'Failing up' for social enterprise success

Fear of failure is common for nonprofits worried about losing donor support. But there is value in failing and learning from failure. Photo by: Chris Potter / CC BY

Part yin, part yang, social entrepreneurship measures success by both profit and social impact.

Companies pursue a mission that attempts to solve problems affecting society, and revenue supports mission-driven activities or an affiliated nonprofit. These companies face a unique set of challenges, but with the right mindset, they can do good — and do well — wisely.

In most cases, that involves embracing and learning from failure.

1. Failure to profit

Social entrepreneurs want to provide sustainable social improvements to their communities as well as offer an attractive return to their investors. They develop resource strategies that are likely to support and reinforce their social missions. These strategies, however, might not always increase the bottom line.

Social enterprises take calculated risks and manage the downside to reduce the harm that will result from small margins. Ensuring that investor values fit community needs is also an important part of the challenge. Shareholders must have a clear understanding that stock prices take a back seat to improving the community.

2. Failure to measure

Standard measurements for success in social entrepreneurship are not always available or even calculable. In a for‐profit business, a company either makes a profit or it doesn’t. But how does one measure social innovation? By the number of jobs created? Lives saved? Diseases eradicated?

At Elpis, we assist philanthropists by conducting extensive research on nongovernmental organizations as well as measuring and monitoring the direct impact of their donations. That way, we also promote social innovation. We help clients achieve lasting and meaningful results by identifying their specific contributions to society.

“In the ‘80s and ‘90s, the innovation agenda was exclusively focused on enterprises. … In the long term, an innovation in social services or education will be as important as an innovation in the pharmaceutical or aerospatial industry.”

— Diogo Vasconcelos (1968-2011), senior director and distinguished fellow at Cisco’s Internet Business Solutions Group

3. Failure to innovate

Social innovation refers to the process of developing new responses to social needs in order to deliver effective outcomes. However, solutions to social needs may not always work as planned. Successful companies in the for‐profit sector not only learn from mistakes, they expect them. Research and development teams identify a problem and test multiple responses to determine the most effective solution. Successful social entrepreneurs take the same approach. The only difference is that no one talks about it. We have heard many success stories, but rarely do we recognize that failure is as effective a learning tool as any.

Engineers Without Borders has developed a platform through which NGOs could share experiences with — and lessons learned from — failure. Admitting Failure is “a community and resource that encourages new levels of transparency, collaboration and innovation across the for-purpose sector.”

Fear of failure is common throughout the nonprofit sector, as organizations worry that a bad decision will drive away donors and partners. But there is real value  in failing, and these lessons need to be shared in order to move the nonprofit sector forward.

I wholeheartedly agree with Admitting Failure’s vision: “Fear, embarrassment and intolerance of failure drive our learning underground and hinder innovation. The most effective and innovative organizations are those that are willing to speak openly about their failures because the only truly ‘bad’ failure is one that’s repeated.”

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About the author

  • Epaminondas Farmakis

    Epaminondas Farmakis is president and CEO of Elpis Philanthropy Advisors. A seasoned expert in foundation development and governance, strategic planning, and asset/grants management, he also currently serves as program director of Greece's EEA Grants NGO Program on behalf of the fund operator, the Bodossaki Foundation.