along, Social Entrepreneurship, many people jumped on board. Many entrepreneurs like the idea of creating business that do good at the same time. Fundamentally, the very concept of a social enterprise is flawed. Companies pay taxes, and the taxes go to schools and roads. So, does that make all companies social enterprises? What’s more, when examining these concepts in practice, flaws are even further exposed .
At the bottom of the social pyramid, the more similar people’s needs are. Poorer communities need basics like food, shelter and clean water. If you can sell to meet the needs of one, you can also sell to others .
As such, many that sell to one poor community, will try to scale and sell to others. However, when a start up scales it runs into problems. It can lose its ability to be nimble. It can become bureaucratic, and communication with the ground level can suffer. Social projects that scale too quickly often fail. When scaled too quickly, many social enterprises which may have seen success in the small scale may even lose their social impact and cause social harm .
Micro-finance seems to be a good social idea that allows poor people to have basic financial services. Recipients of micro-finance could start a small business and are less likely to pull their kids out of school due to economic reasons. However, many people take a simple idea of giving loans to the poor and twist it to make it very profitable. Payday lenders are getting popular in many poorer parts of the country and each year, about uncountable millions globally incur long-term debt by taking out a short-term loan that’s intended to cover borrowers’ expenses until they receive their next paycheck. This causes many people to slip out of the middle class. Some of the lower income borrowers may pay up to 400% annual in interest rates, causing up to 40% of them to default and push them closer to poverty .
The Flaws of Aid
TOMS Shoes is a social business. If you buy a pair of shoes from them, they will give a pair of shoes to a child in the developing world with the understanding that proper footwear lowers parasite and infection rates. However, this idea is flawed. Hookworms and parasites are sanitation problems. Building latrines is the better and cheaper solution than free shoes. Further, these donated shoes hurt cobblers in those communities .
In Africa, donations of used clothes reduced garment sector employment by 50 percent, from 1981 and 2000. African poverty is a consequence of a general economic stagnation. Giving of any kind targets the symptom, not the disease. A more effective alternative would be to support local business by selling locally made shoes internationally, rather than bringing free ones into the community .
Aid often perpetuates dependency. It does not create jobs or build capacity in a sustainable future .
Aid also gives governments less incentive to build effective institutions. Public revenue from taxes pegs government to the success of their taxpayers. Free money, however, builds bloated bureaucracies. Rather than encourage businesses and job creation, it is easier to use someone else’s money to create new government jobs .
The Public’s Assumptions
Stock assumptions also make it harder to do effective programs. The #IceBucketChallenge was an interesting method for creating awareness and raising funds. However, many complained it wasted water, or argued that the ALS Foundation had too much overhead .
Non-profits need auditing and offices. Regardless of size, they will have overhead. Smaller NGOs have less overhead. However, being small can hurt their credibility .
Numbers only tell part of this story. Consider 2 soup kitchens. One spends $0.60 per dollar raised on the program (soup). The other spends $0.90. However, the first soup kitchen employs professional staff that prepare food safely and with low waste. The other uses volunteers who are less skilled. Yet, evaluating by overhead is easy to do, and doesn’t require additional work .
Bigger programs need infrastructure, staff, and more insurance. They will always have higher administrative costs than an outfit run by a charismatic leader who attracts volunteers .
It’s just not that simple
Many problems are part of a “complex adaptive ecosystem.” “Outsiders” have difficulty understanding the system, hurting their ability to create sustainable solutions .
In Boston, high school graduation rates are relatively high and drop out rates are much better than the national average. The quality of education in Boston is very good and the school committee does a lot to share best practices, even having trainers from charter schools help out in the public system. Despite using all the best innovation, technology and processes similar to those in charter schools. But, using just an academic solution (better ways of teaching) sometimes does not solve the root problems which may be related to housing and school access .
On the flip-side of this, a project in Kenya that gave kids free uniforms, textbooks, and classroom materials increased enrollment by 50 percent, but this swamped the teachers and reduced the quality of education
for everyone .
There’s also the complexity of self-sabotage. Communities in India cut off their own water supply so they could be classified as “slums” and be eligible for slum-upgrading funding. I’ve worked in places where as soon as a company sets up a health clinic or an education program, the local government disappears-why should the government spend money when a rich company is ready to take on the responsibility ?
We may think that the system is broken, that it is hopeless, and nothing can be done. After years of research to end poverty, there are more people in poverty than before. What actually may be wrong are our expectations .
We want things fast, cheap and good. Social enterprises that demonstrate competency often try to quickly scale. The results are always “success, scale, fail”. There are always unreasonable expectations on how fast the organization should grow once it receives funding. When you’ve run a project successfully, scaling up 50 others is not so straightforward .
When we support a social enterprise, we should not expect miracles to happen overnight. Even charities need to pay people a fair market rate to retain talent, otherwise you either get people who cannot get jobs elsewhere or job hoppers. Simple numbers like overheads or number of programs don’t effectively compare different social enterprises or charities. Numbers, charts and graphs do not tell the full story on the ground .
Society equates helping with donations, so there is outrage when there are overheads involved in running charities, foundations and social enterprises. We understand the concept “Feed a man a fish, he eats for a day. Teach a man to fish, he eats for a lifetime.”, however society still takes pity on the marginalized communities, continuously providing food and medical supplies. Billions upon billions of dollars have been poured into so many organizations, yet the areas they serve often are in no better shape years later then when they were first presented. Why is poverty only getting worse ?
The Needed Change
We need to fundamentally change the way people give. Giving out of pity removes all dignity in receiving the aid. Instead, looking at and investing in people’s potential to get themselves out of poverty should be the key to solving the problem .
Next, say “no” to sensationalism. Many charities like to create emotionally driven ads that often distort the truth to push a point across. Empathy should be the standard emotion on which relationships are built. The focus should be kept on what is possible instead of the plight of the situation which usually brings much shame to the recipients of the donations .
Conscious buying can replace donations. When you donate, the money is being used once for food or necessities. When you support a business, you support the community and others in a more sustainable way. When there is a disaster, support local business in the disaster area when they are rebuilding as any amount, however little, does help .
We need to believe in the hidden potential of the people we want to help. Stop thinking of people as “needy”, “handicapped” and “pitiful”. Instead, look at them as people who need to be engaged and empowered with skills to solve their own problems. Enabling them to think positively while connecting them to the relevant help they need creates a positive path to where they can be productive in society and get their dignity back .
Today, we have a lot of small scale social entrepreneurs trying to do good work through social projects. Some of these projects do have a lot of potential; however, there are a lot of considerations required before scaling needs to be done. The impact needs to be studied by an educational body (i.e. a university) to give the project more credibility, create more awareness, get corporate support and affect policy change. For those reasons, social innovation labs are increasingly common; working with such labs on social impact, and studying success and failure of current projects is the way to move forward .
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Bakur Sindy Comments; Good Intentions should lead to Good Consequences as per Islamic Recordings of Good Scholars and Doctors “Professors” as follows :