25 December 2009 ~ 0 Comments

Are Hybrid Organizations Half Bad, Half Good, or Just Confusing?

Or, like so many of these questions which try to put who sectors into a “good or bad” category, does it just depend on a case-by-case basis?

This post on Social Edge talks about hybrid organizations and I added the comment below which relates to other thoughts I have posted on my blog about social venture scalability.

Would love to hear more thoughts on this!

“Is splitting a venture into for-profit and non-profit actually just a crafty way of getting around the fact that your venture is NOT economically self-sufficient?”

I think there might be BIG problems in the future if we keep trying to push social entrepreneurs into thinking that ALL parts of what they do have to be “economically self-sufficient”. What about Grameen? They are a bank. They make loans. It makes money. Good for them.

But a LARGE part of their positive impact comes from Grameen Foundation, aimed at educating lenders and creating training/education groups and methodology for the women taking out loans, (this is my interpretation of some of the ways they use non “economically self-sufficient” funding). If they DIDN’T do those things, and if they just gave loans without investing in educating both lenders and borrowers, they would not be as successful. Do they have to incorporate that training and all of those costs into their business model? Sometimes, the way this group via Skoll or Echoing Green et al talk about financial sustainability and social ventures, it would appear so. Even programs such as The Unreasonable Institute and other training programs within this growing sector ask that you prove economic sustainability in order to qualify.

I think the reason Grameen is viewed as a role model is BECAUSE it ISN’T just trying to be economically sustainable. If they tried to push all of their training into the same business as the loans, there is no way they could break even and perhaps to do so they would have to dilute the efficacy of their educational programs. Instead, they went “hybrid” and Grameen Foundation does the bulk of what makes Grameen great OUTSIDE of the income generating business model.

SHE (www.sheinnovates.com) – now how can you get a better social venture model then that? They are using locally available materials which were once considered waste and giving those things value. They are solving needs locally, through training and business creation. They are targeting needs identified from within the community. Each of the businesses can, hopefully, make money in the future. Each group of women can buy and own their own factory. BUT, what about the technology behind the manufacturing? Can’t that be improved upon and developed further?

In organizations like this, one might argue that people or companies could “volunteer” to help do those things, but isn’t that just a way of changing the facts to try to “appear” financially sustainable because the outside world, and now even more strongly the INSIDE world of social entrepreneurship, is telling people they have to be? Why shouldn’t SHE be able to take donations to cover R&D costs? I for one know that my investments would be used a lot better there than in many traditional non-profits without the income generating arm.

Plus, SHE wants to educate women about health issues and encourage them to use their products, not just so that they can sell more products, but because they want to promote women’s health! Does that advocacy and education need to be included in the same budget as that of the factories? Or should that be funded as a separate NGO allowing the education portion to grow beyond what the company can afford? Yes, that NGO could be an entirely separate NGO not associated with the for-profit arm, but what about the cases where the appropriate NGO partner doesn’t exist? Does giving SHE the freedom to have an NGO arm open Proctor and Gamble up to do the same thing with their products? Slippery slope, yes, but I think we had better start talking about this, as the focus on “economic sustainability” from within this community might kill momentum for projects that ARE successful because they are NOT economically sustainable. They want to be more than just a micro-finance bank or a sanitary pad manufacturing plant. They want to change the way people think and interact with these products, so for them, their “marketing” becomes a social service in and of itself.

Would love to hear other thoughts on this but, my vote overall is “It’s complicated”. Being hybrid is not “just a crafty way of getting around the fact that your venture is NOT economically self-sufficient” but instead a crafty way to add value to social sectors which are not able to include all of the social value potential with their business model constraints. And sometimes, if you look at the groups making the most impact, if you took the “non-economical” parts away, you would end up with a non-exceptional product.