CLEARLYSO EVENT: Structures stymie sector

13 November 2009
by
Chrisanthi Giotis
Financial Times enterprise editor Jonathan Guthrie

Jonathan Guthrie: Your structures are vague

Social enterprises could attract more business and investment if they had more widely recognised structures, says a leading financial journalist.

Speaking at the ClearlySo social business conference yesterday, Financial Times enterprise editor Jonathan Guthrie said that although social enterprise was 'an attractive-sounding phrase', one of his key criticisms of the sector was the 'vagueness of the structures'.

Guthrie pointed to the deal this week between Bridges Social Entrepreneurs Fund,  Big Issue Invest and Call Britannia as an example where certain structures had been imposed on a social enterprise as part of the investment deal.

'I think you do need more commonly accepted structures and they are likely to be imposed by funding,' said Guthrie.

Guthrie added that he believed the UK should adopt a similar strategy to the US and set aside some government contracts for certain types of enterprises.

'I do think we should ringfence a proportion of public sector contracts for SMEs and within that ringfence a proportion for social enterprises - probably those that conform to CICs,' said Guthrie.

Nick Temple, policy and communications officer at the School for Social Entrepreneurs, who shared the podium with Guthrie, disagreed with his focus on structures.

Temple said: 'I'm much less interested in definitions and spending the next decade on debate and much more interested in a decade of doing.'

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Comments

why we shouldn't listen to the experts at the financial times...

Submitted by adrian_ashton2@... on 18 November 2009 - 3:11pm.

so the FT thinks, in its wisdom, that social enterprises should conform more to the accepted norms of the private sector in order to be able to elicit more support (money) from the established order.

Well - maybe I'm missing something here, but isn't it because of the 'established order' and traditional private sector that we've had recessions, are driven by profit margins rather than balancing compassion with costs, and generally see the rise in societal inequality?

I think it should be US that's talking to the FT and its consitiency to show them that its their structures that are flawed and don't make sense - after all, on what basis should people who are already wealthy be able to invest money in companies and then sit back, do nothing, and become even more wealthy while those lower down the food chain struggle to make ends meet on a weekly, or even daily, basis?

Maybe the time for revolution is drawing ever closer... or maybe its just time for me to get down from my soapbox.

The disagreement between

Submitted by Geof Cox on 16 November 2009 - 9:54am.

The disagreement between Jonathan Guthrie and Nick Temple is over two sides of the same coin: the positive side of the diversity of structures we have is the ability to choose exactly the right structure for purpose; the negative side is how confusing and difficult this choice can be.
Funders have always, and will always have specific requirements on legal/financial structure: grant-giving trusts and foundations have them, banks have them, and now specialist social enterprise funds have them. This is not a problem in itself, though getting the optimal structure to meet their criteria, plus all the other constraints of business model, scale, mission, and so on can indeed be difficult. I was involved a few years ago in a research project for Social Firms UK that revealed that over half of all the social enterprises surveyed were disatisfied with their legal structure.
The real problem in my view lies not in the diversity of structures - in itself some choice is usually better than none! - but in the lack of a proper advice/support service for organisational structure design - social entrepreneurs have to rely either, on the one hand, on solicitors - who know the structures but usually do not really understand social enterprise - including the social enterprise funding environment - and crucially lack the experience to advise on how radically reshaping a business model can make a better choice of legal structure possible - and on the other hand business advisors who know enterprise well enough but usually have a limted understanding of legal structures. If you are lucky you'll be able to access a third sector specialist - who still won't really know options less used in the third sector like share companies.
Yet it would be relatively cheap and simple to develop a national support service to help social entrepreneurs get the right organisational structure for their particular needs, and sweep away much of the current confusion.
GEOF COX
www.geofcox.info

www.geofcox.info