A Distinctive Approach That Is Changing the World
The Social Capitalist Awards was our way of recognizing achievement in the social sector -- but the process also yielded tremendous insight into how effective organizations in the sector work. Here, the Monitor Group distills key findings from the collected data.
By Tammy Hobbs Miracky, Social Capitalist Awards project leader. Monitor Group
As you peruse this resource center, remember this: The winners of the Fast Company/Monitor Social Capitalist Awards are just 20 of 80 organizations that agreed to participate in our assessment. Each of those 80 is, in its own right, among the top-performing organizations in the social sector; that's why they were nominated in the first place. We were granted extraordinary access to these groups -- a window to the inner workings of their organizations. The resulting information, besides providing the basis for this year's Social Capitalist Awards, says much about this select universe -- about both its success and the challenges it faces.
Who are they?
The Social Capitalist nominees are as diverse as they are ingenious. They are active in 12 social sectors, involved in activities ranging from human-rights advocacy to building a youth volunteer corps, from building playgrounds to serving autistic children. Their headquarters are located in 19 different states; they range in size from $140,000 to $86 million in annual revenue. The oldest was founded in 1860 and the youngest in 2002. Among this group is a diversity of different models: for-profit firms, advocacy organizations, and service-oriented organizations.
Patterns that emerged
Despite their differences, these organizations demonstrate a consistent point of view about the role they play in the social sector and the magnitude of impact they believe possible. Both young organizations (even though not fully established) and older groups (in the face of more traditional approaches to "charity") have the courage and the vision to approach the social sector in a distinctive way.
Across the board, these organizations focus on achieving systemic impact -- setting in motion a change that becomes institutional or affecting a system in such a way that different, more desirable outcomes are likely. Their activities revolve around a dual mission: a focus on the individual, combined with the understanding that lasting impact requires a change in the context in which those individuals live. This emphasis on systemic impact is even more notable among younger organizations.
Just as important, these organizations aspire not only to increase their impact, but to do so across many fronts simultaneously. All organizations report fairly aggressive growth programs, with 86% employing more than one expansion model.1 A vast majority of the organizations, 70%, report plans to expand physically in the next three years (e.g., add new offices), 72% plan to deepen their coverage in an existing geography (e.g., add more employees), and 72% plan to expand their areas of coverage (e.g., extend a campaign or service into a new geography without establishing a physical presence).
As they look into the future, consistent with their distinct approach to the social sector, the 80 nominated groups are primarily concerned with their:
- "Ability to attract and retain new talent" to enable them to . . .
- "Ensure availability of sustainable and diverse funding" so they might . . .
- "Execute a successful expansion strategy."
In short, they are constantly scanning the horizon for ways to ensure the resources necessary to realize their social vision. They are compelled to have the greatest impact possible, and they are aggressive in their view of what is possible.
Achieving Social Impact. As described above, the nominees place greatest emphasis on achieving systemic impact. When we look beneath these aggregate numbers, it is telling that advocacy organizations and young service-oriented organizations place the greatest emphasis on systemic impact: 41 and 44%, respectively, compared to an overall average of 33%.
This is a predictable result for advocacy organizations; by definition, their efforts are aimed at changing attitudes, policies, and institutions. As for young service-oriented organizations, this finding is, perhaps, supportive of the anecdotal sense in the sector that a shift in focus has occurred in recent years.
Expansion Strategy. Central to the Fast Company/Monitor Group assessment of highest-performing social entrepreneurial organizations was a consideration of each organization's aspiration to grow. These organizations do not disappoint: All have aggressive plans for expansion.
The most frequently reported expansion model is organizational replication to new sites and new territories. On average, executive directors allocated 54 points (out of 100) to this model. Replication via principles -- that is, disseminating to others the principles and lessons learned about how to serve a particular social purpose -- comes in a distant second, receiving an average of 30 points. Rated lowest, with an average of 16 points, is program expansion -- that is, promoting independent programs and services similar to one's own. In keeping with their plans for growth along many fronts, the organizations report aggressive growth targets. The aspirations of the Top 20 organizations are particularly remarkable. In the next three years:
- 85% of the Top 20 (versus 64% of all other organizations) plan to expand physically (e.g., add new offices)
- 90% of the Top 20 (versus 66% of all other organizations) plan to deepen coverage in an existing geography (e.g., add more employees)
- 90% of the Top 20 (versus 66% of all organizations) plan to expand their areas of coverage (e.g., extend a campaign or service into a new geography without establishing a physical presence)
Governance. In addition to surveying executive directors, the Fast Company/Monitor Group team surveyed all board chairs in similar fashion. In general, all board respondents are highly satisfied with their ability to shape the mission and strategy of the organization. They are similarly satisfied with management's ability to incorporate and act on input from the board.
While there are no differences of note in the amount of time board chairs dedicate to their organizations, differences do emerge when we consider the extent to which management teams have formal governance structures in place. It is notable, for example, that 80% of the organizations in the Top 20 have in place "written objectives for the board," compared with 58% of others. Similarly, 80% of Top 20 organizations use a formal system to measure organizational performance, compared with 54% of other organizations.
Funding Model. Not surprisingly, organizations consistently report "securing reliable and sustainable funding" as a high priority. While the concern is shared across the board, different approaches to addressing this priority surfaced.
- Advocacy organizations are notably less reliant on government funding: such sources average just 2.5% of 2002 revenues. Instead, these organizations have a relatively high level of foundation grants (45% of revenues versus the overall average of 32%) and individual donations (32% versus the overall average of 15%).
- Older service-oriented organizations rely more on government funding than do others (27% versus the overall average of 17%). They also derive the largest share of funds from self-generated, earned income 2 (32% versus the overall average of 22%).
- Finally, younger organizations (those founded in 1998 or later) rely primarily on foundation (39% versus 32%) and individual giving (25% versus 15%, respectively).
Future Challenges. To assess the ability of these organizations to meet future challenges, we explored the ways in which they prepare to respond to changes in their environment. From a financial perspective, many organizations report a program to accumulate "substantial emergency funds." It is interesting to note, however, that Top 20 organizations plan to rely on such a reserve somewhat less than others (30% versus 36%). At the same time, Top 20 organizations more frequently find it important to have "a diversified funding base" (90% versus 78%).
From a managerial perspective the organizations, on average, emphasize human resources practices that would make it easier for them to flexibly redeploy key individuals (multi-skilling, etc.) They also report the importance of decentralized decision-making to render their organizations more agile in adapting to future events.
The information gathered in order to assess these organizations offers a window into the source of their success: uniformly, they possess an almost limitless vision about the impact they can have, they aspire to change the world, and they bring to bear every tool at their disposal in order to make that happen.
1 "Dees, et. al., "Pathways to Social Impact: Strategies for Scaling Out Social Innovations," CASE Working Paper Series No. 3, August, 2002. The three models for scaling social impact, as outlined by the authors, are: organization, programs, and principles."
2These organizations offer a commercially marketable product or service, the profit from which helps fund the organization's social mission.