Abstract
Social Enterprises have grown in number and scope in response to reductions in state-provided welfare and increasing ambition to improve social conditions. While a range of issues have been identified in the literature as affecting the ability of Social Enterprises to successfully conduct their activities, there is currently a dearth of research into the relative influence of these factors. This study explores and ranks the challenges faced by social entrepreneurs in South Wales. Based on a Delphi study with 21 social entrepreneurs, government policy-developers and scholars, it presents a hierarchy of 14 factors, useful instruments for informing social entrepreneurs and policy-makers about the way social enterprises are managed, and how national and local policy should be developed. As part of this, the study also identifies four novel factors that affect the sustainability of social enterprises: ‘Professionalisation of Marketing’, ‘Perception of Validity’, ‘Leadership’ and ‘Situatedness’.
Introduction
Social Enterprises (SEs) are playing an increasingly important role in modern neoliberal societies. Urged into existence and shaped by a shrinking state (Chan et al., 2017; Kerlin, 2010; Littlewood and Holt, 2015; Pathak and Murlidharan, 2017), diminishing welfare services and dwindling charity contributions (Mohammed et al., 2018; Munoz et al., 2015), they have been fuelled by an ever-increasing legion of social entrepreneurs (Haugh, 2007; Hoogendoorn, 2016) who are ideologically and experientially driven (Hockerts, 2017; Kurland and McCaffrey, 2016; Thorgren and Omorede, 2018) to develop sustainable enterprises that ‘respond to the needs of others’ (Dees, 2012, 321).
The range of issues that beset SEs and social entrepreneurs has been well researched (see, e.g. both Rey-Marti et al. (2016a) and Doherty et al. (2014)). However, these challenges have tended to be examined in isolation and the relative influence of these issues has not yet been explored (Rey-Marti et al., 2016a). Ranking these issues matters because it allows the most important of what may be a plethora of factors to be identified and this will assist policy-makers in allocating what are often scarce resources. Future research is therefore needed in this sector, particularly that which moves beyond the mere description of the phenomenon and provides more quantitative empirical evidence (Sassmannshausen and Volkmann, 2016). This paper aims to address this gap by making a study of the challenges that are faced by the social entrepreneurs that operate SEs.
The term Social Enterprise denotes a multitude of organisation types that operate in all sectors of the economy (Doherty et al., 2014). Despite their diversity they are united by the common factors of having a clear social/environmental purpose, they reinvest the majority of their profits that are generated through commercial activities and they operate independently of the state (SEUK, 2018). Recognising the high degree of heterogeneity within the sector this study adopts the term ‘social enterprise’ in its broadest sense when focussing upon the challenges that are faced by the social entrepreneurs that lead such organisations.
A structured literature review was performed in the ‘Emerald’ and ‘Business Source Complete’ repositories. The choice of keywords was informed by Doherty et al.’s (2014) seminal work and comprised the phrase ‘social enterprise’ with the words ‘hybridity’, ‘finance’ and ‘human resources’. In addition to this, the search was widened with the addition of the words ‘challenges’ and ‘management’ in order to reflect the aim of this study. This returned 23 papers in 18 journals, with eight published in 2014, eight in 2014 and seven in 2016.
The paper is structured as follows. The literature review is presented thematically and identifies the 10 issues that inform the subsequent Delphi study. The methodology is then detailed before the findings are then presented and discussed. The paper closes with summary comments and suggestions for future research.
Literature review
Doherty et al. (2014) identified that SEs are consistently understood, and referred to in the literature, as ‘hybrid’ organisations. This is because they tend to comprise an amalgamation of private, public and non-profit organisation types. In attempting to satisfy the requirements of being partly competitive and profitable, while delivering much-needed services to society, and frequently being simultaneously constrained by sources of funding and shortage of business skills (Rey-Marti et al., 2016b), SEs are subject to complex and often paradoxical tensions (Ebrahim et al., 2014). These tensions are found to arise between factors such as competing institutional logics (Cornforth, 2014; Crucke et al., 2015) and ‘incompatible goals’ (Santos et al., 2015, 37) as they attempt to maximise both their financial and social performance (Alegre, 2015; Battilana and Lee, 2014; Ebrahim, et al., 2014; Sanders and McClellan, 2014; Seanor et al., 2014).
Delphi issue: ‘Hybrid Complexity’
Ultimately, these difficulties can lead to SEs experiencing mission drift (Cornforth, 2014; Ebrahim, et al., 2014; Santos et al., 2015; Young and Kim, 2015) which can lead to a decline in the quality of their provision of service (Cornforth, 2014). Doherty et al.’s (2014) synthesis of the literature indicates that the root of SEs challenges arises primarily through financial pressures that lead to compromise of the social objectives. In fact, poor financial performance is often ‘punished more readily than poor social performance’ (Doherty et al., 2014: 8) and is exacerbated by difficulties in measuring and reporting their actual and perceived social value (Ebrahim et al., 2014; Grieco et al., 2015; Stevens et al., 2014; Zainon et al., 2014). Some literature has identified a positive link between the financial performance of an SE and its social performance (Gravel et al., 2006). However, this is not necessarily true of all SEs (Whitman, 2009). The validity of measures of social value must also be questioned since some studies rely upon self-assessment tools (Knife et al., 2014; Mook et al., 2015; Whitman, 2009).
Delphi issue: ‘Measuring Social Value’
Recognising the wide ranging and competing objectives of SEs the involvement of multiple stakeholder groups has been stated to be important in order to ensure effective governance structures (Crucke et al., 2015; Larner and Mason, 2014). However, the degree of engagement of board members and their focus upon social over financial objectives can be difficult problems to manage (Berge et al., 2016; Brown, 2014; Costanzo et al., 2014; Crucke and Knockaert, 2016; Fontes-Filho and Bronstein, 2016; Mason and Doherty, 2016; Mswaka and Aluko, 2015; Tian and Smith, 2014). While the achievement of financial and social goals is problematic, the mechanisms of governance are further complicated by the fact that those goals may be shifting. Mswaka and Aluko (2015) suggest that more effective governance is possible by following the stewardship model, whereby boards should act merely as stewards of the assets of the SE and do what is seen as best for the organisation as a whole.
Delphi issue: ‘Governance’
SEs experience many financial difficulties, largely due to the complexities of pursuing dual and shifting missions (Reiser and Dean, 2014). ‘Traditional’ sources of investment are often difficult to secure and investors are often confused about the proposition and opportunity (Doherty et al., 2014; Lehner and Nicholls, 2014; Reiser and Dean, 2014). Post-2008 austerity measures have exacerbated the financial challenges for SEs and lead to them seeking alternative sources of funding (Lehner and Nicholls, 2014): 59% of UK SE income comes from trading with the public sector (Villeneuve-Smith and Temple, 2015). Under this increased pressure many enterprises that have relied upon donations and grants have subsequently perished or have been forced to seek more commercial goals, and in turn this has magnified the challenges of managing dual missions (Doherty et al., 2014). Large numbers of SEs have become administration-heavy ‘grant-hoppers’, diverting already scarce resources away from their social activities in order to remain going concerns (Cornforth, 2014; Martin, 2015): 83% of UK SEs stated that grants were their main source of funding but only 35% reported that they had been successful in securing new grant income (Villeneuve-Smith and Temple, 2015). It has even been suggested that some resort to mimicry in order to gain access to public funds (Dey and Teasdale, 2016).
SEs are reluctant to incur debt and are poorly positioned to clear any debts that are gained, and therefore offer low rates of return for potential investors (Doherty, et al., 2014; Reiser and Dean, 2014). Consequently, finance is often the primary hurdle that prevents those enterprises from innovating and growing (Martin, 2015). Indeed, Rey-Marti et al. (2016b) work supports this and finds that financial support for SEs can be directly attributed to job creation.
Delphi issue: ‘Finance’
Achieving social goals while remaining a commercially viable organisation is a perennial problem for SEs to address (Hines, 2005). Collaborative networking is influential in SE success, and their ability to connect and support one another increases knowledge, capacity and income streams (Jenner, 2016; Jenner and Oprescu, 2016; Weidner et al., 2016). Jenner (2016), however, finds that while the pursuit of commercial viability and growth is a determinant of SE success, it results in a landscape where SEs are now competing as opposed to collaborating. The outcome of a more competitive environment, Jenner (2016) argues, is a reduction in trust between SEs. This is problematic since trust has been identified as a prerequisite for performance (Curtis et al., 2010).
Delphi issue: ‘Commercial Viability and Social Value’
Large numbers of SEs have become administration-heavy ‘grant-hoppers’, diverting already scarce resources away from their social activities in order to remain going concerns (Cornforth, 2014; Martin, 2015). Paradoxically, it has been suggested that the very nature of SEs has the potential to offer novel opportunities for investment (Doherty et al., 2014). For example, ‘Social Investment Funds’ such as the Charities Aid Foundation (CAF, 2016) have emerged that focus upon delivering maximum social impact with an acceptable rate of return for socially conscious investors. Lehner and Nicholls (2014) suggested that SEs explore the use of crowdfunding techniques to secure investments and it has also been suggested that there are some significant advantages to be gained when public sector and private sector organisations collaborate or ‘social alliances’ (Scholten and Schilder, 2015). In particular, private sector organisations may benefit from being perceived to be making an authentic commitment to social goals by partnering with SEs, while SEs may be able to develop new income streams (Acumen, 2015; Samuel et al., 2017).
Delphi issues: ‘Working with Private Sector’ and ‘Working with Public Sector’
While Rey-Marti et al. (2016b) find that SE founder’s lack of experience and professionalisation can result in limiting opportunities for new job creation, Doherty et al. (2014) outline significant issues and challenges that human resource management presents to SEs. These range from day-to-day issues such as staff motivation and morale, dealing with the conflict that arises between paid and volunteer staff, recruiting, and managing the performance and retention of volunteers (Richards and Reed, 2015). In addition, Doherty et al. (2014) identify that SEs are often faced with the unusual position whereby the clients they seek to serve, support or help are frequently also the employees of the enterprise. Thus, client and worker can be one and the same thing, and that in turn leads to further conflict that jeopardises their performance and potential. SEs can find themselves managing vulnerable staff (clients), volunteers and paid staff, with limited resources, all under one roof.
Delphi issue: ‘Human Resources’
The strong ties that SEs have with their stakeholders and neighbourhood beneficiaries are often the sources of much celebration. For example, 63% of UK SEs utilise 100% local employed staff (Villeneuve-Smith and Temple, 2015). A considerable number operate at a neighbourhood level (28%) and that is generally within areas that suffer from social deprivation (Villeneuve-Smith and Temple, 2015). Social capital is therefore suggested to play a pivotal role in enabling business functions, the development of relationships with clients (Child, 2016; Richards and Reed, 2015) and the legitimisation of their entity (Peattie and Samuel, 2015). However, their overdependence upon social capital has been brought into question. Richards and Reed (2015), for example, argued that SE networks and associations are usually limited in size and are highly value laden.
Delphi issues: ‘Stakeholders’ and ‘Social Capital’
The literature review has identified a considerable number of complex and interdependent challenges that modern SEs face. The complexity of SEs hybrid makeup, and the necessity to achieve profit with a social mission, appears to be the primary challenges that social entrepreneurs have to contend with. This conspires to magnify the operational issues that comprise corporate governance, financial management and measurement, leveraging social capital, human resources management and the practical challenges of working in conjunction with private and public sector counterparts.
Methodology
This research employed a Delphi study to elicit expert insight into the relative influence of the 10 factors that affect SE viability and growth (Kosow and Gassner, 2008; Linstone and Turoff, 1975; Skulmoski et al., 2007). Delphi studies are frequently employed in deductive research but may be combined with qualitative data capturing elements in order to afford more pragmatic instrumentalisation (Engelke et al., 2016). This can enable methodological triangulation (Yin, 2013), improve validity (De Vos, 2005) and increase the contextual understanding of phenomena (Jick, 1979).
The Delphi technique has been used in a wide range of research since its development in the 1950s (Dalkey and Helmer, 1963). In the field of business and management it has been employed in the study of a wide range of phenomena and in accord with this study it has also recently been used to examine SEs (Engelke et al., 2016). It is a particularly useful technique for gaining insight into complex phenomena where there is controversy, an absence of data or future predictions are being made (Kosow and Gassner, 2008; Mitchell, 1992; Paliwoda, 1983; Petry et al., 2007; Skulmoski et al., 2007).
The Delphi technique, however, also presents some challenges, including the selection of appropriate expert panel members, maintaining panel members’ commitment and response rates, designing the initial survey questions and determining when a satisfactory level of agreement among the panel has been reached (Brill et al., 2006; Okoli and Pawlowski, 2004; Paliwoda, 1983; Wentholt and Frewer, 2010). Furthermore, there is a lack of agreement about how many rounds should be included in an effective Delphi study (Petry et al., 2007; Wentholt and Frewer, 2010) though two are generally considered adequate (Boulkedid et al., 2011; Gary and Von Der Gracht, 2015) as the addition of further rounds adds administrative burden and places pressure upon participants that results in lower response rates (Gary and Von Der Gracht, 2015). Data analysis methods vary but commonly rely upon the examination of descriptive statistics of the data that have been obtained within each round (Harer, 2003; Scholl et al., 2004; Watson, 2008). More sophisticated techniques, however, can be employed to provide a more precise analysis of the changes that occur between rounds (Melnyk et al., 2009; Ray and Sahu, 1990). In policy Delphi surveys (Heiko, 2012), which this research can be seen to employ, a specific level of consensus is usually not considered the stopping criterion for the process, but rather clarification and definition of the different opinions and viewpoints between different groupings.
The obstacles to SEs often depend on local and national ecosystem conditions and therefore it was decided to focus on a specific local ecosystem. SEUK’s (2018) recent ‘Trading for Good: A report on small and medium-sized social enterprises (SMEs)’ finds that 27% of small SEs are based in the top 20% most deprived areas, and SMEs (41%) in particular are more likely to be focused on improving a particular community. All of the SEs chosen for this study operated in the South Wales Valleys unitary authorities of Rhondda Cynon Taff (RCT), Merthyr Tydfil and Caerphilly. As discussed in Jones et al. (2011), the South Wales Valleys area suffers from multiple deprivation within Wales, consequently, it has been the focus of much government policy (David and Blewitt, 2004). It represents around 60% of the area covered by Objective One Funding (Adams and Robinson, 2005; Brooksbank et al., 2001).
The Heads of the Valleys (HOV) area of the South Wales Valleys, which incorporates RCT, Merthyr Tydfil and Caerphilly (as well as Blaenau Gwent and Torfaen), can be seen as being in particular need, being described in the ‘Wales Spatial Plan’ as ‘An area set in superb natural surroundings facing very considerable social challenges created by economic restructuring of the late 20th century’ (WAG, 2008: 99). Jones et al. (2011) further highlight that the HOV average earnings is only 93% of the Welsh figure, and this must also be considered in light of the fact that the Welsh average is 89% of that in England. The HOV area also comprises around 61% of business employing fewer than five people, less than the average of 68% in the rest of Wales and 67% in England. This suggests, therefore, limited entrepreneurship and self-employment activity within the area.
This specific local ecosystem is therefore chosen because it is an area suffering from social and economic deprivation and is also where a policy of SE development has been used to try to overcome some of these issues (see, e.g. Jones et al., 2011). As such it is therefore likely to have a variety of SE types operating within it, as well as SEs with a range of resourcing issues related to low socio-economic status. The study can therefore be seen to be of specific relevance to SEs operating in resource-constrained local ecosystems. The South Wales Valleys is therefore a perfect economic backdrop for the study, allowing the gaining of further insight from this type of economic geography, which helps us to understand the ecosystem many SE SMEs are presently working in, further strengthening the contribution the paper makes.
This study utilised a three-round Delphi study of the views of nine social entrepreneurs that are founder-managers of SME SEs, 10 academics with expertise in social entrepreneurship and small business, and two local government officials that are responsible for regional business policy development and implementation. Invites were sent to 75 SEs that had an operating presence within South Wales: target organisations were identified from a University database run by the business engagement unit. The response rate (12%) reflects the resource scarcity within these organisation types.
Out of the nine SEs that participated, three were local service providers (running existing public service contracts), two were service-based retailers (social cafes and meeting places), two represented skills development agencies for disadvantaged groups, one managed the retail arm of a local charity and one operated a consultancy specialising in sustainability and corporate social responsibility for the construction industry. Policy-makers were from RCT and Caerphilly economic development/business support and all the academics belonged to or had research/practical affinity with universities in South Wales, as well as subject expertise of relevance to the topic under discussion. Specifically, one was a professor of Small Business and Enterprise, one was a professor of marketing and seminal author on the topic of SE, one was an associate professor of strategy, one a specialist in human resource management and six were strategy specialists. All of them had published in areas of relevance to the study in terms of subject (SE), geography (South Wales) and organisational size (small organisations).
The exercise began with all participants ranking the 10 factors that had been identified through the literature review. Following this, the data were analysed to generate the rank order of factors and this was used as the basis of facilitated discussions with participants in order to question and understand their rationale for providing their rankings. These discussions provided useful and enlightening information about an individuals’ position (Denscombe, 2010; Fox, 2009). Subsequent to these discussions, the participants were separated into groups, identified as ‘Academic’, ‘Social Entrepreneurs’ and ‘Policy-Makers’, and each cohort reviewed and re-ranked their perceptions of the significance of the 10 factors that affect SEs. In the Analysis section, pertinent discussions are illustrated with participant quotes and all responses are anonymised.
Descriptive statistics were used to make comparative analyses of responses and Kendall’s W was employed to measure the degree of concordance of the rankings in each round, where W = 0 indicates no level of agreement and W = 1 indicates complete agreement (Okoli and Pawlowski, 2004). There is no universally agreed value of W that indicates an ‘acceptable’ level of concordance but it may be used as a comparative indicator among sequential rounds of a Delphi study. In addition, and following Heiko (2012), coefficients of variation were used, with values between 50 and 80% in round one suggesting a need for an additional round, and comparisons with round one values in round two identifying whether a further round was likely to increase levels of concordance.
Analysis – Round One
Analysis of the entire panel’s perceptions of the importance of the 10 key factors that affect SEs returns a moderate degree of concordance (W = 0.30): see Table 1 for a breakdown of results. The Academic cohort returned a marginally higher degree of concordance than the overall panel (W = 0.398) whereas there was a negligible difference between the overall panel and the SE cohort (W = 0.312). The Policy-Makers cohort, comprising a small number of panel members, returned a slightly higher degree of concordance than the other groups (W = 0.45).
Round one analysis.
Round two analysis.
The Academic, Policy-Makers and Social Entrepreneur cohorts all identified ‘Finance’ as the key issue that affects SEs today. This was closely followed by the ‘Dual Challenge’ and ‘Measuring Social Value’. There is reasonable agreement at a panel level, and across all three cohorts, that the least significant issues that face SEs are their ‘Social Capital’, ‘Stakeholders’ and ‘Working with the Private Sector’. Note however that the Policy-Makers perception of ‘Working with the Private Sector’ is markedly different to that of the other cohorts. Also, there is a considerable difference between the Academic cohort’s ranking of the importance of ‘Governance’ (9) and that of the Social Entrepreneurs (4) as well as the Policy-Makers (5). There is a further difference in perception of the significance of ‘Human Resources’ between those of the Academic (4) and Policy-Makers cohorts (4), and that of the Social Entrepreneurs (9). Four of the factors the coefficient of variation was between 50 and 80% and this supported the need to undertake another round of analysis.
Analysis – Round Two
Following an open discussion of the overall rankings obtained in Round One, each cohort reviewed and re-ranked their perceptions of the significance of the 10 factors that affect SEs. The overall panel returned a similar degree of concordance to round one (W = 0.31): see Table 2 for a breakdown of results. The Academic cohort returned a much higher degree of concordance than that of the overall panel and that returned in round one (W = 0.445). The SE cohort returned a similar degree of concordance to that returned in round one (W = 0.318). The Policy-Makers cohort, comprising a small number of panel members, also returned a comparable value to that in round one (W = 0.43).
Round three analysis.
Similar to round one, the overall panel results, along with the Academic and SE cohort results, all identify ‘Finance’ and the ‘Commercial Viability and Social Value’ as the key factors that affect SEs: ‘The big challenge for the social enterprise is to find the balance between value creation and profit’ (Social Entrepreneur 2).
‘Social Capital’, ‘Stakeholders’ and ‘Working with the Private Sector’ remain the factors that are perceived to be least important. This is an interesting and at first glance, counter-intuitive result, given the relevance placed on these in the literature. The key point, however, is not that these are unimportant issues, but rather that they are not perceived as being as important as other issues for this group of stakeholders in this local ecosystem.
It is particularly important to note however that the perception of the importance of ‘Governance’ shifted considerably between rounds. In round one it was considered to be the seventh most important factor whereas in round two it was considered to be the third most important: ‘An inexperienced Board leads to failure’ (Policy-Maker, 2).
This change has arisen through changes in both the Academic and Social Entrepreneur cohorts’ perceptions following group discussion. The Social Entrepreneur cohort ranked it fourth in round one and third in round two, but the Academic cohort ranked it ninth in round one and fifth in round two. This serves to reinforce the importance of selecting a balanced panel of expert advisors when conducting Delphi studies. The coefficients of variation for the 10 factors were also similar to round one, and it was therefore determined that a third round of analysis would be undertaken.
Analysis – Round Three
Many of the social entrepreneurs were keen to express their concerns with regards to SEs’ inability to professionalise their internal and external marketing systems. Two key marketing functions, pricing and promotion, emerged from the discussions as problematic for SEs to manage and execute effectively: ‘It’s very hard for us to put a financial value on what we actually do, so knowing our worth can be difficult to estimate’ (Social Entrepreneur 3).
Some of the participants reflected upon their historical failings and expressed concerns over their inability to respond to the many rapidly emerging options and techniques now available through such things as social media platforms and programmatic advertising: We would benefit from knowing how to use social media more professionally. What we do with it now is make announcements on Facebook if we have a special event running or if we have a success story we would like to share. I have no idea how this works and if anyone is really reading it or sharing it. (Social Entrepreneur 4) Some of my friends have told me you can use Facebook for advertising. We just use it now and again when we think we have something to say. I think if we learned how to use it more professionally I’m sure we would get some people from around here interested in helping us or using our services. (Social Entrepreneur 2) Social Enterprises can struggle to communicate both their social impact and their commercial activities together. As a result, I think this can confuse some people. Whereas people know what a business is and know what a charity is your average person in the street really isn’t that familiar with what Social Enterprises actually are. (Policy-Maker 2)
Numerous participants indicated that their ability to carry out commercial work for private enterprise or participate in public sector procurement contacts had frequently been questioned. Social Entrepreneurs noted that when bidding for contractual work they feel as if they face extra scrutiny regarding their resource capacity and commercial professionalism to complete their obligations on time and up to standard. As a result, many Social Entrepreneurs spoke of losing work simply because they are perceived as possessing third sector ‘amateurism’.
The nature of SEs results in their founders and their staff being motivated to voluntarily contribute by their ideological positions or their social and personal needs. This was perceived to often result in a lack of skilled management and leadership. Similar to the challenges around the selection and structure of governing boards, there is a recognition of the need for greater formal leadership skills and abilities to make best use of scarce resources and aid in improving the internal and external perception of their validity: I find it hard telling people what to do and telling them off if they do things that aren’t appropriate is a nightmare cos lets’ face it they are not getting paid and they are doing lots of things that really help us. (Social Entrepreneur 4) I try to support as many people as possible, but some days I’m just overwhelmed. I don’t help myself cos I just can’t say no. I hate to turn people away its goes against what we are trying to do. So, I try my best, but sometimes I must rush and sometimes I have nothing left to give. That’s just so disappointing, I can see the disappointment on peoples face but there’s not much I can do about it, basically I need to learn how to let people down gently, but that’s not why I came into this. (Social Entrepreneur 5)
Overview of factor ranks by round.
aIndicates novel factors.
A moderate degree of concordance was returned by the Academic cohort for the modified list of 14 factors that affect SEs (W = 0.359), with a similar average coefficient of variation, which was also under 50%, suggesting that an additional round was not necessary (Heiko, 2012). Similar to the previous rounds, ‘Finance’ and the ‘Commercial Viability and Social Value’ were identified as key issues. Three of the four new factors were then identified as the next most significant issues: ‘Leadership’ (ranked second), ‘Professionalisation of Marketing’ (ranked fourth) and ‘Perception of Validity’ (ranked fifth). Following these was ranked ‘Measuring Social Value’.
Discussion
While the results can be seen as in many ways in line with already existing literature, two specific contribution to the literature are made by this research. First, a ranking of the importance of the key issues affecting social entrepreneurs has been possible and second a number of new/more specific issues have been identified. This matters because it allows for a more nuanced and structured discussion and analysis of social entrepreneurs and also supports policy-making prioritisation where resources are often constrained. Because of the local ecosystem-specific nature of the analysis, however, it is difficult to generalise these results beyond the local ecosystem itself, but the process of obtaining the results, via the Delphi technique, can itself be seen as representing a contribution to method in this area.
Throughout the investigation, the issue of ‘Finance’ was recognised as the dominant factor that affected the viability and growth of SEs: see Table 4 for an overview of the ranking of factors in each round. This finding concurs with the literature that recognises the particular difficulties that SEs face in securing adequate sources of funding (Doherty et al., 2014; Lehner and Nicholls, 2014; Martin, 2015; Reiser and Dean, 2014).
Post-2008 austerity measures have exacerbated the challenges that SEs face in attempting to secure sources of funding (Lehner and Nicholls, 2014). Whereas many SEs would have previously relied upon grants and donations, they have now had to become more commercially adept in order to continue their work (Martin, 2015), and this has compounded the issue of their hybridity (Doherty et al., 2014). Contemporary sources of funding are also more difficult for SEs to access by virtue of the uncertainty that surrounds their ability to deliver tangible returns to investors (Doherty et al., 2014; Lehner and Nicholls, 2014; Reiser and Dean, 2014). There is, however, a contrasting view that suggests that SEs may be able to utilise their unique identity in order to raise capital from innovative sources such as ‘crowdfunding’ (Lehner and Nicholls, 2014).
The multifaceted nature of SEs manifests as internal pressures to balance social and financial goals and staff motivations, along with external pressures to communicate a clear and unambiguous message of their purpose and identity (Costanzo et al., 2014; Crucke and Knockaert, 2016; Fontes-Filho and Bronstein, 2016; Mswaka and Aluko, 2015; Tian and Smith, 2014). This is compounded by challenges such as finding practical and meaningful ways to measure and communicate their social value (Mason and Doherty, 2016) and resisting the ideologically negative perception of engaging in more commercial activities even though such actions may ultimately improve their ability to deliver social value (Liu et al., 2014).
The perception of SEs’ validity also emerged as a key factor that they need to address. This is clearly related to the challenge of possessing dual missions (Cornforth, 2014; Costanzo et al., 2014; Doherty et al., 2014; Ebrahim et al., 2014; Jenner, 2016; Martin, 2015; Richards and Reed, 2015; Stevens et al., 2015) along with satisficing a wide range of stakeholders (Costanzo et al., 2014; Crucke and Knockaert, 2016; Fontes-Filho and Bronstein, 2016; Tian and Smith, 2014) and being dependent upon organisational and individual social capital (Domenico et al., 2010; Jenner, 2016; Richards and Reed, 2015).
The hybrid nature of SEs and the problems that they face in raising investment can result in increased tension between themselves and other SEs (Huybrechts, 2012). As SEs are forced into adopting a more commercial stance so they risk turning the landscape from one of interdependence and collaboration, to one of competition (Jenner, 2016). This, Jenner argues can result in a destruction of the trust that exists within SE networks and a gradual erosion of their social capital. This is also related to the newly emergent factor of their professionalisation of marketing and these enterprises appear to be poorly equipped to make the best of their efforts even if they were able to successfully manage their multitudinous and often competing challenges (Katre and Salipante, 2012).
Moving the social and commercial validity of SEs in the same direction appears to be a key challenge and ironically calls for better or more novel approaches to marketing communications (Liu et al., 2015, 2014) that demonstrates an ability to promote the purity of SEs’ social mission alongside the pragmatic necessity of their commercial professionalism. Expanding upon Sakarya et al (2012) suggestion that social alliances between SEs and commercial business improve organisation validity our work indicates that SEs’ ability to deliver community-based social value has the potential to become a ‘socially validating advantage’ that other commercial enterprises will find impossible to replicate.
Leadership was identified by social entrepreneurs as a significant problem and was subsequently also ranked by academics as second only to finance as a key issue for SEs. The governance and stewardship of SEs has been recognised within the literature as an issue (Berge et al., 2016; Crucke et al., 2015; Larner and Mason, 2014; Mswaka and Aluko, 2015; Rey-Marti et al., 2016b). The specific problem of individual leadership has, however, only recently been recognised, and then only in specific contexts, for example Rey-Marti et al. (2016b) suggest SE leaders’ lack of professionalism and commercial experience can be detrimental to growth, while Bacq et al. (2017) recognise the problems of founder succession and the impact this has on the mission and values of the SE. This is an area that requires further examination since, while the practice of leadership is a complex discipline in itself, within SEs it is further complicated by the need to lead an often poorly resourced enterprise, with indistinct and competing missions, in an uncertain and maligned environment (Ohana et al., 2010; Teasdale, 2010; Villeneuve-Smith and Temple, 2015).
Finally, the situatedness of SEs was seen to be a complex array of issues that often need to be addressed (Kistruck and Beamish, 2010). SEs can be heavily influenced by two dominant stakeholder groups, the client as both the employee and the volunteer from the immediate community. These two groups offer unique attributes that SEs benefit from, for example the social entrepreneurs in this study expressed an ability to develop services that are informed by local knowledge and an understanding of social issues directly from those who possess the lived experience. However, these advantages are sometime paradoxical in nature. SEs’ deep-rooted belongings to certain geographical and special interest communities can permeate their cultures, thereby rendering their functionality susceptible to the negative effects of local politics and community conflict.
In keeping with Haugh’s (2012) call for greater theory development in the study of SEs, this section closes with an examination of theoretical lenses that may be valuable for the further exploration of the nascent challenges that SEs face and may aid in problem resolution. For instance, a considerable body of SE literature has championed the fiscal challenges that beset SEs and their hybrid nature. This is perhaps unsurprising since the issue of funding and income generation is the most significant that SEs face. However, we suggest that if we continue to examine SEs from a position that prioritises financial concerns and performance above others (Doherty et al., 2014) then we are likely to restrict our discoveries to those that are grounded in financial theory.
The overriding message that the extant literature and this study impart centres upon the issues that are presented by the dichotomous nature of SEs. This is not something that is unique to this sector or type of organisation. For example, the dual objectives of financial effectiveness and environmental/social performance have received some attention within the supply chain management literature and there have been recent suggestions to move away from the use of these terms in order to embrace more holistic concepts such as ‘resilience’ (Ahi and Searcy, 2013; Kashmanian, 2015). The paralysing influence of the hybrid mission is a facet that requires focussed attention and approaches such as Paradox Theory may be of further value in unpicking this particular problem (Lewis, 2000; Peattie and Morely, 2008; Stevenson, 2010).
Alternatively, adopting alternative theoretical lenses may also yield greater insight into the gamut of operational issues shown in Table 4. Leadership is a well-researched and theorised area and numerous approaches could be adopted that would provide insight into the managerial challenges within SEs (see, e.g. Gandolfi and Stone, 2017; Sudha et al., 2016). Servant Leadership (SL), for instance, may provide insight into those that own and manage SEs (Northouse, 2015; Spears, 2009). SL differs from other leadership theories by virtue of adopting a view of the leader as being morally and ethically motivated to benefit others (Hill, 2017; Northouse, 2015; Parris and Peachey, 2013). This approach is most apposite to the context of SEs since ethical leadership is evidently compatible with their social mission and has been shown to improve social performance (Bedi et al., 2016; Bonner et al., 2016; Hicks and Waddock, 2016; Mo and Shi, 2017; Samuel et al., 2017; Shin et al., 2015). The social mission of SEs also suggests that Followership Theory may afford a valuable lens through which they may be examined (Foti et al., 2017; Uhl-Bien et al., 2014). SEs are frequently staffed or voluntarily supported by individuals and other enterprises that are motivated by a desire to ‘do good’ that mirrors that of the organisation. Those individuals and enterprises may therefore be considered to be followers of the organisation and by extension its leaders. Examining their behaviours and responses may shed light upon the challenges of leading and managing SEs (Haven-Tang and Jones, 2012; Kurland and McCaffrey, 2016).
The Professionalisation of Marketing, and indeed other staff and functions, may be examined through RBV (Campbell and Park, 2017) or Internal Marketing (Modi and Sahi, 2017) theories. These may proffer insight into the factors that govern their efficacy within the context of a hybrid organisation. Place also plays a significant role in determining identity and authenticity (Tuan, 1977) and is key to the situatedness of SEs. Some research has already called for further placed-based research in order to illuminate the machinations of SEs (Munoz, 2010).
Managing the perception of SE validity is a complex undertaking. Measuring social value, for instance, is a topic of much current debate but is currently dominated by measures of financial performance (Bagnoli and Megali, 2011; Mook et al., 2015). The perceptions of SE validity may be explored through alternative concepts of value that are not grounded in financial metrics, for instance, community-based social marketing theory (McKenzie-Mohr, 2011), and theories of authenticity (Samuel et al., 2017; Wicki and Kaaij, 2007) would explain how perceptions of an SE are built by stakeholders and how SEs may influence their perceptions.
Conclusion
In an era of global austerity and increasing social plight, new forms of hybrid SEs have emerged that aim to tackle a range of problems. Born of the founding social entrepreneur’s ideological motivations and responding to their local community needs, these organisations attempt to balance their social goals with the need to be a self-sustaining going concern, in an increasingly complex socio-political environment. SEs provide much-needed support in areas where local government services are being reduced or withdrawn and, as such, are becoming an increasingly valuable, and sometimes necessary, form of social institution.
Recognising the challenges that beset hybrid SEs, this study examines the factors that inhibit their inability to remain viable and to grow. It also responds to the call to provide more quantitative research in this field. Drawing upon expert insight from social entrepreneurs, academics and policy-makers, a Delphi study was conducted to rank the 10 factors that have been identified within the extant literature. Through facilitated discussions a further four key factors are identified that affect the successful operation of these types of enterprises.
The study identifies that the key challenges that social entrepreneurs face comprise the securing of finance and having to balance commercial viability with a commitment to providing social value. It also makes an important contribution by identifying four new factors that had not previously been recognised in the literature: ‘Leadership’, the ‘Professionalisation of Marketing’, ‘Perception of Social Enterprise Validity’ and ‘Situatedness’ are all identified as further factors that impinge upon the successful operation of hybrid SEs. The paper outlines potential theoretical lenses that may be useful for the further examination of the many tensions that beset SEs.
The research makes a further valuable contribution by providing an examination of the factors that affect SEs and ranking them in relative order of importance. This is useful information for social entrepreneurs and policy-makers that can inform the way that SEs are structured and managed, and how national and local policy may be developed to aid in overcoming the prevalent issues. The key issues that require attention are ‘Finance’ and ‘Duality of Mission’. Policy development needs to address the difficulties that SEs face when attempting to secure sources of funding by furthering their access to public sector opportunities and improving their ability to successfully secure such funding. In addition to this, social entrepreneurs should explore innovative models of securing funding such as crowdfunding.
This study is based upon a sample of expert views. Consequently, the generalisability of the findings can be debated, but they do reflect the views of the considerable body of extant literature. Further research should confirm the validity of the four novel factors that have been identified. Future work should also confirm the relative ranking of the factors in other countries, contexts and other forms of SE. Further valuable work could also be undertaken that explores how social entrepreneurs manage the transition from ideologically motivated founder to more commercially aware manager of the maturing organisation.
Footnotes
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.