As the mission of a social entrepreneur is having impact on social and societal challenges, it’s important to ‘measure’ this impact. And to have impact parameters on the management dashboard. As looking after social and societal challenges was mostly taken care of by non-profits, little management instruments on relevant parameters and collecting data were developed. Until the last decades, when social investors as well as governments started asking for prove of impact. The focus shifted from ‘good intentions’ to ‘creating impact’. We like to quote Dr. Karen Maes from Erasmus University Rotterdam who said: “It doesn’t matter why you want to measure your impact, be it for your CSR strategy or for philanthropic reasons. The approach and the reasoning behind stay the same, it’s necessary for both aims. Because, if you don’t measure your impact it’s the same as a commercial organization which does not know how much profits it makes”.
Financial management is where the economic part of the business model gets translated into financial data. As well as impact management it’s about defining valid parameters, collecting the right data and analyzing and interpreting them. Because entrepreneurship in our world was first focused on money and profit, and one needs a bookkeeping and financial reporting to monitor it, we have lots more experience and instruments about the financial processes. But both -finance and impact- are equally important to the social entrepreneur. Without money and profit, there is no chance of going concern, and one won’t be able to create impact.
What if… you have a strong business idea, and you are very clear about the impact you want to achieve, but you do not get your organization well developed, nor your processes efficient? Depending on the concrete situation, one thing is sure: you will achieve less impact and benefits, with more effort. In the worst case, the organization will not survive. This is a thought provoking illustration to show that managing processes, both material and human, are also very important. We refer here to courses in LEAN management as well as organizational development.
To be honest, we only recently added this fourth domain to our ‘management responsibility’-scheme. Maybe because somehow, we assumed social entrepreneurs would also be sustainable entrepreneurs. And I guess they want and honestly believe in sustainable business! But what for example, if you are the leader of an enterprise employing people with a distance to the labour market and you’re already challenged to find enough orders to keep your people at work. Would you say no to unsustainable assignments like wrapping gifts in lots of plastics?