In the contemporary world, people always venture into different businesses to earn a living by making profits. Sometimes they start large social enterprises, which are expected to generate income for them. As Konda, Starc, and Rodica (2015) observe, although the majority of them give up when they face hardships, others utilize the challenges as learning opportunities that help them to realize the best ways or places to establish their businesses, including the people who they can deal with when undertaking business operations.
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Social enterprises are not an exception. Social enterprises comprise organizations that are devoted to achieving some social good, which must also incorporate commercial revenue and business activities. This paper identifies some of the challenges that hinder the success of social enterprises. Besides, the paper will also develop possible solutions to these challenges. To substantiate its arguments, the paper provides examples of three UK-based social enterprises that have endured various challenges before reaching their current successful state.
Challenges Facing Social Enterprises
The running of any business venture involves taking and encountering challenges. Foerster (2013) reveals how legislative bodies in many nations are not keen on establishing a clear support social enterprise framework. If any support is given to these enterprises, they can be a key contributor to the economy of the nation. The opposite is true if initiatives are not taken to support the establishment and operations of social enterprises. Lack of this support leads to deteriorating of the organizations since they end up lacking finances and well-articulated policies to manage their activities (Webster, Joynt, & Sefalafala 2016).
Lack of proper guidelines that define the financial bases of social enterprises makes such businesses face the problem of failing to invest constantly in quality goods and services that are delivered to clients (Foerster 2013).
Thus, they are not able to maintain good quality production. In turn, this situation affects their power to compete with rival enterprises, which provide similar goods and services. Maintaining this high-quality production requires a constant flow of finances to facilitate business operations. Hence, weak financial grounds and hence inadequate legislation eventually lead to dropping production levels and the collapsing of the social enterprise.
Limited Capital and Unskilled Workforce
As Webster, Joynt, and Sefalafala (2016) observe, many social enterprises are not able to operate programs that upgrade the skills of their workers. Executing such programs is a costly affair for many social enterprises due to their limited capital. Smaller organizations are more affected to the extent that they cannot compete effectively with large enterprises in producing quality goods and services (Webster, Joynt, & Sefalafala 2016).
Andy Bradley’s Frameworks 4 Change is an example of a UK-based social enterprise that seeks to develop and maintain constantly considerate caring surroundings for the elderly, in addition to individuals who have diverse health complications. The service-providing enterprise could have collapsed due to a lack of enough skilled labor force to handle the ever-changing health demands. It began as a small organization run by Bradley alone. Service-providing organizations such as Frameworks 4 Change rely heavily on the skills and expertise of their employees for the production of high-quality services.
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However, it becomes a problem for social enterprises since production will be of low quality if measures to upgrade workers’ skills are not put in place (Solon & Kratz 2016). Some social enterprises face the problem of limited capital. Chapeltown Baths & Community Business offers a working example of such enterprises that have suffered because of insufficient capital. The UK-based social enterprise faced the threat of possible shutting in 1996 because of a lack of financial aid to sustain its operations. However, the facility survived after securing grant financial support and loans. Currently, the non-profit-making facility has served the community for almost 20 years.
Underdeveloped Business Networks
Pitta, Guesalaga, and Marshall (2008) address the need for managers to establish partnerships that can aid in boosting the operations of their companies. Lack of proper network-based relations among social enterprises, both locally and globally, affects their smooth operation. This factor constrains the ability of the enterprises to exploit economies of scale and/or take on new ventures. Poor business networks can prevent social enterprises from taking a more proactive approach when it comes to strategy making.
According to Marsh, Akram, and Birkett (2015), some enterprises lack a structured architectural design, which shows all positions in the organization. According to Santos, Pache, and Birkholz (2015), a business structure is important since it reflects the existence of different stakeholders who have varied functions and interests in the organizations. Sykes, Venkatesh, and Johnson (2014) address the role that stakeholders and vital people play when it comes to bringing constructive ideas to boost the progress of various enterprises.
Unpredictable Political and Economic Environments
Irregular political and financial environments hinder the operations of many social enterprises. According to Schmitt (2014), the political environment may favor some operations of the enterprise while at the same time hindering some of them from taking place. For instance, the economic climate and the period of the recession may have a considerable negative impact on social enterprises in terms of reducing their income.
Their reliance on the private sector exposes them to common problems and hardships that other organizations face. This overreliance leads to the independent nature of the enterprise and hence the possible collapse when they are left to stand on their own. Poor procurement processes inhibit innovation in the social enterprises since they (enterprises) are exposed to the pressure of emulating the conventional private or public sector’s way of doing business. By adopting this strategy, they adjust their operations to be in line with the standards of the public sector, hence leaving no room for innovation and creativity.
Theft and corruption that have dominated many economies are also a major problem for many social enterprises. Many of the enterprises lose their property to the hands of corrupt individuals. Most of these self-interested individuals who form part of the management of the enterprises take bribes in exchange for favors such as offering quality goods and services to some key figures at the expense of the organization (Schmitt 2014). This situation leads to losses, which accumulate to the level of leading to the closure of the social enterprise. Unsustainable losses are a common issue in almost every social enterprise that is run by self-driven parties.
Solutions to the Challenges that face Social Enterprises
Every challenge has an underlying solution. The above challenges can be addressed by adopting various strategies. For instance, social enterprises need to formulate a clear support framework. The legislation of the nations and leadership should form a clear support framework for the enterprises to ensure that the businesses run within the formulated rules and structures that guarantee them maximum production of goods and services. This framework is necessary, especially when social enterprises are undergoing a crisis that needs financial assistance.
More capital should be invested in social enterprises. This move will enable them to produce more and high-quality products. The volume of sales will also go up, thanks to the increased investments. This capital may be obtained as grants and funds from the government and stakeholders (Webster, Joynt, & Sefalafala 2016). The investment will enable the enterprise to pay its workers, service itself, and/or pay licenses and other legal documentation that guarantee its continued operation. The appropriate investment will result in first-class goods and services, which will attract more customers and hence more profits to the enterprise (Schmitt 2014).
Social enterprises should conduct training of their workers and volunteers. As Webster, Joynt, and Sefalafala (2016) observe, they should also devise programs for improving the workforce skills by updating them on the latest ways of production or skills of work. The enterprises should also allocate more of their share of resources to development. They should sponsor some of the programs that are meant to maximize quality production. Conducting training of workers will attract more volunteers who will work with the enterprise management to guarantee faster and more productive.
According to Santos, Pache, and Birkholz (2015), stakeholders and founders of the social enterprises should improve their managerial competence by giving this role to the most qualified, professional, and skilled individuals who will ensure that all matters of the enterprises are handled properly. The Create Foundation CIC is an example of a social enterprise that has benefited from excellent management. The society-based business was initiated in 2007 to offer inventive teaching and job opportunities.
Its agenda is to offer capacity building services to destitute people. The West Yorkshire-based company’s excellent management team has led to the expansion of the business. Currently, it runs first-class corporate restaurant services in various places in the UK. Proper management will enable the enterprise to compete effectively in the market with its rivals. As a result, more profits will be generated in the business. If the returns are plowed back into the enterprises, the businesses will record significant growth.
The government, stakeholders, and social enterprise management officials should develop a collective structure of financing new enterprises. Their establishment and growth will greatly influence the progress of the enterprises, thus increasing their income (Santos, Pache, & Birkholz 2015). This strategy will eventually result in an adequate supply of high-quality goods and services. Establishment of new organizations will lead to reduced unemployment levels, decreased dependency ratio, and hence healthier life. Good business networking and cooperation will boost the productivity of social enterprises.
They should also improve in knowledge sharing to guarantee the availability of additional resources that the different enterprises require in their day-to-day smooth operations. This strategy will lead to the exchange of useful ideas that help in the development of the social enterprise (Marsh, Akram, & Birkett 2015). Knowledge sharing will make social enterprises realize the need to assist each other financially, thanks to their good relationships. Good networking and cooperation will also be essential where one enterprise can borrow some assets such as machines to achieve its production targets.
Peace is essential for all social enterprises because it encourages investment. Many investors prefer venturing into an organization where they are sure that they will not lose their property due to unpredictable political and economical environment. Hence, the government is supposed to maintain peace through holding seminars and workshops to sensitize the public about the importance of peace, besides taking stern actions against perpetrators of violence and warlords. By so doing, social enterprises will develop to the level of boosting the living standards of the people and the society at large.
The government, stakeholders, and the management of the social enterprises should take stern actions against social enterprise management officials who are found engaging in scandalous deals at the expense of the enterprise. Harsh penalties should be formulated and executed to discourage people from engaging in the vice. This action will reduce corruption, hence minimizing the malicious disappearance of the enterprises’ capital. This plan will then lead to the steady growth of business enterprises. Besides, a crackdown on fraud in the whole economy will also guarantee a friendly environment that will fuel growth in the enterprises. Well-managed enterprises will qualify to get financial services from investors. As a result, they will record high productivity.
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Social enterprises form a very important component of the economy of a nation. They provide services to the public while at the same time delivering multiple incomes to the working population. However, this sector is affected by several challenges that when critically handled may fuel its success. The paper has presented challenges such as theft and corruption, lack of good networking, lack of a peaceful business environment, and lack of finances and programs to upgrade and train workers.
The paper has also highlighted several possible remedies to these challenges. Such solutions include taking stern actions against corrupt individuals, maintenance of peace by the government and local leadership, enhancing good cooperation, and investing more capital and finances in the social enterprises to smoothen their operation. Success is only witnessed in social enterprises that manage to learn from the challenges by developing the most viable strategies that address each challenge.
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Santos, F, Pache, A & Birkholz, C 2015, ‘Making hybrids work: aligning business models and organizational design for social enterprises’, California Management Review, vol. 57, no. 3, pp. 36-58.
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