Category: Organization Development

There’s just no way to avoid it. You might fail with your social enterprise. Lose your shirt. Wish you’d never started it. There’s no safety net for social enterprise, and there never will be.

The U.S. Census Bureau reports that half of business startups with employees are gone five years later. Social enterprises probably do a bit better than that. So perhaps your odds are a bit better than 50-50. But it’s still risky business.

Yet all is not lost. There are things you can do to reduce risk. Write a business plan. Need help? Review the Free Management Library and blog on business planning. (Full disclosure: I’m the author.) The blog is currently running a series about feasibility testing, a central part of good business planning. That means lower risk.

Also, don’t forget the “enterprise” part of social enterprise. Many nascent social enterprisers behave as if awareness of their social impact will translate into sales and profitability. While in certain circumstances people will purchase, and even pay extra, for something that creates a desirable social impact (think Girl Scout cookies), most of the time they won’t. Or if they will, it’s only if the product meets or exceeds their expectations. Fair trade coffee sells if it tastes great, but if it doesn’t, no matter how much the other stuff exploits indigenous Latin American farmers, it sits on the shelf. That particular social premium ends at their taste buds.

Finally, failing isn’t as bad as it’s cracked out to be. Most successful entrepreneurs hit their stride after failing a few times. But each time they learned important lessons. So my final tip for this risky business is to decide that you’re OK with failure. Stuff happens.

Welcome to Crisis Management in the 21st Century and to Internet: The Ultimate Medium. A cross between tabloid journalism and a gladiator competition, between Pollyanna and Pandora, where minds meet and merge, clash and clamor, and where you can get more of anything you want than was EVER available at Alice’s Restaurant.

The Internet has become the largest media outlet in our known universe. Interactive print, audio and video communications are all available, with the line between “amateur” and “professional”, “traditional” and “untraditional” media blurred almost beyond ken. This massive medium has spawned what I have been calling “The I-Reporter” since long before CNN started using that term.

Consider these realities:

• Anyone can be an I-Reporter.
• While some I-Reporters compete for commercial gain, others compete simply for the joy of recognition. Just as traditional media reporters want to show up on page one of a newspaper, or at the top of the broadcast news, I-Reporters want their material showing up on page one of a Google search and – better yet – staying there for a while.
• Often, I-Reporters are also their own publishers and site promoters, or work in small teams to provide these functions, and through their skill can get better search engine placement and more attention on the Internet than “competing” entities.
• Search engine ranking has very little – and sometimes nothing – to do with quality or accuracy of content.
• Information posted on the Internet propagates virally – it finds a “home” via links or reprinted pages on websites run by people of like mind, and even misinformation is blatantly re-reported at websites operated by supposedly legitimate organizations.
• Some I-Reporters are constrained by the conditions of their employer, some are constrained by a sense of ethics, and some are completely unconstrained except by law – where it can be enforced.

Throw into that cauldron the fact that the general public still hasn’t fully realized how easy it is to misrepresent information on the Internet, and the witches’ brew has now become the most difficult environment challenging many ethical and honest organizations.

Organizations have always had individuals who disagree with their policies, dislike their products or services, are disgruntled former employees, or just had a bad experience with a receptionist. In the past, unhappy individuals could call or write letters to the company, contact the Better Business Bureau, or even seek the help of their local Consumer Reporter. Today, as or more quickly, they can just launch their own website.

Try this fascinating demonstration, given to me by a client recently. In a Google search bar, enter the word “socks” only substitute a “u” for the “o.” I am being obtuse so that readers’ spam-filters don’t delete this article! There were something like 23 million results as I write this article, and almost all of the first 20 Google pages – 200 entries (which is as far as I looked) – were complaints about companies or products.

How does today’s crisis manager deal with this when his or her organization is under fire? Here are some strategic considerations, offered as do’s and don’ts:

• Do not depend solely on the Web-based tactics to correct information that has been misreported on websites of any kind (Web pages, blogs, wikis, etc.) Use direct-to-stakeholder communications.
• Do your best to balance the results of a search for the keywords important to your organization, but remember that a totally balanced search – just like a totally balanced traditional news story – may be, at best, only 50 percent “your side” of a story when there is any controversy already brewing.
• Do not automatically think that you have to respond to every Internet critic.
• Do monitor critics to see if they either (a) draw the attention of your stakeholders and/or (b) start to achieve high search engine ranking. Then have your crisis team meet to discuss the pros and cons of PR and legal responses which could force inaccuracies off the Web or demonstrate to concerned stakeholders, on your own Web pages and/or through off-line tactics, why they have no reason for concern.
• Do not engage in debates with critics on “neutral” sites which allow such interchanges. There are ways to defuse those bombs that don’t make you a target for yet more negativity.
• Do consider getting more aggressive from a PR and legal perspective if allegations have already propagated widely, with considerable damage and the promise of worse damage.
• Do insist, as the top executive officer of any organization, that legal actions against hostile websites not be implemented without professional consideration of the PR implications, and that PR actions against hostile websites not be implemented without legal consideration.
• Do be sufficiently aware of the thoughts and feelings of your stakeholders – internal and external – that you know when and how severely Internet-centered negativity is impacting them. If you do, you will also know when they think you’re doing a good job responding to such negativity.

Virtually all of the crises to which I’ve helped clients respond in the past five years have had a Web-centered/Internet component, with the impact of the Internet on crisis management strategies and tactics growing exponentially every year. While many organizations have “IT people” on staff or on-call, IT expertise often does not translate to “Internet Communication” expertise. With the growth of the Internet, companies were very quick to experiment with it and sometimes learn how to use its capabilities to PROMOTE their products and services, to build brand awareness and enhance their reputation.

But now, just as it was “pre-Web,” the purpose of crisis management is to PRESERVE what has been gained through promotion. To, ideally, prevent crises from happening but, when that isn’t possible, to minimize damage. In the 21st Century, crisis managers need a new paradigm and an expanded skill-set to help their organizations or clients achieve that critical goal.

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For more resources, see the Free Management Library topic: Crisis Management
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What do September 11, Enron and the news about sexual molestation by Catholic priests have in common?

They were all what I’ve previously termed “creeping crises,” vulnerabilities, bombs (literally and figuratively) waiting to explode. There were people — the American intelligence community, some employees of Enron and Church leaders, respectively — who had information that could have prevented or reduced the damage from these situations. And who perpetuated and exacerbated the crises by acts of commission or omission.

They were all terrorism if you define it as “parties inflicting suffering on innocent victims as a means to an end.”

They are all the tip of massive icebergs of creeping crises. Who dares to say that there aren’t other terrorism groups poised to wreak unprecedented damage, corporations whose fiscal and legal practices will lead to Enron-like ruin, and criminal sexual behavior by clergy of possibly every major world religion?

They are all crises which strike at our emotional infrastructure: our desires for physical, psychological and financial security.

Human beings have an immense capacity for enduring pain individually and as organizations. And an immense resistance to change. That’s a bad combination, because for most individuals, and most organizations, it seems to take a great deal of pain to motivate change.

There is a psychological concept called “hitting bottom” that refers to the point at which an individual feels so much pain from what he or she has been doing that the fear of continuing “as is” is greater than the fear of change. At that point, the individual is willing to take some direction from someone other than him- or herself.

It has been my experience that organizations, too, usually have to “hit bottom,” to feel enough crisis-related pain from their actions, or lack thereof, that they’re willing to realize that their own best thinking isn’t making them crisis-resistant, versus crisis-prone. And that’s when they start getting proactive about crisis management.

Here’s the catch, however. Sometimes, that willingness to change comes too late. Sometimes, for an individual or an organization, that delay is fatal.

So ask yourselves at your next board meeting: how much pain does it take?

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For more resources, see the Free Management Library topic: Crisis Management
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My clients, and my kids, have been told that there are four ways that they can be perceived as lying:

1. Dishonesty by commission — literally saying black is white.
2. Dishonesty by omission — leaving important information out of your communications.
3. Dishonesty by understatement for the purpose of obfuscating the truth.
4. Dishonesty by overstatement for the purpose of obfuscating the truth.

We have all been witnessing — first in the Church’s initial communication and handling of sexual abuses by priests in the United States, now by the Church’s bungling of what seems to be an even worse situation in Europe — dishonesty in all four categories.

There was a time when, to the vast majority of Christians, not just to Catholics, the word of the Vatican equated to the word of God, and even non-Christians had great respect for most statements coming out of the Vactican. But in the 21st Century, “consumers” are too savvy to believe that God directed his representatives on Earth to lie. The Vatican must put down the proverbial shovel before it digs its way to a place much less inviting than Heaven.

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For more resources, see the Free Management Library topic: Crisis Management
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For centuries there was only one bottom line: profitability. Then people and companies interested in making the world a better place, not just making money, decided social impact should have equal billing. Fair enough. A bit later, environmental impact demanded a place at the table, so now we have three bottom lines. And from that the vibrant corporate social responsibility (CSR) movement emerged that in many ways has changed the way Wall Street, and even Main Street, does its business, or at least talks about the business it does.

The social enterprise movement has also generally incorporated that three bottom line perspective. Consider the definition we’re using here: “harnessing the power of the marketplace to solve critical social or environment problems.”

But I would argue that there really is only one bottom line that matters for a social enterprise. That’s the social impact as it relates to the mission of that organization. Sure, the venture has to be financially successful, even sustainable to use the current buzzword (for which I’m still searching for a meaningful definition; do you have one?), but without mission impact, there isn’t anything there. Or, to put it differently, as we point out to the nonprofits we work with, only go down this path to expand your organization’s mission impact. For social enterprise, making money is just a means to that higher end.

So while we’ll spend a fair amount of time talking about strategies for generating that revenue, which at times can be all-consuming, we’ll need to keep our eyes on the prize. For social enterprises, mission matters. Ultimately it’s the only thing that does.

Not all social enterprises look alike. While many people immediately think of nonprofits (or nongovernmental organizations, NGOs), in practice any type of business can be a social enterprise. As long as you “harness the power of the marketplace to solve critical social or environmental problem,” which to me means you sell stuff to customers as you pursue your larger social purpose, you’re in.

Regardless of whether you’re set up as a nonprofit, a for-profit, a hybrid like the new L3C in the US, or just an individual with an idea to change the world, funded — at least in part — by selling products or services, you’re a member of this special club.

Social enterprise is not just about finding the right business-like strategies, which, if applied correctly, will help create social impact. It’s also a movement, of tens of thousands of people and organizations around the world working on their own and working together to change the world, combining the best of the commercial and non-commercial sectors.

What makes this a movement is the shared vision for social change — how the world will be better if we succeed at our work; and the business models — how that work gets paid for, at least a big share of it, from entrepreneurial strategies.

Now, speaking of share, there’s no formula on what percentage of your income needs to be “earned” (as opposed to granted or donated) to be a social enterprise. But I tend to think the earned portion needs to be at least 25% to make some claim to the “enterprise” portion of the term. And while profitability is a good thing, and for for-profit social enterprises ultimately an essential thing, it’s not a requirement to qualify as a social enterprise.

So, for example, if you have a sustainable business model that relies on half of its revenue from earned income, and half from grants, I call that a successful social enterprise.

So regardless of your organization’s legal structure, or lack thereof, join us to talk about not just why we do this work, but how. It’s the how that will be the primary focus of this blog, but we won’t shy away from the why as well.

What are the challenges you’re facing with your social enterprise work?

Crisis: Any situation that is threatening or could threaten to harm people or property, seriously interrupt business, damage reputation or negatively impact share value.

Every organization is vulnerable to crises. The days of playing ostrich are gone. You can play, but your stakeholders will not be understanding or forgiving because they’ve watched what happened with Bridgestone-Firestone, Bill Clinton, Arthur Andersen, Enron, Worldcom, 9-11, The Asian Tsunami Disaster, Hurricane Katrina, Virginia Tech, Tiger Woods and Toyota.

If you don’t prepare, you WILL take more damage. And when I look at existing “crisis management” plans while conducting a “crisis document audit,” what I often find is a failure to address the many communications issues related to crisis/disaster response. Organizations do not understand that, without adequate communications:

* Operational response will break down.

* Stakeholders (internal and external) will not know what is happening and quickly be confused, angry, and negatively reactive.

* The organization will be perceived as inept, at best, and criminally negligent, at worst.

The basic steps of effective crisis communications are not difficult, but they require advance work in order to minimize damage. The slower the response, the more damage is incurred. So if you’re serious about crisis preparedness and response, read and implement these 10 steps of crisis communications, the first seven of which can and should be undertaken before any crisis occurs.

The 10 Steps of Crisis Communications:

1. Identify Your Crisis Communications Team

A small team of senior executives should be identified to serve as your organization’s Crisis Communications Team. Ideally, the team will be led by the organization’s CEO, with the firm’s top public relations executive and legal counsel as his or her chief advisers. If your in-house PR executive does not have sufficient crisis communications expertise, he or she may choose to retain an agency or independent consultant with that specialty. Other team members should be the heads of major organization divisions, to include finance, personnel and operations.

Let me say a word about legal counsel. Sometimes, during a crisis, a natural conflict arises between the recommendations of the organization’s legal counsel on the one hand, and those of the public relations counsel on the other. While it may be legally prudent not to say anything, this kind of reaction can land the organization in public relations “hot water” that is potentially, as damaging, or even more damaging, than any financial or legal ramification. Fortunately, more and more legal advisors are becoming aware of this fact and are working in close cooperation with public relations counsel. The importance of this understanding cannot be underestimated. Arthur Anderson lost its case and went out of business due to the judgment rendered by the court of public opinion, not the judgment of a court of law.

2. Identify Spokespersons

Within each team, there should be individuals who are the only ones authorized to speak for the organization in times of crisis. The CEO should be one of those spokespersons, but not necessarily the primary spokesperson. The fact is that some chief executives are brilliant business people but not very effective in-person communicators. The decision about who should speak is made after a crisis breaks, but the pool of potential spokespersons should be identified and trained in advance.

Not only are spokespersons needed for media communications, but for all types and forms of communications, internal and external, including on-camera, at a public meeting, at employee meetings, etc. You really don’t want to be making decisions about so many different types of spokespersons while “under fire.”

3. Spokesperson Training

Two typical quotes from well-intentioned organization executives summarize the reason why your spokespersons should receive professional training in how to speak to the media:

“I talked to that nice reporter for over an hour and he didn’t use the most important news about my organization.”

“I’ve done a lot of public speaking. I won’t have any trouble at that public hearing.”

Regarding the first example, there are a good number of people interviewed by CBS’ “60 Minutes” or ABC’s “20/20” who thought they knew how to talk to the press. In the second case, most executives who have attended a hostile public hearing have gone home wishing they had been wearing a pair of Depends.

All stakeholders — internal and external — are just as capable of misunderstanding or misinterpreting information about your organization as the media, and it’s your responsibility to minimize the chance of that happening.

Spokesperson training teaches you to be prepared, to be ready to respond in a way that optimizes the response of all stakeholders.

4. Establish Notification Systems

Remember when the only way to reach someone quickly was by a single phone or fax number, assuming they were there to receive either?

Today, we have to have — immediately at hand — the means to reach our internal and external stakeholders using multiple modalities. Many of us have several phone numbers, more than one email address, and can receive SMS (text) messages or faxes. Instant Messenger programs, either public or proprietary, are also very popular for business and personal use. We can even send audio and video messages via email. Depending on how “techie” we choose to be, all of this type of communication — and more — may be received on or sent by a single device!

It is absolutely essential, pre-crisis, to establish notification systems that will allow you to rapidly reach your stakeholders using multiple modalities. The Virginia Tech catastrophe, where email was the sole means of alerting students initially, proves that using any single modality can make a crisis worse. Some of us may be on email constantly, others not so. Some of us receive our cellphone calls or messages quickly, some not. If you use more than one modality to reach your stakeholders, the chances are much greater that the message will go through.

For a long time, those of us in crisis management relied on the old-fashioned “phone tree” and teams of callers to track people down. But today there is technology — offered by multiple vendors and also available for purchase — that can be set up to automatically start contacting all stakeholders in your pre-established database and keep trying to reach them until they confirm (e.g., by pressing a certain number on a phone keypad) that the message has been received. Technology that you can trigger with a single call or email.

5. Identify and Know Your Stakeholders

Who are the internal and external stakeholders that matter to your organization? I consider employees to be your most important audience, because every employee is a PR representative and crisis manager for your organization whether you want them to be or not! But, ultimately, all stakeholders will be talking about you to others not on your contact list, so it’s up to you to ensure that they receive the messages you would like them to repeat elsewhere.

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For more resources, see the Free Management Library topic: Crisis Management
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