Social Enterprise

Social enterprises have been around for many years but gained impetus in the so called austerity period which followed the financial crisis which started in 2007.

Since then many government departments and the services they provided have been reduced or even eliminated.

This has created increasing need for social enterprises to fill the gaps created as well as responding to a wide range of social and community needs.

All successful organisations have a robust structure which links the key elements:

The purpose of the organisation

• This is the framework that defines the organisation. It’s important to be realistic about the scale and scope of the organisation. Many social enterprises start with ambitious plans which are beyond their resources and capabilities.

The legal framework

• There are a range of possible frameworks and some can be used in combination. Having decided on the purpose the legal framework helps to optimise the funding opportunities as well as the regulatory and tax requirements.

• Common formats in the UK include:

  • Charity

  • Company Limited by Guarantee

  • Community Interest Company (CIC)

  • Co-operative

The board and management structure

• This will vary depending on the purpose and the legal framework. A common structure is to have a board of trustees (for a charity) and a board of directors (often volunteers) for the company. The day to day management is usually through professional managers and staff.

• At start-up and early stage growth there is often overlap with trustees/directors providing operational support – for example providing financial management. This can be valuable in the early stages but can cause friction as the organisation grows and there is confusion about the boundaries between the board and management.

The funding

• There are four main streams of funding for social enterprises:

  • Grants from a range of organisations (eg Big Lottery fund). There are lots of them at local, regional, national and international level

  • Commercial income earned by providing services to clients both in the public and private sector. This funding can be critical in developing sustainability

  • Voluntary contributions from the public

  • Sponsorship which is often linked to partnerships with public and private organisations

The governance

• Many commercial start-ups survive with a relaxed approach to governance. This is not good enough for social enterprises as there needs to be clarity and transparency from day one about the structure and funding

• Grant providers and commercial partners insist on the organisation complying with both their stated purpose as well as legal and regulatory rules.

• For example, most funders require a clear commitment to an asset lock which is a mandatory requirement for CICs.

The ‘glue’ that binds this together is leadership and shared values

The robust structure can lead to:

• The potential for partnerships

• The potential for critical mass

• The potential for surplus/profits

• The potential for sustainability