Social entrepreneurship, by its very definition, requires innovative thinking and an aggressive approach to problem solving. While not a new concept, there is growing support for organizations that combine the passion of a social mission with sustainable, for-profit business models. This momentum is largely in response to the underwhelming outcomes and unmet expectations of various governmental and philanthropic efforts.1 As social entrepreneurs usher in new solutions at an attempt to solve large societal woes, organizational values must align with business operations at every level. This level of alignment requires the leadership of not only the organization’s founders, but also the creation of a leadership culture that inspires and empowers employees while creating sustainable and lasting impact. (See Figure 1)
1. Dees, J.G., The Meaning of “Social Entrepreneurship”. 2001
As with many businesses hoping to grow, social enterprises need reliable sources of investment capital. Many well-known investors frequently mention the attributes of founders when deciding whether or not to invest in a company. Andreeson Horowitz, the well-known $4 billion Silicon Valley investment firm, specifically cites the “courage” of a founder to pursue a seemingly “berserk” idea as a critical contributing factor to the success of a startup and the allocation of their investment dollars.2
Effective leadership also contributes to a firm’s profitability. A Harvard Business School study showed that a CEO’s influence contributes to 15% of an organization’s profitability variance, the same variance reflected when comparing industries.3 In other words, choosing the right leader is equally important as choosing the industry in which to operate in all-together. A great leader in a narrow market could create as much profit as a mediocre leader in a great market. Again, for much needed start-up capital and ongoing investments, funders are more likely to place their money in the hands of those that will generate expected, positive returns.
2. Andreesen Horowitz: Here’s The Magic Formula For Building Massive Companies [DECK]. Business Insider. Business Insider, Inc, Feb. 2013. Retrieved June 2014.
3. Nohria, N., Joyce, W., Roberson, B. What Really Works. Harvard Business Review. July 2003
MIT’s Edgar Schein, a foremost scholar on organizational culture, argues that culture results from having an independently defined social unit (i.e. a business) in which members share significant experiences in addressing both external and internal challenges.4 This problem-solving process defines what will or will not work in the world. Over time, these rules become so engrained into every aspect of the social unit that they are taken for granted and assumed to be necessary and true. Again, given that social enterprises are attempting to change the way the world works, it follows that they are also attempting to change both internal and external culture. It is critical to realize both the magnitude and complexity of this challenge.
General Electric (GE), the 136 year-old company, is often referenced as a shining example of an effective corporate culture rooted in effective leadership. GE is also admired for its ability to change and adapt to meet the needs of the time. GE’s leadership culture and ongoing commitment to developing leadership talent have led to their lasting success.5 While hard to imagine GE as once a startup, many praise Charles Coffin, the CEO to follow Thomas Edison, as having a critical role in laying the foundation for a lasting, effective company culture. Coffin created an effective meritocracy that measured and rewarded performance aligned with organizational goals.
Leadership and culture are intertwined. When exploring change and change management, researchers at Harvard Business School observed leadership and culture to be two of the four cooperation tools vital to facilitating this difficult process (See Figure 2).6 At the intersection of leadership tools and culture tools lies vision, further underscoring the founder’s role.
There are many texts and perspectives on leadership, but The Leadership Challenge by James M. Kouzes and Barry Z. Posner has been very well-regarded since its original publishing in 1987. Currently, in its fifth edition, Kouzes and Posner structure their “five practices of exemplary leadership” from years of research and analysis (See Appendix A: The Leadership Challenge: 5/10/20 Model).7 The first two steps, “modeling the way” and “inspire a shared vision”, lay a foundation for a leadership culture that social entrepreneurs can easily embrace.
Figure 2: The Four Types of Cooperation Tools
4. Christensen, C. M., What is an Organization’s Culture, Harvard Business School Publishing. 2006
5. Bartlett, C. A., McLean, A. N., GE’s Jeff Immelt: The Voyage from MBA to CEO. Harvard Business School Publishing. 2007
6. Christensen, C. M., Marx, M., Stevenson, H. H. The Tools of Cooperation and Change. Harvard Business Review. October 2006.
7. Kouzes, J. M., Posner, B. Z., The Leadership Challenge, John Wiley & Sons, Inc., 2007.
Kouzes and Posner state that “If you don’t believe in the messenger, you won’t believe the message.” With social enterprises, the organizational mission is usually clear and explicit. However, implicit in a mission are the founder’s values and vision for the world. The social entrepreneur should further clarify his or her values so that others within the organization can fully understand them and align themselves to these values. Furthermore, the values themselves need to be integrated into the very framework of the organization by both incentivizing desired behavior and removing unwanted actions. Dr. Charles Howard, University of Pennsylvania University Chaplain, sees this process as similar to that of the parent-child relationship and states that “parents try to raise kids who can see beyond themselves – kids who are not selfish and focused on their own toy accumulation, but rather kids that share, kids that have compassions, kids who want to make their world better. Children can rarely cultivate this kind of living on their own.”8
The second Kouzes-Posner “practice” for exemplary leadership is to inspire a shared vision.9 As stated, many social enterprises have a clear sense of their current mission and a future vision for a better world. Once values are aligned within the organization and woven throughout the daily operational practices, social entrepreneurs can further build upon the momentum by engaging employees around this shared vision. In market data provided by a national leadership association, only 23% of survey respondents feel their supervisor frequently articulates a compelling vision.10
Figure 3: The Leadership Challenge
8. Howard, C. Personal interview. June 23, 2014. See Appendix B: Summary of Personal Interviews for transcript
9. Kouzes, J. M., Posner, B. Z., The Leadership Challenge, John Wiley & Sons, Inc., 2007.
10. Market data provided from a leadership association. See Appendix C: Market Data Excerpts for additional details
Once a solid leadership foundation is laid, the organization must sustain itself for lasting impact. As stated, the need for innovation within the social enterprise sector is clear. However, alongside a leadership culture, a culture of innovation and adaptation is also needed. Unsurprisingly, effective leadership is required for that cultural shift to occur. Kouzes and Posner call for leaders to seek opportunities and take necessary risks in their third practice, entitled “Challenge the Process”. As a seasoned Human Resources professional, Petula Wilson states that an essential quality of leadership is “not being afraid to fail and not taking yourself too seriously. This combination allows a leader to think outside the box.”11
In a recent Boston Consulting Group publication, The Most Innovative Companies of 2012, it is reported that innovation ranks as a “top three” strategy among the majority of CEOs for the first time in the survey’s history. However, as more organizations search for innovation, it is critical that leaders do so in a sincere and meaningful manner that aligns with their already established and articulated vision and values. Innovation, and its required leadership, cannot simply be a business trend.
11. Wilson, P. Personal Interview. June 23 2014. See Appendix B: Summary of Personal Interviews for transcript
A unique opportunity exists for social entrepreneurs. With a clear vision for the world and a strong set of values, employees are able to align their personal values to that of the organization. In their research, Kouzes and Posner found that an individual’s clarity of their personal values is the largest determinant of commitment to an organization.13 However, taking it a step further, Dr. Howard states that leaders also need to remain focused on the “deeper meaning for the work, a larger vision for global, local, and individual change, the culture within the company and more importantly the hearts within the company.”14 This delicate process requires effective communication and collaboration throughout the organization. Again, in market data provided by a national leadership association, 94% of survey respondents share their expertise at the request of co-workers. However, only one-third felt that their supervisors take time to teach, coach, and develop their strengths.15
Ms. Wilson continues that leaders need “the ability to appreciate differences in people and perspectives” and must “know what they don’t know and surround themselves with those that do.” In his popular article, Leading Change, John Kotter outlines eight essential steps for transforming organizations including the need for leaders to form a dedicated coalition and empower others.16 These findings execute that of Kouzes and Posner.17
13. Kouzes, J. M., Posner, B. Z., The Leadership Challenge, John Wiley & Sons, Inc., 2007.
14. Howard, C. Personal Interview. June 23, 2014. See Appendix B: Summary of Personal Interviews for transcript
15. Market data provided from a leadership association. See Appendix C: Market Data Excerpts for additional details
16. Kotter, J. P. Leading Change. (1995). Harvard Business Review.
17. Kouzes, J. M., Posner, B. Z., The Leadership Challenge, John Wiley & Sons, Inc., 2007.
Running any organization, of any size, within any industry, is a challenging process. All organizations are faced with a multitude of strategic decisions that impact not only its success, but the well-being of its stakeholders. Social enterprises have the additional self-imposed burden of addressing a desired social impact while remaining self-sustaining and even profitable. This additional chore must be addressed thoughtfully and methodically to truly maximize impact and realize organizational vision. While only one piece of the puzzle, effective leadership is an essential component that establishes the necessary foundation for growth, sustainability, and lasting impact.