A Purpose-Driven Culture in Business is Important for Millennials
What Does it Mean for an Organization to Have an Ethical Culture?

Incorporating a Balanced Scorecard Approach into Social Entrepreneurship

The Best Way to Measure Results of Performance in Today’s Organization

Social enterprise has been a buzz word for millennials for some time now. A social enterprise is a commercial organization that has specific social objectives that serve its primary purpose. Social enterprises seek to maximize profits while maximizing benefits to society and the environment. The profits are principally used to fund social programs.

According to the Case Foundation, social entrepreneurship is the next generation’s secret weapon for tackling chronic social challenges and creating the change they want to see. Jean Case, CEO of the Case Foundation, says that: “Like other young generations before them, they are idealistic, but what sets this generation apart is that they are turning their idealism into action.” They are using their collective ability to pave new pathways and create new solutions to old problems. Social-entreprise

Social entrepreneurs create businesses in a variety of industries that can have a positive impact on society, including alternative energy, health awareness, access to clean water, and education. It’s not enough to say businesses should be developed to attend to these needs. It must be done in an ethical manner by emphasizing right behavior over wrong; doing good things not bad.

According to the 2019 Deloitte publication, Leading the social enterprise: Reinvent with a human focus, when CEOs were asked to rate their most important measure of success in 2019, the number-one issue cited was “impact on society, including income inequality, diversity, and the environment.” I believe these findings are questionable in today’s world. In short, saying “environment” is too vague. It could mean the economic environment and not the cultural environment, for example, which misses the point of social entrepreneurship.

The report also shows that CEOs have not solved the issue of social enterprise. That’s because, according to the survey, leading a social enterprise is not the equivalent of practicing corporate social responsibility. It’s about recognizing that, while business generate a profit and deliver a return to shareholders, they must do so while also improving the status and position of workers, customers, and the communities in which we live.

In ranking the most important factor when measuring success when evaluating annual performance, respondents rated societal impact (e.g., diversity, inequality, and environment) at the top (34%), followed by customer satisfaction (18%), employee satisfaction/retention (17%), financial performance (e.g., revenue, profit), and regulatory adherence (14%). However, it’s my view there is a gap between what organizations say is most important and what they do with their resources.

Basically, social entrepreneurship should adopt a balanced scorecard approach to evaluating the results of organizations. In 1996, Robert Kaplan and David Norton published their seminal work on strategy development and execution,” The Balanced Scorecard: Translating Strategy into Action. It has become quite popular with many companies and fits well into the notion that organizations have a social responsibility to go beyond financial metrics to evaluate performance and consider non-financial metrics, such as those mentioned above. Balanced scorecard

It’s important for these factors to have an ethical component to satisfy the goals of social entrepreneurship. This can be done by considering the interests of stakeholders and acting in a way that maximizes the benefits to them while minimizing the harms. The various perspectives should include:

  • Employee perspective
  • Customer perspective
  • Community perspective
  • Vendor perspective
  • Shareholder perspective
  • Regulatory perspective

The social enterprise is becoming more important to organizations over time. The Deloitte survey indicates that 56 percent of organizations believe it will be more important three years from now compared to today. It also shows that 44 percent feel it is more important today than three years ago.

The balanced scorecard is an integral part of a social enterprise. More needs to be done to develop these ideas by top management. Most important, the culture of organizations should change to instill a commitment to both a balanced scorecard approach to performance evaluation and a social-driven purpose of ethical organizations.

Blog posted by Steven Mintz, aka Ethics Sage, on June 6, 2019. Visit Dr. Mintz’s website and sign up for his newsletter. Follow him on Facebook and “Like” his page.