Back in 2008, some friends and I were queuing up to get in to celebrity club de jour Punk. Two got in but myself and the birthday boy were prevented. ‘Sorry fellas, we’re full up’ said a man holding a clipboard, whilst lots of more beautiful people continued to file past. After much negotiation, we got to the bottom of why we were being excluded from the party. ‘Sorry fellas, but we’ve got our full quota of Suits for tonight’. I looked at my friend, the one wearing the suit. He was shocked. ‘I’m not a fucking Suit, it’s my birthday!’ he exclaimed. ‘Sorry mate, but you’re not cool enough’.
I was reminded of this encounter recently following the launch of the latest State of Social Enterprise survey. The latest findings show that more and more people from the private sector find themselves on the guest list and are coming in to the social enterprise club. But buried in the back of the same report, an acknowledgement that women and BME groups are still disadvantaged in terms of accessing finance.
When I look around at seminars and events, most of which exclaim ‘This is a new type of business!’, I see lots of white middle-class men in suits and ties. It seems that, unlike Punk, the social enterprise club has a pretty large quota for Suits. Which makes me wonder, how come ‘The Quiet Revolution’ looks so similar to the thing it’s supposedly replacing? And, as the social investment market grows and matures, is it becoming any more accessible than traditional sources of finance?
But before we get carried away, some defence of the situation is needed. Not only do we see more and more people leaving the private sector to start a social enterprise, we also see a similar pattern with people entering support intermediaries and Social Investment Finance Institutions (SIFI’s). I’m sure for most people the idea of earning a decent living whilst ostensibly improving other people’s lives is a bit of a no-brainer. This is definitely a more desirable form of capitalism than what existed pre-2008.
As the sector seeks legitimacy and to appeal to the mainstream, I think it’s only natural that it will adopt some of the language and symbolism of ‘serious business’. Furthermore, as the government and others pile more and more money in to the sector, we need people who already have the knowledge and skills to create and manage a new suite of financial products and services. This is, therefore, ostensibly a good thing.
So like many others, I think it’s great that so many people are coming in to the social enterprise sector from the private sector. In the short-to-medium term, if we’re going to change business and avert further crises, this is one way to do it.
It’s the long-term implications of this short-term trend that concern me and many others. In particular it’s the culture that is developing, and potentially becoming institutionalised, that presents the greatest threat to the sector genuinely offering an alternative to traditional modes of capitalism.
The Social Construction of Reality
There’s an alternative way of looking at why certain practices crop up and persist within different areas of society. This could help us better understand the prevalence of cultural norms imported from the financial services industry (e.g. such as the insistence on wearing suits and ties) and why a culture may be developing that unintentionally excludes certain groups from accessing social finance.
There’s an argument that “any action that is repeated frequently becomes cast into a pattern, which can then be reproduced with an economy of effort and which, ipso facto, is apprehended by its performer as that pattern”. So for example in the social enterprise sector, SIFIs and other investors talk about what they look for in potential investees. Unsurprisingly, as these types of conversations have been taking place in the financial services industry for years, the criteria and the language used tend to be similar. “Habitualization makes it unnecessary for each situation to be defined anew”. This process has been accelerated by the influx of people from the private sector, where these practices and customs have long been institutionalised already.
Unfortunately what happens during this process is that, while freeing us from “the burden of all those decisions”, the original meanings and purposes of these behaviours, symbols and jargon slowly get taken for granted and lost.
What does this mean for social enterprise?
As these practices and conventions become more and more prevalent, they take on a life of their own, confronting us as objective reality. That means anyone looking for social finance also needs to learn these behaviours, symbols and jargon in order to effectively communicate with those who hold it. This is not endemic to the social enterprise sector of course, as anyone who’s ever worked in the voluntary and community sector knows. ‘Need a grant, go there and say that. Need a loan, come here and say this’.
As more and more people engage with social finance institutions, they come to better understand them, but in doing so, they also come to better understand how others participate in this process. They develop tips for how you get funding for instance, based upon other’s experiences of getting funding from an institution. Basically, we end up creating subjective meanings based upon other’s subjective meanings.
But isn’t that just playing the game?
In the short-term, yes. But in the long run, these practices can become so embedded that they seem unchangeable. Which is fine if they’ve been fully thought through from the start, but given the pace of growth in the social enterprise sector, many practices have just been picked up as quick fixes without much thought to their long-term implications.
I’ll give a practical example. In their 2010 report, the coalition government identified several reasons the social investment market hadn’t taken off by that point in time, one of which was ‘imperfect information’. ‘Investors need to know what they are investing in’ – a truism imported from the established investment market. What happened as a result is that even more people started talking about social impact measurement, and now there’s almost universal agreement that it’s essential if social ventures are going to attract investment.
So going back to the theory, this states that when a society puts forth a set of rules, they often put people forward to enforce those rules. When people follow those rules and habitually repeat them over time, they eventually create institutions. So in terms of the social impact measurement example, what happened was that lots of people starting talking about its importance, and the government set up a new institution – Big Society Capital, which uses the power of its capital to enforce ventures to measure their social impact. A similar thing has happened with the Social Stock Exchange. Now any new person coming in to the sector will think that is both natural and well established for ventures to measure their social impact.
Learning from Punk
This is just one of many examples of practices that have seemingly been picked up from one sector and dropped in to another, without much thought to their practical implications. This is possibly because they seem to make sense. Why wouldn’t you measure your social impact? Well what if your venture produces a lot of ‘soft outcomes’ and not a lot of ‘hard outputs’? Why would an investor risk their money to improve the confidence of one young person at risk of exclusion from school, when they could invest the same money to buy books for hard-up schools? While presented as objective, these behaviours, symbols and jargon are inherently value-laden.
Coming full circle then, we should take heed from the lessons of Punk. Not only did it exclude two ridiculously cool young cats from its premises, but it later went out of business. The argument presented above has real implications for the social enterprise sector and social investment market if it is going to be more inclusive than traditional business and undo many of the issues that has caused. We need to more closely scrutinise the investment deals being done in the sector – for instance, I wonder what percentage of the 765 deals in 2011/12 were made between men? How can we ensure that social finance doesn’t exclude people as traditional finance often does? We’re not going to avert further crises by marginalising the very people we’re trying to help.
Given that we have now created an institutionalised, objective world for social enterprise, we can’t just wish it away. It now seemingly exists, and we can’t better understand it through introspection, but rather going out there and learning more about it. Given that the sector is still young, there’s still an opportunity to take a look at the cloth we’re cutting and change the fabric.