• Eugene McGarrell

The Social Investment Paradox - The 8 Steps to unlock the paradox

Are you frustrated that your social investment budget seems to be having no real impact?

In Australia we invest $6,000,000,000 ($6b) a year in social and environmental impact. That represents a 400% increase in investment over 3 years. In the US they invested $12,000,000,000,000 ($12 trillion) in 2018. So, in short, that’s a lot of money.

So, is this investment doing any good? In the 2016 census in Australia there was a reported 20% increase in homelessness since 2011. There are no signs that this rise in homelessness is slowing down.

Despite the investment, outcomes for people and communities are worsening.

By the end of the day in Australia, roughly 6 men will take their own lives. If this rate continues a total 2,348 men will die at their own hands every year. Sons, fathers, brothers and grandfathers will continue to be lost as a result of loneliness, social isolation, depression and anxiety.

The NSW Government’s Social Impact Investment webpage provides a suite of investment initiatives. But when you click on the link for the evaluations of the investments you are presented with a “page not found” message. Despite the investment, outcomes for people and communities are worsening.

As we become more conscious of spending our money with ethical brands the incentive of the business community to be seen to do good is attractive. Of course, the context of the market requires business to compete. But in the market of social investment it is critical that investors collaborate.

To collaborate means to share the “kudos of making a difference” with a competitor. To invest without collaborating means brand recognition for no or little social impact. And this is the paradox.

In 1926 Henry Ford established to 5 day working week. He didn’t do this as a benevolent business owner, he established the 40-hour work week in the understanding that people needed time off work to buy the products he was selling. And it worked.

Today we have millions of people economically marginalised. They are living at minimum wage or on welfare and do well to keep food on the table, the debt collectors from the door and a roof over their family’s head.

And then there are those who are further marginalised, with no home, no meaningful social connection and no employment. Disability, mental illness, injury, addiction, caring responsibilities and old age has further marginalised and isolated people from paid employment.

But if we created opportunities for people to be employed then they would have money in their pocket to buy your services and products, to boost business and stimulate the economy. Instead of investing in social care services we should be investing in ways to employ people who have been marginalised. Are there any modern-day Henry Ford’s out there?

But if we created opportunities for people to be employed then they would have money in their pocket to buy your services and products, to boost business and stimulate the economy.

Benevolence is a worthy value but investing in ways to create self-agency for all is the path to better social outcomes and is linked to a stronger economy. Don’t do it because it’s you care, do it because it will get you more customers.

The Shirky Principle is the idea that organisations sustain the problem they were set up to solve. Not for profit organisations do great work helping the homeless, the poor and the disenfranchised. To the best of their ability and within the resources available to them they make sure they have food, shelter, warmth and love. Start up social enterprises are emerging including vans that provide showers and laundry facilities for the homeless. Great initiatives that provide wonderful services for people in distress.

But how many of these services have a mission statement to end homelessness, to end poverty or to end the social circumstance that attracts funding for their organisation? Not many that I have read, although there are exceptions.

This is not to blame the Board or CEOs of Not for Profit organisations. They are responding to the system and the demand for services like any other business. But let’s face it, they are in business and the incentive to reduce the demand for that business does not exist.

Many people working in the not for profit sector do so because of the social values. Many do it for low wages and some do it for free. They volunteer their time because they care. They are the salt of the earth, but the system does not value their time. No one expects to get rich from working in the public sector, but they should expect to live as comfortably as people working in for profit companies.

They volunteer their time because they care. They are the salt of the earth, but the system does not value their time.

According to Clay Shirky in the Innovators Dilemma disruption comes from the edges of industry and are often ignored by established industries that are focused on established problems and solutions. Social investment is an established paradigm and it needs disrupting if it is to have a positive impact on social outcomes.

So how would an organisation even begin to disrupt the social investment industry? Here is an 8-step plan for disrupting the system for good.

1.      Stop your current social investment program. This won’t be as easy as it sounds. Not for profit organisations are relying on your regular income and it will be a shock to them, and it may well threaten their very existence. A 12-month transition period may be advised to manage the political fallout.

2.      Get clear on the social outcome you want to support. This is an opportunity to engage your people in the conversation about the social outcome that generates the most passion and energy. Keep it simple. Land on a social outcome that everyone gets. As an example statements could include “end street living in the CBD”, “provide resources for women and children to safely leave violence at home” or “provide community hubs to tackle loneliness and prevent suicide”.

3.      Join with other businesses to collaborate on your social outcome mission. Reach out to your business community to enroll them in a shared mission. Negotiate the final statement of social intent so that ownership is shared. The business community may include your competitors which may be a challenge. Just keep in mind the shared mission to boost the economy that supports your businesses.

4.      Engage social scientists to create an evidence-based theory of change. The theory of change should show a rational link between investment, activity, results and impact to you customer. Partner with a University to maintain on-going relationship with their social scientists.

5.      Invest to leverage collaboration and focus on outcomes (not services). Social enterprises and not for profits are experts are sharing heart warming reasons why you should invest in their organisation. I know, I have been seduced by those stories. The stories are real, and they do make a difference. However, this model of investment supports competition, fosters dependency in your ongoing funding and sustains the status quo. Stimulate the collaborative and collective movement to generate community driven solutions.

6.      Insist on accountability and discipline for reporting failure and success. As with any disruptive technology, social innovation projects will fail. Accept that as part of the territory. But also report that failure so others do not make the same mistake. Celebrate failure but don’t celebrate repeating the failure. And when you do succeed, celebrate and share that success.

7.      Have an “open source” attitude. The reflex reaction to designing and implementing a successful technology is to IP that technology and realise the competitive advantage that technology will give your company. In social innovation that technology is only effective if it is shared and scaled. Preventing suicide in Blacktown is good but do you want to keep the social technology to yourself? Why not be known as one of the companies that prevented suicide worldwide?

8.      Keep your people engage. By keeping your people fully engaged in the social investment program from ideation through to social and economic results will enhance your organisational culture and lead to enhanced performance of your people and teams.  

The results of marginalisation are trending in the wrong direction. It makes sense that the more people who are marginalised from the economy then the fewer people there are to buy your stuff. We have a responsibility to make the neo-liberal promise a reality for all. The benefits of a strong economy are obvious, but they should be enjoyed by everyone.

The economy is not a finite pie with limited numbers of slices. It is possible for everyone to enjoy a good slice of the abundant pie. We must be smart about how we make it.

Eugene McGarrell is a management consultant with 40 years’ experience in the health and community sector. He coaches people, teams and organisations with a shared value mission of better social outcomes and a better economy.

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