I accept not everybody will have had the time to watch the entire proceedings, that took place on Tuesday of this week, when the Charities Committee met in the House of Lords but I have to say it made me think.

During a slow start to a Saturday morning, browsing on twitter, I stumbled across this link, parliamentlive.tv/event/index/63b7e8f4-5be6-44b2-92c9-df8e2f5277eb made myself a coffee, got myself comfy, and settled down to watch - you may even like to try it for yourself?

After watching the full 80 minutes, I still felt I had a different answer to the first question than I had heard and I certainly had a response to the final question that I would like included in the report to be published next March.

Whilst I may not have had a direct opportunity to respond to the committee I nonetheless have fairly significant experience and informed views on what they were discussing. Over the years I have also had the privilege to speak face to face with some of the witnesses that were present and I respect them. Although some of the responses were helpful and insightful somehow I was still left feeling we have somehow got caught up with labels and a vocabulary which is not really that helpful.

The first question asked was "What are the main benefits of social enterprise and what distinguishes social enterprise from other business?".

In my view the answer is "the people"; the people that staff them (paid and unpaid) and their motivation. They are, almost without exception, values driven, passionate about the cause and do things out of a sense of purpose for the benefit of others. This may help with the "social"  but referring to "enterprise" is where I believe we may have gone wrong and it would be helpful if there was a little more clarity.

Enterprises are lead by entrepreneurs and often use resources in a different way to charities. They take risks and seek to make things grow. Businesses describing themselves as "not for profit" will find it hard to attract "investors" in any market place. 

So before we dig ourselves an even deeper hole with "social finance" perhaps we should take a step back and use some more accurate language?

Thankfully I learned, fairly early on in my career, that in business you require a range, and sometimes a blend, of finance options to meet differing funding requirements. Funding is a balancing act that involves risk and reward. If you want to share in the financial rewards you have to have some skin in the game. If you take little or no risk you cannot expect a huge financial reward for simply providing the finance. If you see all the social impact you were looking for then why can't this be enough on its own; particularly if you are guaranteed to get the money back too? 

When the idea of out-sourcing the employment service, or probation service was considered by government those activities did not become "enterprises" overnight they remained services. They may well have needed to be done better and cheaper which may be why the government has called in the private sector and professional "contractors" not because the service became an enterprise!

In the property sector, as anybody who has ever employed a building contractor will know, you are given a price for the job that covers the cost of materials, labour, plant and equipment, office overheads and then their margin. So, as long as they price the job right, maintain their performance, complete the job and get paid, they make a profit. It is the developer that carries the risk and reaps the reward, if there is one!. It is down to them to find the opportunity at the right price in the first place, do the their research, manage the job and then be able to sell the finished article, promptly, for more than it all cost. This requires them to know their market and how to operate in it, generating revenue from customers, who have a choice where they are spend their money. That's "enterprise" not just "contracting".

90% of businesses in the UK are known have less than 10 employees. Each of those employees is now legally required to be paid, at least, the minimum wage. However, in the world of charity and social enterprise the staffing make up is likely to be quite different. Some staff will be paid and some staff will work voluntarily so again that is not really a "business". 

However, in this sector, we can see there is another shape emerging. This can be called a "social business" It operates in the commercial marketplace, to generate profits, which it then chooses to invest in funding interventions that make a real difference in the lives of disadvantaged people. They operate for more than profit and often employ people that others wouldn't even consider. It's a business that funds itself and the social impact it delivers.

Each one of these categories, charities too, require funding but, at the end of the day, we're talking about money. So why do we make it complicated and call it social finance? Isn't it either repayable or non-repayable, short-term or long-term, high-risk or low-risk, equity or loan, gift or donation? 

Savvy investors will know how to assess risk. They will know, or make sure they do the research, to find out exactly what and who they are funding. They will determine the reward required before they risk their cash and the investee simply needs to decide whether their terms are acceptable. 

So after all this my response to the final question "What should be included in the report?" is plea not to continue to use social enterprise as an homogeneous term in this sector. Can we be clearer and differentiate between charities, contractors, enterprises and businesses. This may even help funders and investors focus on the part of the market where they are most likely to achieve their objectives. 

If experience demonstrates to a Trust or Foundation that a well placed grant can leverage in a huge amount of volunteer activity and bring change within a community and a leave a legacy then don't make them waste time and use precious resources talking to contractors. Let them make grants to those who can make the most use of them but don't call it social finance or social investment.

If a Commissioner needs to see a contract and wants a strong balance sheet, track record, decent return and easy to measure KPI's fund the contractors, through a bond if you must, but don't call it social finance, it's not, it's contract finance.

However, if you are willing invest in equity, or lend to an enterprise with a business plan showing social impact is embedded in it's culture and it can also generate a profit then I believe you're really talking about social finance plus I expect you'll already be prepared to include the value of the impact funded by your investment as part of your reward. 

Richard Nicol
October 2016

Since the first time I saw this YouTube clip made by Stephen Morris I have found Asset Based Community Development strategy so much easier to explain. Take a moment or two to watch this and even listen to the explanation of the physics at the end.

The prospect of building up enough energy to tackle even the biggest problems can serve as the motivation required to stand the dominoes up in the first place.
As The Re Group works with different organisations it becomes clearer and clearer it is the people within those organisations that make things happen, or indeed stop them from happening. For too long, with the best of intentions, "experts" have tried to helicopter in their "big dominoe" solutions without taking the time to recognise and build relationships with the "smaller dominoes".
Whilst their solutions may be entirely valid its all about timing. They need to take their place in a sequence of events which starts with the kind of activities that draw people to be involved and allow them to contribute.
A friend of mine says "If your vision doesn't scare you it's not big enough". I wonder if sometimes it is the fear being left on our own to deliver that we are really scared of? There's nothing wrong with big ambition but how often do we not make a start because we think the scale of the task will put others off and they'll walk away!
If a community feels valued and can see purpose in what they bring to the early stages of any project they too will feel part of the bigger picture. The early actions are the foundations that others build on and do not disappear or move away. Even when most people have forgotten how the journey started that starting point will still be just as important.
We shouldn't ignore small groups of people doing seemingly small and insignificant things, that's often how big things start. We should search them out and understand why and ask "So what do you think needs to happen next?".

Richard Nicol 
October 2016      

This well known proverb exists in different forms in many African languages. The basic meaning is that child upbringing is a communal effort. The responsibility for raising a child is shared with the larger family (sometimes called the extended family). Everyone in the family participates especially the older children, aunts and uncles, grandparents, and even cousins. It is not unusual for African children to stay for long periods with their grandparents or aunts or uncles. Even the wider community gets involved such as neighbors and friends.
So why is that in the western world, in what are held to be the more the developed economies, that we have lost sight of these responsibilities, often preferring to delegate the responsibilities to school teachers and social workers particularly when things get tough?
It has been said that "children do not do what they are told they do what you do". We see how influential negative peer pressure can be and how important it is to be accepted and affirmed "to be cool" so to speak but if your compass is pointing in the wrong direction you are going to end in the wrong place.
In a world where the media, both social and broadcast, have become hugely influential we can see that community values have been eroded and personal ambition fame and financial success is seen as the goal by many. Well the truth is that is wrong. Have you noticed when Bruce Parry or Gordon Buchanan visit a tribe living in the deepest parts of the jungle everybody works together for the greater good and they enjoy each others company. 

​Richard Nicol