Hybrid Social Enterprises: Rationale, Challenges and Impact
Date
2014-01-08
Authors
Rajah, Daryl
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Abstract
There is a growing interest in Social Enterprise in South Africa driven by perceived advantages that Social Enterprise has over the government in efficient delivery of services; over conventional business. The desire to combine a social and commercial business model has led to creative ways to structure an enterprise, often known as a Hybrid model, because it combines the non-profit entity with a for-profit subsidiary. The for-profit allows an enterprise to facilitate investment, while the non-profit can facilitate grant capital and provide non profit-making services to a community.
The research analysed five Social Enterprises in South Africa that went down this route to seek a better understanding of the rationale for Social Enterprises to move to the Hybrid business model, the challenges faced when moving to the model and whether the move to the Hybrid model had the desired impact.
It was found that the justification for wanting to move a Hybrid business model was a way for Social Enterprises to issue shares. Issuing of shares allowed the Social Enterprises to attract private investors and incorporate staff as shareholders. Another reason for the move was for the ability to become more self-sufficient which meant that their strategy did not need to be shaped by the priorities of prospective funders.
The research found that there were three main challenges with establishing and maintain a Hybrid business model. These related to getting stakeholders to understand the model and agree to participate, the process was very time consuming process which could take your eye of other more pressing needs and that the costs involved in moving to Hybrid model were quite substantial.
The final part of the research looked at what was the impact of the move. The findings show that the Social Enterprises were able to access alternative sources of funding which included Bank and Enterprise Development funding. This allowed the Social Enterprises to become self sustainable, independent and achieve surpluses. The move raised the Social Enterprises profile and made the organisations more marketable. None of the Social Enterprises reported mission drift after moving to the Hybrid business model. Overall the Hybrid model allowed them all the social enterprises to reach more of their constituents by enabling them to scale up their operations and create sustainability of their programs.
Description
MBA thesis
Keywords
Social enterprises