Social enterprises frequently struggle because they do not have the right leadership. There are two different kinds of wrong leader, and one kind of right leader.
Wrong Leader #1: Strong Social Motivation and Weak For-Profit Background
Many social enterprises start out as an affiliate of a non-profit that wants to create a revenue stream for its core mission. The appointed leader may come from within the non-profit itself, or from within the non-profit world. The leader seems attractive for the role because of their demonstrated passion for the cause. When pressed to deliver both social outcomes and financial results, the leader leans towards the social outcome – just as he would in the non-profit world. The social enterprise ends up being another program within the non-profit, rather than making a financial contribution towards its non-profit activities.
Wrong Leader #2: Strong For-Profit Background and Weak Social Motivation
A social entrepreneur wants to start a new business, and would like to “give back” as part of his business. He soon faces situations where he has to choose between making incremental additional revenues, and staying focused on the social mission of his enterprise. Over time, the social enterprise drifts towards being a regular for-profit business. Any social impact becomes a sideline to the main goal of making money.
The Right Leader: Mix of Strong Social Motivation and Strong For-Profit Background
The right leader of a social enterprise understands that he will need to balance social mission and financial results. He understands that this may lead to lower profit margins compared to others in his industry. But he also understands that his social enterprise can become a strong niche player with powerful differentiating characteristics. He is driven by the motivation to “change the world,” and understands that the best way to do this is through a financially sustainable social enterprise.