Four Models of Social Enterprises in Israel: Implications for Measurement

Prof. Benjamin Gidron

School of Business Administration

College of Management Academic Studies (COMAS)

Rishon Le’Zion, Israel

Workshop on Social Impact Measurement

University of Economics and Business

Vietnam National University, Hanoi

March 16th, 2016

The Changing Relationship between Business and Society

• Classical capitalist thinking advocates separation between business and society

• Milton Friedman – “the business of business is business”

• Such outlook also means institutional separation – public sector and NGOs/NPOs are responsible for dealing with social issues

• CSR – 1980’s-1990’s – in light of privatization and retreat of governments –devoting a (small) share of profits to social causes outside the business venture – business and society still separated

• Social Business – Muhamad Yunus 2006 Nobel Peace Prize – attempt to create organizations that combine the social and the commercial

Forms of Business Contributions to Society –

The 3 P’s• A business venture can contribute to society in one of 3 ways:

•Profit – it can take a share of the profits and donate it to a social cause

•Product – it can manufacture a product that has social implications, such as a

chip in the brain that can help blind people see

•Process – it can manufacture a product or provide a service whereby the

process of creating that product is social, such as when the business employs handicapped persons

• (Only the last requires internal organizational changes).

Social Enterprises: An Exciting Form of Combining Business and Social Goals

• In a world that faces major challenges in overcoming gaps between rich and poor, regarding the environment, in health, the concept of “shared value” and “double/triple bottom line”, when taken seriously present new opportunities for the business sector and for society

• In the 21st century it is done through entrepreneurs within social enterprises. Entrepreneurs who combine business, social and possibly technological skills can create exciting ways to help themselves as well as contribute to society

The Israeli Experience: Four Models• Strong entrepreneurial spirit expressed in the 1990’s in high-tech

entrepreneurship. Existence of entrepreneurs, hubs and accelerators

• Four existing legal avenues to establish and incorporate Social Enterprises: Business organizations, NPOs, public organizations, cooperatives.

• Each of those has a different ideological base, suggesting one can contribute to society from different ideological stances.

• All of them combine economic and social goals and are interested to measure their success on both fronts and of course on the connection between those two aspects.

• However, because of ideological differences, each has a different emphasis as to what to measure and how to measure the impact of its endeavor.

Impact Measurement: What and by Whom

Business Organizations

NPOs/NGOs Government Agencies

Cooperatives

What Primarily EconomicPerformance

Primarily Social Outcome

Impact on Public Budget (SROI)

Solidarity, Links between Members

By Whom External “Objective” Agents

Mix between External Agents and Internal Workers

External,“Objective” agents

Internal Members

Two introductory remarks:1.It is not possible to create universal “objective” measures of social impact in social enterprises because of their diversity, in their goals and target populations, therefore, in most cases measurement is divided into two2. Measurement ís a “political” process

Conclusions• Impact measurement – a major challenge for social

enterprises

• Two approaches to measurement: Economic/business and social. Different traditions, different methodologies

•One should not strive to find fully “objective” measures when measuring social impact: It does not exist

• There should be an emphasis on measurement and accountability to show the success of the enterprise and attempts to improve measurements all the time, but an enterprise should not be enslaved by it.

Thank you