Thriving in Turbulent Times: Maximizing Your Success in the New Social Environment

Thriving in turbulent times

maximizing your success in the new social environment
May 4, 2009

www.wellesleyinstitute.com

agenda

 The emerging new economy
 The third sector and survival
 Funding and new opportunities
 From competition to co-petition
 Challenges and opportunities
 Rise of social innovation
 Need for social enterprise and social finance
 Building a resilient and sustainable future
 Culture underpins success


independent, non partisan, think tank advancing health equity

rigorous research leads to pragmatic policy

consumer-centric, solutions focused

relentless incrementalism tipping point decisions


affordable
housing

social healthcare
innovation reform

immigrant
health


“the future isn’t what it used to be”
environment

communications

information freedom 85?

interconnectedness

sandwich generation

Boomer and zoomer

less is less

the new normal

 shift to the intellectual capital economy
 massive credit and debt loads
 $5 trillion dollar stimulus
 trillion dollar hangover and possible stagflation
 possible loss of 20,000 NFP
 coping with those left behind


the best is yet to come….we will recover


speed debating

What macro issues do you
see affecting your
Discussion 1 organization?

What micro issues affect
your organizations?

What is affecting your
colleagues?

What is affecting you?


the third sector (and why it matters)
Delivers vital services and
programs to people

Strengthens
communities…builds social
cohesion

Makes a large and dynamic
contribution to economy

Significant employer

12 million volunteers


$90 billion GDP
Six times
the size of
the auto
industry


Trends in Revenue Sources
Core Nonprofit Sector
(without business and professional associations)
70%

60%

50%

40%
earned income
charitable donations
30%
government

20%

10%

0%
1997 1999 2001 2004


Case study: developing affordable homes
Financing a 50-unit seniors’ housing project (2007)
$122,000 per unit construction cost
Canada-Ontario Contribution $2,100,000
Municipal grant 194,750
Donation 520,000
Fundraising 675,000
Subtotal $3,489,750
Mortgage 2,610,250
TOTAL PROJECT BUDGET $6,100,000

Issues: Multiple funding sources, multiple accountability / regulatory
requirements, inconsistent funding rules, timing concerns, heavy
reliance on fundraising / earned income (20%), heavy reliance on private
financing (43%) with ongoing financial burden…


collaboration


collaboration principles

Collective activities form
significant part of NFP work

Much is accidental or
incidental; but still important

Much is also simply
information sharing with
some resources

Need to take to next level


speed debating

In what types of
Discussion 2 collaborations are you
normally involved?

What makes them good or
poor?

What would you change to
improve?


cause for concern

a heightened sense of anxiety about
funding and organizational stability, even
survival, over the next two or three years

at least one-third of the organizations
experiencing serious economic impacts,
and all fear that things will get worse before
they improve

NFP organizations are hearing that many
long-term funders, including many United
Ways, Community Foundations and family
foundations will be reducing their granting
programs in 2009 and 2010.


our collaborative initiative

A multi-year research and
policy initiative to examine
good (and not-so-good)
collaborations in the third
sector – and the private
sector

…and to provide solid
research and policy
direction to our ongoing
work in supporting effective
collaboration


funding and collaboration

 reliability remains tenuous.
 cumulative administrative
burden is all consuming.
 multi-year grants do not
solve the administrative
burden.
 funders are slow to
approve/reject grants
 slow response time causes
“gap” problems for service
delivery.

collaboration challenges

 administrative burden is heavy, unrelenting, and places many
constraints on their ability to operate effectively
 actual impact of the funding process is directly at odds with
reasons we engage non-profit organizations to deliver
community services.
 funders, large and small, rarely give community organizations
any latitude to adapt or adjust programs and finances to meet
local conditions and changing circumstances.
 grant applications tend to be overly long, complicated, and
difficult to complete.

collaboration principles
 “more for the same”, not “the same
for less”
 collaboration can make existing
organizations more efficient and
effective, and can deliver better
programs and services that benefit
clients, through shared resources.
 funders should not view
collaboration (or, indeed, measures
such as forced integration or
amalgamation) as a means to
reduce infrastructure
 a means to improve effectiveness
and efficiency starting, at a
minimum, with existing resources.


recommendations

 A new “virtual” Centre for Leadership in Collaboration, working in
partnership with a funders’ collaborative alliance, should be created to
serve as a hub and a catalyst for action among individual organizations,
and with funders.
 a more intentional structure within the third sector to identify and share
good practices and to bring together NFPs and funders to share and
assess collaborative ventures.
 funding agencies should shift a meaningful portion of program dollars to
create the infrastructure that supports collaborative partnerships.


recommendations
 If collaboration is one of many activities that NFPs are expected to
perform without dedicated resources, then the real gains from
collaboration will be hard to achieve.
 Existing collaboratives, networks and integration structures (as an
example: Local Health Integration Networks, the Community-Based
Research Network, Community Partnerships, and others) should
provide leadership in developing and sustaining effective collaborations.
 The capacity for creativity for collaboration among these existing
organizations needs to be encouraged and supported.


recommendations

 Collaborative efforts should be established as time-dated
initiatives with a shared vision, clear goals and objectives, and
highly-defined impact mandates by all partners
 Longer-term collaboratives should be encouraged to continually
self-assess and re-invent themselves to remain relevant
 Collaborations should adapt to changing circumstances and, in
some instances, should be prepared to wind down in response to
evolving conditions.”


not all doom and gloom

 umbrella groups and networking
groups are bringing their members
together, to share best practices.
 agencies are looking for new ways to
collaborate with one another.
 charities are looking at diversifying
their fundraising base, and also at
opportunities to generate new
revenues.
 concerned funders – such as
foundations and United Ways – are
actively engaged in explorations of
how to have greater impact with fewer
dollars.
 reduce costs – to do more with less.


the chase for revenue

 Stock market declines have
had a severe impact on the
value of endowment funds
that many NFPs have been
carefully building for years.
 Corporate donors and
sponsors are frequently not
renewing their support.
 A number of social service
agencies – such as food
banks and credit counseling
agencies – report
significantly increased
demand for their services.


challenges

 political vulnerability of grants
and programs is increasing.
 large and small grants impose
heavy administrative burdens.
 all three organizations
described themselves as
“operating on the edge,” with
staff more than fully engaged
and extremely vulnerable
should a senior manager
leave.
 senior managers are very
aware and worried that they
cannot replace themselves.


More challenges

 Grant management, of necessity, takes priority
over other management responsibilities.
 Funders need to do things differently.
 None of the agencies we studied had a portfolio
of funders that supported them to get on with the
task of delivering effective services and building
communities.
 Core non-profits rely more heavily on non-
governmental funding…


The Roof co-location (Barrie)


social innovation
Culture of
Social
Innovation

Social Finance Public Policy

Social
Social Enterprise
Entrepreneurship

A common lexicon is important
 Social innovation does not entail commercial
interest and is oriented towards systemic change

 Social enterprise is a profit oriented entity marketing
its products and services blending business interests
with social ends getting both an economic and social
return on investment. Often also called a social
purpose business.

 Social entrepreneurship is an individual-centred
concept


social enterprise continuum

Volunteerism

Public Services

Social enterprise

Socially responsible
business

Profit driven
mainstream
business


social finance in the third sector
 Role of third sector is to respond to
need and pioneer new approaches
beyond the reach of public and
private sector.

 Ability to do so is undermined by
financial frailty

 In UK Commission on unclaimed
asset develop the concept of a
Social Investment bank

 Objective is to provide urgently
needed greater investment and
professional support.


speed debating

How do you define innovation
Discussion 3
What forms of social innovation
do you use?

What are the obstacles to
innovation?

How do you reward risk taking?


the rise of social innovation

 Social innovation is an initiative, product, process or program that profoundly
changes the basic routines, resource and authority flows or beliefs of any
social system (F. Wesley Sig Waterloo).
 Social system is defined as any organized assembly of resources, beliefs and
procedures regulated by interaction or interdependence to accomplish
specific outcomes
 Social systems are complex and must be adaptive and constantly evolving
 Social systems have own culture, political and economic structures and
social interactions


insights

 Successful social innovations
have durability and broad
impact
 Innovations avoid “band-aid”
solutions
 When broad and durable, SI
is disruptive and create
systemic change
 Must cross multiple
boundaries, reach different
and more people, more
organizations, and linked into
social networks
 Social innovations depend on
“surprising coalitions”


the innovation cycle (F. Wesley)

capacity exploration

resiliency choice

exploitation
S 

building social innovation capacity
 Process needs to connect:

 1) Links between vulnerability
and resilience

 2) Re-engaging vulnerable
populations that are
disenfranchised from
resources

 3) Creates links between a
healthy environment, vibrant
economy and social justice


Social Finance: New (and sometimes not-to-
new) ways to deliver the finances that third
sector groups need to get their work done…

enpTO: A pilot project led by the Centre for
Social Innovation, with the Wellesley Institute as
a founding partner, to assist non-profits to
develop their financial base


speed debating

What new ways of
Discussion 4 funding/financing have you
explored?

What are the barriers
internally and externally

Where might you find capital
sources?


The UK experiment…FutureFund
 Invested unclaimed bank assets into a 250M GBP
fund with annual revenue of 20M GBP

 Bank acts as a “wholesaler” of capital for the social
sector

 It capitalizes present financial intermediaries, provide
advice and support, develops sustained investment
programs, supports new intermediaries in efforts to
raise capital

 Facilitates access to private finance as well as
broader capital markets.


social finance
Social finance is the flow of financial capital to
human need uses:
Charity and
• Affordable Housing Non-profit
• Social Enterprise
• Support for working families
• Health & Home Care
• Community Development Hybrid
• Social Economy Space
• Clean Technology Business Government
• Microfinance
• Fair Trade
• Green Building
• Education
• Bottom of the Pyramid

source: market sector listing adapted from www.xigi.net)

spectrum of social finance
A healthy social finance marketplace contains many different MODELS

Investment Type UK Examples Canadian Examples
Financial Institutions Triodos, Charity Bank Vancity
Financial Investment Product Social Investment Jantzi Index
Universe Forum, GSI
Social Venture Capital - business Catalyst Investeco, Renewal 2

Social Venture Capital – social Bridges Ventures, Resilient Capital
enterprise Venturesome
Government Loans Future Builders Fiducie Chantier de
L’economie Sociale Trust
Non-Government Grants Unltd. Enterprising Non Profits
(ENP) – BC and ON
Philanthropy Esmee Fairbairn McConnell Foundation
Vancouver Foundation
Ontario Trillium
Foundation,
47 Wellesley Institute

UK social finance spectrum
Venturesome’s Spectrum of Venture Capital Investment
Increasing evidence of
HIGH commercial finance available
CHANCE OF Secured loan
REPAYMENT
Dark grey area show where supply
Standby of finance is readily available Light
Facility grey area is where there is a need
Overdraft for more capital and instruments

Unsecured
Loan LOW RISK HIGH RISK
Working Pre-funding
Hard Soft
Capital Capital Working
Patient Development Development
(closed) Capital (open)
Capital Fundraising Capital
Capital

Quasi-equity

Equity
LOW Need for further supply of
CHANCE OF
REPAYMENT Grant capital and development
of financial instruments

What does Canada’s spectrum look like?
48
Courtesy of Paul Cheng at Venturesome

Creating Social Finance Solutions
Paul Cheng - Venturesome
Venturesome is not a bank, nor a granting organisation - it provides
underwriting/stand-by facilities, unsecured loans and equity and quasi-equity
3 models of social enterprise
1. Profit Generator – goal to get profit and give some (or all) away to charity (Patagonia)

2. Trade Off Financial and Social Returns - activity has social impact, but needs to trade off
between financial and social impact (ie, The Hoxton)

3. Lock-Step – no trade- off between social and financial impact - if one side goes down, the
whole organisation does (ie. community wind farms)

• Responding to issues in the third sector – charities are undercapitalized with weak balance sheets and a
‘donor’ culture rather than an ‘investor’ culture
• Provided £12m to 200 organisations, with a default rate of less than 5%
• Current fund is £10m with banks, foundations and HNW individual investors
• Exploring the ‘negative return’ spectrum

- 100% - 15% 0% + 8%
Grant-makers Capital-protected Market-rate return
49
Courtesy of Paul Cheng at Venturesome

social finance support systems
Courtesy SIG @MaRS

The UK marketplace also contains many social finance INTERMEDIARIES

Investment Corporate
Bank Finance
Social Finance
Ltd Catalyst

Research Legal
Guidestar
Structures
Ashoka Social CIC’s
Enterprise
Growth

What systems exist in Canada?
50

legal structure basics
What is an appropriate legal structure?

What is CIC?
Community interest companies (CIC) are a type of limited company designed specifically for those
wishing to operate for the benefit of the community rather than for benefit of owners of the company..
CICs can be limited by shares, or by guarantee, and will have a statutory “Asset Lock” to prevent the
assets and profits being distributed, except as permitted by legislation. This ensures the assets and profits
are retained within the CIC for community purposes, or transferred to another asset-locked organisation,
such as another CIC or charity.

What is an L3C?
L3C'sare low-profit limited liability corporations, which function via a business modality that is a hybrid
legal structure combining the financial advantages of the limited liability company, an LLC, with the
social advantages of a non-profit entity. An L3C is run like a regular business and is profitable. However,
unlike a for-profit business, the primary focus of the L3C is not to make money, but to achieve socially
beneficial aims, with profit making as a secondary goal.

What is the Community Enterprise Act?
Sector leaders in Canada are exploring the creation of a legal structure, learning from CIC and L3C models.

51 Each model has its pros and cons...what is right for Canada?

financial stakeholders in Canada
Charitable
Foundations
Endowments

Mainstream
Private Companies
Banks

Federal and
Financial
Financial Pension Funds Provincial
Stakeholders
Stakeholders Government

Insurance High Net Worth
Companies Individuals

SIO & SRI Mutual
Credit Unions
Funds

How do we engage and connect the individuals in these stakeholder groups?
52 What is he role of crowd sourcing and micro-investors?

enabling public policy
The UK civil society contains many successful
ADVOCATES and ASSOCIATIONS

• Social Enterprise Coalition provides research and awareness programs and
is proactively developing relationships with both political parties
• The National Council for Voluntary Organisations (NCVO) provides the
support and voice for the voluntary and community sector

The UK has an OFFICE OF THE THIRD SECTOR

• Created in 2006
• Sits within Cabinet with its own minister, Kevin Brenn an
• Pros and Cons to placement in central government

The Third Sector includes voluntary and community groups,
social enterprises, charities, cooperatives and mutuals

Which government body, advocates and associations do we need in
53 Canada?

Policy Catalyst Working Group
Reflecting public benefit through government

Key issues to address

What is an appropriate policy catalyst?
•Creation of a social innovation ministry (Office of the Third Sector)?
•Creation of a social innovation endowment (NESTA)?

What should a ‘government body’ cover?
• How should public benefit services be reflected in government
•Focus Innovation and not cost-cutting

What should a ‘NESTA-like’ organisation do?
•Canada-wide knowledge management and research
• Funding for social innovation projects
•Challenge Grant Programs

Should the catalyst be provincial, federal or both?
54 Is there a role for municipal leadership?

structure and reform
(courtesy SIG @MaRS)

Two big issues to address:

Legal structure
• Designing and advocating for a legal structure for Canada
• Pros and cons of CIC and LC3
• Provincial and Federal actions need to be activated

Regulatory reform (foundations and taxes)
•Revising and advocating for improvement of regulations for
foundations
• CRA and PRI guidelines for foundations
• Exploring how tax levers might support investment in social
innovation and social enterprises

Key Step: Convene a high profile working group
55

building a resilient and sustainable future

 Third sector organizations will need to engage in new models for future expansion

 Private-Public and Third sector partnerships will be critical

 Collaboration will necessitate real exchange and sharing of financial and people resources

 Organizations will need to agree to common missions, values and objectives


Breaking news…legislative victory!
The Wellesley Institute convinced
the Ontario government just last
week to amend its draft anti-
poverty law to recognize critical
importance of third sector


People are talking to each other
online
2 choices:

1. Resist it, and it will happen anyway, elsewhere,
outside your influence
2. Support it, participate, influence it, and leverage
it for extending your brand

some benefits of social media
1. Listen and learn
2. Publish valuable news and
information
3. Distribute promotions
4. Create or extend your brand
personality
5. Engage in conversations
and customer services
6. Efforts lead back to
websites – repository of
information

The web is about
conversations,
not top down delivery
of information or
messages.

Social media works best in tandem
with traditional means
 Baby….bathwater….no!
 Segments our audiences
 Build on the power of networks and burgeoning
communities
 Organizations using communities to connect
faster, more collaboratively, more inclusively, and
more effectively
 Proliferation of social media stories within
traditional media piques interest

the purpose of social media is to
engage with audiences in interactive
communities
 Genuine engagement facilitates a highly involved
audience that wants to interact with “the brand”
 The more people an organization can interact
with who already have strong social networks, the
more likely it is that a message can be spread
through those networks

Social media can change the world
 We’re looking for impact, influence, and change
 A message that resonates can make an enormous
difference
 Frozen Pea Fund – original Twitter posts became a
global campaign for breast cancer awareness
 Barack Obama’s presidential campaign
 Kiva.org
 Netchange
 Stableandaffordable.com
 Homeless Hub
 Can you think of any others?

innovative ways of getting things done
 The social web allows people and organizations
to connect in unlimited ways
 connectivity as a catalyst for change
 Technology as an enabler for innovation
 For example: Kiva.com
 Microloans for the developing world
 Connects third world entrepreneurs with
microlenders world wide


Organizations using sm successfully

 Here comes everybody
 Focus on relationships, not on “campaigns”
 Commit resources to learning and training
 Made and learned from mistakes
 Respect and humbled by medium


Social web innovates….
 Public relations
 Media relations
 Communications
 Networking
 Collaboration
 Outreach
 Fundraising
 Word of mouth


How?
 Constant, small iterations
 Lather, rinse, repeat
 Tell stories


 Great grassroots initiatives
 Facebook groups
 Flashmob opportunities
 Online communities
 Email
 E-commerce on site


Building your brand


Ensuring the right culture


Culture precedes innovation success
 Social entrepreneurship governance model

 Permission to fail

 Integrated thinking

 Creative thinking and pragmatic doing

 Small acorns produce large oak trees


We gratefully acknowledge the
support and contribution of our
various partners in the creation of
this presentation.

Thank you.


Thank you and summary



Thriving in Turbulent Times: Maximizing Your Success in the New Social Environment

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