Recession will change voluntary sector for good – social enterprise will dominate, says third sector experts

Third Sector magazine’s recession watch panel says the third sector landscape will be permanently changed by the current economic downturn, according  to a story in the online mag today.

Changing patterns of giving, the rise of public sector commissioning and the need to generate greater levels of independent income are all having an impact on the way the sector operates, says the panel. Social enterprise will continue  to become an increasingly dominant business model in the wider sector, partly as a consequence of funders looking to invest their money for social good rather than simply donate it, and it is also likely that mergers amongst bigger charities and voluntary organisations will continue as they seek to scale-up  to compete for the largest public sector contracts.

In fact, these are trends that have been evident in the sector for four or five years. What is new is the accelerating pace of these changes.

Can charities & social enterprises run prisons?

Libby Brooks writing recently in the Guardian thinks not. The purpose of imprisonment, she says, is fundamentally punitive and cannot be reconciled with the third sector’s social mission — even (and perhaps especially, she seems to suggest) when this social purpose might be penal reform. The article revolves around the recent announcement by Turning Point and Catch 22 that they have been successful in bidding to build and manage prisons in partnership with private sector provider Serco in Liverpool and Manchester.

It’s an interesting piece and touches on some key issues to do with the role of the third sector in public service reform.

iSE celebrates 10th anniversary in style



On Thursday 3rd September iSE celebrated its tenth anniversary, hosting a dinner for over 80 guests at the Botanical Gardens. Welcoming guests, Sarah Crawley, iSE’s CEO explained: “iSE began life in 1998 as a European project providing employment opportunities for people with disabilities. At the end of this project we saw the potential — and the need — for continuing this work in the longer-term and set about establishing iSE as a permanent provider.”

It has been a long journey. The organisation was was originally set up by Sarah and current director Tony Davis and was incorporated as a company in July 2000. It now employs 13 staff — including workers in Aquamacs, the social firm ‘franchise’ it established in 2006 — and in just the past few months has bought its own building at Avoca Court in Digbeth’s Irish quarter.

Guests listened to a fascinating question-and-answer session with a panel of special guests — Sally Reynolds, the chief executive of Social Firms UK; Cllr Paul Tilsley, deputy leader of Birmingham City Council and its champion for social enterprise; Mark Cook, a partner at Anthony Collins Solicitors; Steve Harding, chair of iSE’s Board; and Kevin Lynch, co-author of Mission, Inc.: The Practitioner’s Guide to Social Enterprise, who had flown over specially from the US to attend the International Social Enterprise Business Models Conference in Glasgow, present a master-class on social enterprise, and speak at iSE’s dinner.

Sarah also presented five ‘Social Enterprise Hero’ awards to mark what she said were “outstanding contributions to the sector”. Awards were made to:

  • Alison Lawson, of AWM, for her championing of social enterprise within and beyond the RDA — many are unaware of the key role Alison played in helping to bring the national social enterprise conference Voice09 to the ICC in February this year;
  • Mark Ellerby for his outstanding work in promoting the sector while also managing groundbreaking social firm Concept Conference Centre at RNIB’s Birmingham headquarters;
  • Sharon Annakie, deputy CEO of Future Health & Social Care, one of the fastest-growing social enterprises in the country and Inner City 100 winners (“We should be proud that they are in Birmingham!” Sarah Crawley added);
  • Richard Beard, CEO of The Jericho Foundation, for his achievements both at Jericho and his generous wider support for the sector.

And here I must declare an interest. The fifth award was to me – the first time anyone has awarded me anything! – to recognise the contribution BSSEC has made to keeping social enterprise on the agenda in Birmingham. I couldn’t have been prouder.

IMG_5403Those who know iSE will recognise it as one of the most entrepreneurial business support organisations around. Congratulations to Sarah and to all the staff and directors at iSE — here’s to the next ten years!

Community Sector Coalition says new Compact is a charter for third sector sub-contractors

Today’s Third Sector Online has a story about the new ‘refresh’ of the voluntary sector Compact, currently available as a consultation paper until 12th October 2009.

The Community Sector Coalition (CSC) has already written to third sector minister Angela Smith saying that the draft lacks sufficient focus on the community sector and claiming that the “bulk of it” reads like “a Compact for third sector sub-contractors”.

I think they’re over-stating their case. The draft does acknowledge the importance of community-based organisations. It notes that they are the most numerous groups making up the third sector (estimated at 500,000) and make a contribution to local services, community cohesion, and mobilising volunteer effort.

What the draft doesn’t do is commit Government to any specific actions or principles in its dealings with the community sector. And exactly the same is also true of the social enterprise sector. In fact, beyond generalities, there are many areas where this revised version of the Compact fails to commit its parties to specifics.

Many will be more concerned that the revised Compact no longer mentions the term ‘full cost recovery’ (FCR). Instead, it says that public procurement should recognise the inclusion of relevant “overheads” and “administrative costs” in the prices quoted for delivering services, and notes that “back office functions” are often as vital to achieving success as “other more visible activities” (p.33).

The disappearance of FCR could be attributable to the fact that in June 2007, the National Audit Office published Office of the Third Sector: Implementation of Full Cost Recovery – a report which concluded that FCR was “too difficult to pin down in any practical way”, “too blunt an instrument”, and useful only as “a code” for fairer funding but not as “an accounting treatment”. The report also noted – more ominously – that FCR misleads organisations into thinking “that all costs will be recovered in all situations”.

While NAO’s conclusions about full cost recovery seem difficult to disagree with, it’s nonetheless fascinating to see principles which just a few years ago were being touted as intrinsic to the sector’s future already being quietly airbrushed out of the picture.

Don’t forget to have your say on the draft Compact before the 12th October.

“Getting More for Less: Efficiency in the Public Sector”

In conjunction with the think-tank Demos, the Social Enterprise Coalition has just published Getting More for Less: Efficiency in the Public Sector by Jamie Bartlett. Continue Reading →

A new ‘three tier’ brand for social enterprise?

Social Enterprise Live has just carried an interesting story suggesting that a new ‘three-tier’ branding package for social enterprises is being considered. Last year the Central Office of Information published Is Social Enterprise at a Crossroads?, research which indicated that of those most likely to support social enterprise only around 20% knew anything about it.

The national committee that has been set up to ponder this branding problem (the so-called social enterprise identifier steering group) believes that a three-tier approach which builds on the existing social enterprise Mark will help customers understand whereabouts an enterprise is on its journey to becoming ‘social’.

Steve Wylie, chair of the identifier steering group, acknowledges that  the strategy has inherent risks of ‘socialwashing’ — as environmental consumerism has resulted in ‘greenwashing’ — but says this can be avoided by ensuring that the brand is backed by ‘a clear set of principles, values and criteria’.

That the sector needs dramatically higher public awareness and understanding is undeniable, but can a branding strategy achieve this? Would it ever achieve the kind of widespread usage necessary to fundamentally change levels of public awareness? I this the idea we’ve been waiting for…or is it an over-sophisticated marketing fantasy?

Maybe it can succeed — Fairtrade branding, for example, has been outstandingly unsuccessful successful (which is what I meant to say originally, of course! — apologies).

Anyway, watch this space — the new SE brand will be unveiled on the 19th November, Social Enterprise Day.

Govt response to Social Enterprise Summit says “peer-to-peer support” a key issue for social enterprise

The Office of the Third Sector has published an cross-departmental response to the recent Social Enterprise Summit. The report says that “peer-to-peer support and mentoring” is a key issue for SEs and that OTS and the Dept for Business Innovation & Skills (BIS) will build on existing work with Horsemouth, the informal mentoring website, to encourage more social entrepreneurs to engage in such support.

Beyond this, however, the report seems to offer only more of the same — pledges that government departments and agencies will work together “to ensure our promotion and support activities are inclusive of social enterprise…”

There’s gold in them thar NHS hills!

A Dept of Health tendering exercise to identify specialist contractors who can support the development of SEs emerging under the DoH right to request legislation has just been terminated part-way through – at an estimated cost to bidders of between £800,000-£1m. Some 70+ consortia had been narrowed down to 21 which were actively engaged in developing bids. Mind you, this lost investment in bid development has been calculated by participants (some of the top law and accountancy firms) at a day-rate of £2,000-£2,500.

Specialist expertise doesn’t come cheap, but this will look rich (no pun intended) to many SE business development organisations that have decades’ of experience but can’t finance their services – especially the kind of labour-intensive, long-term support grassroots organisations and local communities need to develop new social enterprise initiatives.

Personally, I think the NHS was right to pull the tender…

‘Building your cluster’

Developing clusters that enable SEs to combine for the provision of public services and larger contract bidding is currently an idea that is in much in vogue. But practical ‘how to’ resources about cluster development are relatively thin on the ground. ISE has just announced that Building Your Cluster, the booklet it has developed with backing from the Office of the Third Sector, is available for free download from the resources section of its website.

Leading or driven? Transforming the third sector…from the top

The signs are increasingly clear. Key (and especially national) players are positioning themselves to secure a transformative role in the third sector, focusing on the large structural changes that are needed in order to ‘marketise’ the sector.

Third Sector, for example, has just carried a fascinating piece about the Adventure Capital Fund’s bid to manage the government’s proposed ‘wholesale’ social investment bank. ACF (see earlier post) has launched a new company, Social Investment Business, as the brand for all ACF and Futurebuilders funds. ACF already administers over £400m and says it plans to be a billion-pound plus voluntary sector investor. Charity Bank and Triodos have claimed that ACF’s sustainability is threatened by this rapid growth.

We are now also beginning to see the growth of genuinely large-scale third sector partnersips as a means of achieving scale and securing contracts. The same Third Sector article notes that a newly established third sector consortium — Third Sector Consortia Management — is bidding for almost £32m of work from the DWP Future Jobs Fund.

The consortia — a social enterprise set up only this month — is the brain-child of Ian Wrigglesworth, enterprise director at Futurebuilders England. It already has 225 members and is inviting more (prospective members are invited to email Ian Charlesworth <ian dot charlesworth at futurebuilders hyphen england dot org dot uk> or ring 020 7842 7704).

Perhaps the Cabinet Office/OTS had this in mind when it published Working in a consortium: A guide for third sector organisations involved in public service delivery (Dec 2008)

These trends confirm what has been evident for a long time: that in future ‘investment’ will be the dominant funding model, and contracting/commissionning the dominant service model.

Is this a marketplace you are ready for? Is the sector leading or being driven by transformation? One thing we do know: demand for business advice/support is spiralling — especially from voluntary organisations trying to modify their business models or restructure operations to make them more ‘market ready’.

While having long argued that social enterprises need to operate as effectively in the marketplace as they can, is anyone else beginning to wonder whether the market is or should be the dominant economic and service model for the whole of the third sector?

A good read…

I’ve just finished reading Andrew Mawson’s 2008 book “The Social Entrepreneur: making communities work” which is based on his experiences in and around Bromley-by-Bow in London.

A very interesting read, and he sets down a number of challenges on the interaction between government policy and the best ways as he sees it of encouraging more social entrepreneurs.

So, if you want a view on the last 20 years of social enterprise, a bit of inspiration, or even a metaphorical slap round the face, I’d recommend this book.

The bitter wine of apartheid

Wine, fruit and other products were at the epicentre of  the 1980s boycott and disinvestment campaigns that helped bring down South Africa’s apartheid regime.

But the SA wine industry — which had an appalling labour record under apartheid, not just for the near-slave labour conditions it imposed on its black workforce, but also for the  ‘dop’ system which saw many workers paid partly in alcohol — is changing. The Guardian has just reported that one of the biggest exporters, Thandi, will shortly be both wholly worker-owned and Fairtrade — the first wine producer in the world to be both a Fairtrade producer and a black-owned collective. And the Co-operative is also sourcing wines from the Du Toitskloof community co-operative in Western Cape Province.

It also makes me want to start drinking again!

Health: ‘outsourcing’ or real, new social enterprises?

Reading Social Enterprise – Making a Difference: a guide to the Right to Request recently, the latest brochure from the Dept of Health Social Enterprise Investment Fund (SEIF), I was struck by the thin line that exists between ‘outsourcing’ of services and genuine, new social enterprise opportunity.

What I mean by this, is that looking at some of the examples cited, I struggled to see their social enterprise potential – a capacity to trade in the wider marketplace, innovate in delivery, and maximise income-generation Continue Reading →

Why haven’t we got more flagship social enterprises?

The Big issue, Jamie Oliver’s Fifteen, Divine chocolate – and just a handful of others. For many, these are the national social enterprise brands that come to mind when social enterprise is mentioned.

And even then, if we’re honest, it is probably quite unlikely that the average person in the street is thinking, “Ah, what great examples of social enterprise…” No, even now, they are far more likely to think, “Ah, great charities doing great work…”

This is just a personal view, but I’m increasingly convinced the term “social enterprise” is unsatisfactory. True, it’s a relatively new term that only really entered the lexicon ten years ago, but it’s vague and abstract; it isn’t synonymous with an activity. It doesn’t prompt the kind of understanding that Fairtrade does, for instance — which is ironic, because many fairtrade businesses are social enterprises. (Although not all, of course. Cadbury’s has just announced that biggest-selling brand Cadbury’s Dairy Milk will henceforth be fairtrade — adding 300m bars of Fairtrade chocolate a year at a stroke.)

Maybe this will change with time, but increasingly I believe that revisiting the language of social enterprise is a prerequisite for fostering greater public understanding.

Anyway, this post isn’t about definitions or language (although anyone with any better suggestions than “social enterprise” should please make urgent use of our comments facility!), it’s about flagship social enterprises.

Flagship social enterprises are important — (a) because there are so few of them, and (b) because they can help significantly raise the overall profile and understanding of the sector.

So it is good to see that as part of its Trading Know-How project Social Enterprise West Midlands has chosen five flagship social enterprises in the West Midlands region which will form part of a national PR campaign specifically intended to raise up another group of nationally recognised SE ‘brands’.

Birmingham’s own Gateway Family Services — one of the first Community Interest Companies to be ‘spun-out’ of a PCT (South Birmingham PCT) — is one of them.

Congratulations to Vicki Fitzgerald, the CEO at Gateway, and to all of her team.

Lessons from the Adventure Capital Fund

The Adventure Capital Fund has recently published the fifth and final external evaluation report on its third sector investment activities, Investing in Thriving Communities. The evaluation has been carried out by London Metropolitan University.

Even for those not interested primarily in social enterprise access to finance issues, the report makes interesting reading. The Executive Summary alone is probably sufficient (it’s a very well done and comprehensive Executive Summary) but the full report contains some buried nuggets.

ACF has grown from a £2.8m, one-year ‘demonstration programme’ originally established in December 2002 – “to test different approaches to enabling community-based organisations to grow and become more sustainable” – to an ongoing £14.4m portfolio which now includes delivery of the Dept of Communities & Local Government’s Managed Workspace Fund, the second phase of the Futurebuilders (England) programme, the Dept of Health’s Social Enterprise Investment Fund, and the Communitybuilders programme.

Although much of the report will not surprise anyone who has been working at the coal-face of the sector, it offers a good source of evidence/intelligence on broader development issues that many will find useful to inform their own papers/briefings/bids.

For example:

  • The ACF Business Development Programme, aimed at organisations considering making an application to the main investment programme, offers a small grant and input from an independent strategic advisor. This model has been especially successful, offering a low-cost/low-risk model that has enabled applicants to commission stratgeic planning, support with business planning and feasibility research, and support to raise skills and improve systems.
  • ACF applicants that have completed the projects they received investment for have grown faster (in terms of gross income) than general charities/enterprises of the same size that have not received investment.
  • Successful support packages need to combine loans, grants and professional advice/business support (“independent strategic advice”).
  • Organisations that are attempting to develop new social enterprise initiatives while also continuing to deliver their key activities/services have found this “much more demanding in time, resources and complexity than anticipated by the funding agencies, the ACF, or the applicants themselves”.
  • Not surprisingly, perhaps, the ACF portfolio does not have a strong presence of organisations involved in community development activities (probably, it can be assumed, because it is very hard to to turn community development into an income-generation activity that can be traded as opposed to a cost-centre that requires funding).
  • There is an inverse relationship between the number of expressions of interest and successful applications. The larger the number of applications the lower the proportion of successful applications.
  • The report acknowledges that even for SEs the public sector plays a key role in largely determining the shape and nature of marketplace.

Incidentally, this ACF report, like the recent report on the Dept of Health Social Enterprise Investment Fund (Social Enterprise — Making a Difference: A Guide to the Right to Request), appears to indicate that Birmingham SEs are making little use of these national investment opportunities.

Both the DoH SEIF and ACF have had only two successful Birmingham-based applicants (and I think a further two in both cases from elsewhere in the region).

While we don’t know how many unsuccessful applications there might have been, this certainly looks disproportionately low from the second city’s perspective.

What’s driving the new marketplace in health & social care?

The presentations from ISE’s recent — and excellent — Healthy Social Enterprise Conference are now available to download on the ISE website.

The conference was technically a project dissemination event but the speakers and presentations went significantly beyond that and anyone looking to get an overview of how current policy in health and social care (such as ‘personalisation‘, the ‘right to request’ legislation for DoH employees wanting to explore the SE potential of specific services, and the DoH Social Enterprise Investment Fund — worth £100m and open to existing as well as new-start health & social care operating on a not-for-personal-profit basis) is shaping a new ‘social marketplace’ in the provision of these services will find the presentations extremely helpful.

Cllr Len Clarke (Birmingham City Council) gave a fascinating opening address to the conference that set out, with just a handful of key statistics, the factors that are making a re-examination of health and social care delivery models inevitable.

For example:

  • Fifty years ago there were 8 people working to every retired person. Now, there are only 4. In fifty years time there will be only 2.
  • Birmingham found that its thirty elderly homes cost 2.5 times more each to operate than independent sector homes.
  • In home care, Birmingham was spending 70% of its budget on 35% of its services — this inevitably led to a need for services to be rationed.
  • An ‘industrial model’ of 9-to-5 delivery is inflexible and has disproportionately high unit costs. Birmingham’s health and social care costs are increasing by almost 80% a year — and yet the DoH budget control figure offers an increase of only 0.7% a year…

Given this scenario, an examination of the potential for third sector, social enterprise and independent sector delivery was pretty inevitable.

But for those in the sector seeking (or advocating) innovation, new delivery models and greater social and community benefit, it is also salutary to understand the extent to which third sector commissioning is actually driven by the need for cost savings. This can only become more the case as the anticipated public spending cuts deepen.

In this climate, says Cllr Clarke, Birmingham City Council cannot just wait for providers to emerge — there must be a degree of ‘market shaping’.

BSSEC absolutely agrees with this view. For several years now we have been arguing that third sector commissioning must, if it is to be meaningful, go hand-in-hand with a planned and systematic expansion of the marketplace of providers.

This requires systems, structures and processes that enable joint planning — i.e. that bring together social enterprises, voluntary & community sector providers, and service commissioners in the context of a suitable operating framework.

To fail to do this will turn the clock back to the kind of unplanned laissez-faire provision that preceded the NHS.

Soapbox, signpost & commentary!

Welcome to BSSEC’s new blog. It has taken us a while to get round to doing this but finally it’s here — a new soapbox, an additional source of information, and a place for comment and commentary on all things social enterprise. We hope you enjoy it — and that you’ll want to participate.

By offering a quick and flexible method of adding news and comment and signposting readers to interesting things elsewhere, we think the blog will also help us to expand out updates function.

So, welcome to the BSSEC blog — we hope you find it provocative and interesting, and that you’ll keep coming back.