Great social enterprises: Zaytoun

I was at a social enterprise event recently run by Cityzone, a fantastic network for entrepreneurs. Twelve social entrepreneurs presented their businesses and Jonathan Jenkins of UnLtd and John Bird (always good value) gave talks.

My favourite social enterprise of the evening was Zaytoun, a fair trade company producing and importing olive oil from Palestine.

Do you know that the oldest olive groves in the world are in Palestine and were exported to Greece, Spain, Italy in Roman times?

I also learnt from Atif Choudhury - the activist/director of Zaytoun - something about the challenges of distributing olive oil out of a war-torn area and the need in this case for both Palestinians and Israelis to support in this process. I was reminded of the power of social enterprise and so even today Zaytoun - an embryonic business – is making a real difference by giving villagers an opportunity to earn a living and a reason to avoid the need for more extreme resistance.

What a great example of addressing a social need through the market.

But what struck me most was that Zaytoun is promoted as a great product not as a ‘pity purchase’. The olive oil is a premium product and costs more than alternative brands in supermarkets. Atif is proud of this and promotes Zaytoun for the quality of its taste.

Spot on!

I have ordered a box (looking forward to that). I think Atif’s approach is exactly the right one and you can see this attention to quality in the website too - it looks classy and is good to read.

Social enterprises thrive when they deliver a high quality and relevant service/product for customers. When I go to say Bikeworks, I expect a reliable bike. I want a stimulating read when I pick up a magazine from a Big Issue Vendor and I want a high quality Pentium 4 PC from Computer Aid.

It's a useful reminder for us all as social entrepreneurs that the sure way to create conditions for long-term business success and therefore social impact is to strive continually to deliver quality to our customers. This is what business is about after all.

Pick up some Zaytoun at: http://www.traidcraftshop.co.uk/searchadv.aspx?SearchTerm=zaytoun

Can Boards be Enterprising?

In a recent post, I mentioned that one of the reasons that mergers do not happen more frequently in the third sector is that Boards are averse to taking risks.

There are of course many wonderfully effective Boards and management teams around. But in our experience this is because of the presence of a very accomplished CEO (who does most of the decision making), the Chair or individual Trustees who are really hands-on. In a sense success happens despite the structure rather than because of it.

A sweeping statement maybe. But in our work we do see it again and again that Boards are very risk averse and it is often to the detriment of the long term stability of an organisation. This obsession with risk is particularly stifling for social enterprises whose existence is after all predicated on market opportunism and a certain amount of risk taking.

So what’s the problem? Well, first Trustee Boards tend to meet once every two to three months. In a marketplace where organisations need to be agile and responsive, this can really slow up decision-making and hinder the endeavours of the senior management.

Compare for a moment how governance works in the private sector. Board Directors are voted by shareholders and have a duty to maximise financial profits. In contrast, the Boards of a charity or third sector organisation do not have an explicitly stated role to maximise the social impact of that organisation, only to avoid insolvency. Their role is written in terms of protecting the downside, ensuring reasonable use of assets and funds and avoiding activities which put the organisation’s assets at risk. My point is that they should be explicitly encouraged to seek ways to find strategic opportunities to maximise the upside (ie the social impact).

I guess it shouldn’t be a surprise that Boards are not as effective in the role of strategic decision making. There are many reasons not to do something. And it’s often easier to say “let’s not do that”, than it is to get the consensus needed to commit to a plan for investment. This is especially so if Board members only have limited information.

But in spite of the governance structures, there is so much value that Boards can make by seeking opportunities and growth as well as protecting for risks. In fact, often the risk of inaction is much greater than pursuing a well-informed growth opportunity.

This is very much the case with the thorny subject of mergers, as discussed in my previous blog. Whether you are a Board member, or a charity supporter concerned about your cause’s options in the current economic conditions, it might well be a greater gamble to stay independent than to seek integration with a like-minded peer and organisation.

Please comment on this blog - your views are welcomed as are any suggestions for blog topics going forward.

Mergers and social enterprise

Richard Litchfield, Eastside's Managing Director, shares his thoughts on the third sector's need for mergers and social enterprise:

I like Craig Dearden-Phillips’s comments in the Third Sector that 2009 could be the year of the merger. His point is essentially, if we’re facing vaporisation, then “lets get together”.

Mergers have been talked about for a long time in social enterprise and more widely the third sector. There is a clear logic for them – they reduce duplication of services, increase the capacity of frontline agencies, and enable cost savings as organisations pool resources.

Occasionally we do see a merger – though they seem to be few and far between.

Compare this to the private sector where mergers are a key part of a CEO’s job description; there mergers are common place, whilst most of the third sector has grown organically. As a result senior charity and social enterprise managers and executives do not have direct experience of undertaking joint ventures or mergers.

So what’s preventing more mergers happening in the third sector?

Well. Merging two organisations is just a difficult thing to make happen. My thesis is that there are three things in particular that block more mergers: the egos of senior executives (which Craig also points out), the nature of charitable Boards who are risk adverse (and perceive mergers as risky) and the lack of experience among executives as mentioned above.

Yet times are changing. Hard economic reality means that organisations will be forced to pool resources with neighbours. Recession will galvanise management teams to make hard decisions and the risks of inaction will be greater than the risk of doing something opportunistic.

Through the recession, many more senior execs will gain experience of mergers. They will be forced to. In fact, ‘merger’ is probably not the right word here. We are much more likely to see distressed takeovers than mergers. This is where a larger organisation steps in to takeover the assets of a failing organisation to ensure a continuation of that service.

But there is a bright note here. The third sector should become more streamlined and efficient by pooling resources and merging. More experience, more case studies and more success stories of how to do it (and of course how not to do it) will emerge. This will create a positive cycle so that when the good times come – as they will do – then executive teams will be much more able to use merging as a strategic tool for scaling up and growth.

More reading we found on mergers

http://www.thirdsector.co.uk/news/FinanceBulletin/869248/rise-merger/

http://www.guardian.co.uk/society/2008/sep/10/voluntarysector.publicmanager

http://www.thirdsector.co.uk/news/Article/867613/manchester-charities-merge/

http://www.thirdsector.co.uk/news/Article/871080/housing-charity-absorbed-larger-organisation/

Case Study from Eastside’s experience of Mergers:

http://www.eastsideconsulting.co.uk/social_enterprise_services/case_studies.asp#social_enterprise_Strategic_review