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The Mass Media

The Mass Media

Social entrepreneurship: Grads Can Do Good and Do Well

Many of our nation’s college grads this year want to pursue a career in which they can make a difference in society. But they also want to buy a car, rent a nice apartment and save for the future. There is a way to both make a difference _ and a buck!

“Social entrepreneurship” is a term and concept that seems to have captured the imagination of both the world of entrepreneurs and that of not-for-profits. In the not-for-profit world, most seem to live from hand to mouth in order to serve from hand to mouth. But the not-for-profit sector _ contributing $600 billion a year to the U.S. economy _ is a powerful force for change, in our neighborhoods, and in our nation.

Social entrepreneurship has a powerful appeal in the world of entrepreneurship as well as the not-for-profit world. For the entrepreneur, this mission rises to an almost redemptive calling. Social entrepreneurship is proselytizing. The entrepreneur strongly believes that the answer to many, if not most, social/economic problems is to set loose the animal spirits of entrepreneurship. The guiding intellectual lights here are Joseph Schumpeter and Ayn Rand, both of whom eloquently and romantically essayed the heroic, creative and indispensable socio-economic roles of the entrepreneur.

The not-for-profit organization’s motivation toward social entrepreneurship is ironically less ethereal. They see a shrinking donor base, aggravated by recent death tax reform, and ask: Where will the resources come from to support the essential services provided to clients of modest means?

Social entrepreneurship involves the development of surplus generating activities that are natural extensions of the not-for-profit’s core mission. The rationale is to provide resources for the agency’s activities that are not financially self-sustaining. In other words, the profits earned in the entrepreneurial realm become available to subsidize services to those unable to pay full cost. If this can be done without the diversion of scarce resources and without undesired incentive effects, the result is an unmitigated blessing; there is no problem and we can all go home. But this is a superficial and naive way to conceive of social entrepreneurship. For the question to be germane there must a trade-off.

In a recent fireside chat with a group of idealistic undergraduate students, I found that their admirable inclinations were to save the world and disdain the pursuit of personal wealth. I asked my youthful audience to compare the nobility or redemptive value of the impecunious, lifelong social worker to Bill Gates, who contributes billions of personal wealth to socially uplifting causes. Who adds more? Who is to be more admired? Which path should they choose?

These are questions that embody trade-offs and choices. Manna is a blessing to be prayed for, but it is also a rarity.

Think of a not-for-profit agency receiving a $10 million gift. Should the group use it directly for the production of social services, or invest the $10 million in the stock market, or some other capital market claim, and spend some fraction of the earnings. After all, starting some service-for-fee business with the prospect of profit is the crude equivalent of buying stocks.

In St. Louis, Paraquad, the not-for-profit organization that has been helping people with disabilities live independently in the community for more than 30 years, started a service-for-fee business called Deaf Way Interpreting Services. Starting with just one staffer four years ago, the entrepreneurial spin-off now has a staff of eight interpreters, serving thousands of clients in our community since its inception, including colleges, corporations and government agencies, and contributing more than $1 million to Paraquad revenues.

Deaf Way helps the hearing impaired live independent lives, providing a much-needed service to the community, all while contributing to Paraquad’s bottom line.

The mission of the not-for-profit in society may be unaltered by its experimentation in the world of entrepreneurship, but the mix of activities could change, the customer base could be affected, priorities may evolve, the level of stress, discipline and monitoring could escalate.

There is great value in the idea of “social entrepreneurship.” The notions of self-help and independence, of accepting the disciplines of the marketplace, have merit in the not-for-profit world. But not-for-profit agencies shouldn’t forget their own history and values, their donors, their competencies and limitations. They should remain the master of their own destiny, and avoid subtle cultural subversion. By the same token, not-for-profits need to remain open to finding new ways to build competencies and serve their communities. Nothing worth doing is easy!

There is no reason for the not-for-profit world or the idealistic college graduate to reject the marketplace or the world of business, unless it will result in a compromise of values. In that case, it would be better to remember Adam Smith’s admonition, and focus on doing good while leaving to others the chore of doing well.

By Stuart I. Greenbaum


Stuart I. Greenbaum is the dean of the John M. Olin School of Business at Washington University in St. Louis. Readers may write to him at: Olin School of Business, Washington University in St. Louis, Campus Box 1133, St. Louis, Missouri 63130.