Joe Johnson, Ph.D.
Entrepreneur. Investor. Startup Expert.
Oftentimes, social entrepreneurship is confused with charity. This is principally due to charitable offers of help being seen as selfless gestures made to, and for the benefit of, individuals who are unable to afford to help themselves. Social entrepreneurs also offer help to those in need and make a difference in society, but manage (ideally) to turn a profit. Given those similarities, how does social entrepreneurship fundamentally differ from charity? Consider these points:
Charity is predicated on the compassion that an individual feels for his fellow man and revolves around helping people by means of a traditional donation mechanism. Social entrepreneurship certainly includes an element of compassion, but is also driven by a strong desire to transform society. Consequently, it’s based on more than mere good intentions; it’s seeking to create a sustainable system, capable of continuity following the social entrepreneur’s exit from the scene.
For a charity to survive, it must continuously seek funding. Without the goodwill of its donors, a charity is likely to rapidly find itself unable to assist anybody. Especially in times of turbulent economic conditions, charities may feel as though they’ve been hit the hardest, as they’re naturally less likely to receive donations when their donors are themselves strapped for disposable income.
Social enterprises strive toward self-sufficiency. Doing so helps to ensure that their activities generate an ongoing revenue stream. Therefore, their reliance on outside funding is minimized and they’re able to sustain operations over a much longer period.
Charities, ordinarily heavily dependent on donated funds, tend to suffer from comparatively short-lived effectiveness. Additionally, it’s often challenging for a charity to scale their scope of operations in order to have an ever-more-substantive impact. Conversely, social enterprises avoid this situation as a benefit of depending on self-generated funds to produce results. Properly managed, a social enterprise will be geared toward achieving growth and meeting more ambitious targets year after year.
Charities are, by definition, structured very differently from social enterprises. A charity’s primary goal is to facilitate the redistribution of funds from those who ‘have’ to those who ‘have not’. Social enterprises seek to create social value through innovation and thereby effect a mutually beneficial exchange with society.
Charities work toward meeting an immediate need. For example, if there’s a place where people are hungry, a charity will bring food to offer compassionate relief. Charities frequently respond quickly to situations and, while they are often effective, their positive effects tend to be quite short-lived. Social entrepreneurship aspires to create a lasting impact. Beyond simply solving an immediate problem, a social enterprise strives to create a long-term solution.
Charities meet their identified needs by trying to fill them immediately. Social entrepreneurship aims to address needs by creating ongoing opportunities for lasting change.
Charities do sometimes evolve into social enterprises. Once they’ve developed a system that helps them address a particular need, they can register to operate as a business. Properly managed, this should get them to the point of no longer requiring donations. It’s worth bearing in mind that actually achieving this transition is a relatively rare phenomenon. Running a social enterprise requires substantial business acumen not often found in charitable organizations.
About the Author
Dr. Joe Johnson is an entrepreneur, investor, and startup expert. He is the founder and principal of GoodField Investments and the GoodField Foundation (www.GoodField.com).
Joe has a Ph.D. in Entrepreneurial Leadership and an MBA. He is the author of the upcoming book on The Science of Why Most Entrepreneurs Fail and Some Succeed.
Most importantly, he is the incredibly blessed husband of one amazing wife and father of six wonderful children. He resides in Bradenton, Florida. For more information on Dr. Johnson and his work, go to www.JoeJohnson.com.