Grant funding can have a downside for social enterprises, says new research

Social Enterprise and Homelessness paper says that secure non-trading income streams can undermine the commercial drive of organisations

The report
The report

Grant funding can have a detrimental effect on the sustainability of social enterprises that integrate beneficiaries into their workforce, new research has found.

Mark Richardson, a consultant and fellow of the Clore Social Leadership Programme, surveyed 53 social enterprises working with homeless people and interviewed the managers of 15 social enterprises that help homeless people into employment, for his paper Social Enterprise and Homelessness.

He found that while grants play an extremely important role in getting some social enterprises off the ground, they can also undermine the commercial drive of the organisation.

The research says: "Most social enterprises [become] much more driven by financial sustainability following the withdrawal or the threat of withdrawal of grant funding. Those organisations with secure non-trading income streams were least commercially focused."

The paper says that social enterprises with more income streams rely less on grant funding. "Those with only one income stream typically relied on about 40 per cent grant funding, compared with only 5 per cent for those with five income streams or more," it says.

It also says that social enterprises have difficulty balancing social and financial targets.

"For the vast majority of social enterprises, fulfilling the social objectives of the organisation comes at a huge financial cost," it says. If managers focus on the commercial outcomes alone, this can lead to failure, it says, but all organisations agree that a focus on social mission alone gets them nowhere.

"Also important is a focus on the quality and reliability of the commercial product or service," the paper says. "This is arguably even more important for a social enterprise than a mainstream SME because the expectation is often that, in delivering social outcomes, you cannot also deliver a high-quality commercial service."

The paper says using the social mission of the organisation as a marketing tool is useful when marketing to businesses or public or voluntary sector organisations, but can sometimes be a disadvantage when marketing to the general pubic.

Richardson told Third Sector that many of the paper’s findings could be applied to other types of social enterprise that integrate beneficiaries into their workforces.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Follow us on:
  • Facebook
  • LinkedIn
  • Twitter
  • Google +

Latest Jobs

RSS Feed

Third Sector Insight

Sponsored webcasts, surveys and expert reports from Third Sector partners

Markel

Expert Hub

Insurance advice from Markel

Cyber and data security - how prepared is your charity?

With a 35 per cent rise in instances of data breaches in Q2 and Q3 last year, charities must take cyber security seriously

Third Sector Logo

Get our bulletins. Read more articles. Join a growing community of Third Sector professionals

Register now