This is a continuation of my exploration of four core approaches to philanthropy.
- The Charitable Giver
- The Philanthropic Investor
- The Strategic Philanthropist
- The Social Entrepreneur
The Social Entrepreneur seeks to directly execute programs that align with a theory of change, defined by themselves. They are the enterprise with which the other approaches engage. They are primarily concerned with the net social impact that is a result of their programs. (See my note about my usage of the term “social entrepreneur”).
The Charitable Giver is buying program execution. The Philanthropic Investor is providing the capital needed to grow and improve nonprofit enterprises. The Social Entrepreneur is the enterprise that runs the programs. On the one hand, it seems odd to label this approach as an approach to philanthropy, but of course launching a nonprofit enterprise is one of the options available to philanthropists.
The Social Entrepreneur’s job is similar to a for-profit entrepreneur, except it is harder. While a for-profit entrepreneur needs to execute a business plan that turns a profit, the Social Entrepreneur needs to execute a business plan that is financially sustainable AND finances programs that actually make a cost effective difference.
In order to do this, the Social Entrepreneur needs to meet the needs of two sets of “customers” their intended beneficiaries and the Charitable Givers who will pay for the programs to be executed. Unfortunately, there can be tension between meeting both sets of needs simultaneously.
For instance, the Charitable Givers who pay for program execution, may prefer programs which are not as beneficial, but which reinforce their pre-existing beliefs about how the world should work. Or Charitable Givers may prefer programs that offer quantifiable results, even when that impact is lower and less cost effective than programs offering less quantifiable results.
Beneficiaries offer a similar set of issues. Programs need to be both effective, as well as be attractive to the beneficiaries. For instance, beneficiaries might not choose to participate in the most effective programs if they have challenging requirements. Or beneficiaries may simply not be aware of effective programs, if their availability is not communicated well.
Both of these challenges are unique to the nonprofit space. In the social sector, one group pays and judges the value of the transaction, while another group receives (and makes their own value assessments). In the for-profit sector, a single customer receives, pays and determines value.
While most Social Entrepreneurs, and the social sector in general, tends to focus on program design and execution, financing the Social Entrepreneur’s enterprise is of equal importance.
Importantly, the Social Entrepreneur has their own Theory of Change (see my note about Strategy in Philanthropy). The enterprise must be launched with both a business plan (a plan for financing the organization) as well as a theory of change, which guides the development of programs. Charitable Givers and Philanthropic Investors are both investing in or buying into the Social Entrepreneur’s theory of change. Even when working with Strategic Philanthropists, who have their own theory of change (more on this later), the Social Entrepreneur must stay focused on executing their own Theory of Change.