Three essential characteristics of a highly successful social enterprise

Over the years I have read countless books and articles on topics related to organizations, leadership, and management, and I have learned more from the writings of Peter Drucker than any other author.  In part, that may be because he wrote for so long. In fact, in 1997, when Drucker was 87 years old, Forbes magazine featured him in a cover story titled, “Still the Youngest Mind.”

Despite all that I’ve learned from Drucker’s writings, though, the one book that has (so far) been the most helpful to me is Built to Last – Successful Habits of Visionary Companies by Jim Collins and Jerry Porras, published in 1994.  In it the authors described the commonalities they found among companies that had managed to thrive over long periods of time.  One of those commonalities was that the visionary companies did not brutalize themselves with “the tyranny of the OR – the view that you can be ‘A’ or ‘B’, but not both.  Instead, the visionary companies embraced “the genius of the AND – the paradoxical view that you can be ‘A’ and ‘B’, even if they are seemingly contradictory notions.  This insight helped me solidify my view that to excel in our organization, we had to be outstanding from both business and mission perspectives – not one or the other.

From that view, we arrived at an overall objective of maximizing mission-related impact while maintaining a financial position that enhances the organization’s long-tem viability.  In other words, we must have significant impact and be financially sustainable.

IMPACT is a function of your mission-related services.  How many people are benefiting, and to what extent are their lives being changed for the better?   Measures of real impact are much deeper than activity metrics such as “number of people served”  which may indicate you were busy, but tell us nothing about whether you actually made a difference.

SUSTAINABILITY is a function of the organization’s financial strength.  Do you have sufficient strength to be able to weather periodic downturns and occasional external shocks?  Organizations that are constantly struggling to keep their heads above water financially rarely do a good job accomplishing their mission.  They are too focused on simply surviving.  Neither are organizations that lack adequate financial strength likely to be able to invest in initiatives that might improve their impact and/or accelerate growth.

Even if a successful social enterprise such as Goodwill is having substantial impact and is strong financially, to remain successful over time a third characteristic is necessary:

ADAPTABILITY, which is largely a function of the organization’s culture.  Can you respond quickly and effectively as new needs, opportunities, or threats arise and as the external environment changes?  Organizations that cannot adapt well enough run a strong risk of becoming ineffective or extinct.  Actually, it’s better if they become extinct rather than ineffective.  At least when they’re extinct they no longer consume resources.

Even if you’re highly successful today, it’s wise to remember an old proverb Drucker frequently quoted, “Whom the gods would destroy they give 40 years of success.”  Organizations with a long period of success may be particularly vulnerable to the demons of inertia, complacency, myopia, and/or arrogance that could eventually lead to their demise.   With the pace of change today, this can happen much quicker than forty years.   The wise leader is aware and alert, as well as adaptable.