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Fail Forward: Keys to Success in the For-Purpose Sector

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The purpose of this paper is to identify best practices for achieving positive, measurable impact in the for-purpose sector, which includes non-profit organizations and social enterprises. Through an analysis of secondary sources (case studies,
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   Adelphi University Honors College Thesis Submitted in partial fulfillment of the requirements for graduation from the Honors College Fail Forward: Keys to Success in the For-Purpose Sector Sitora Serverova Gita Surie, Ph.D. Katie Laatikainen, Ph.D Diane Della Croce, Ph.D. May 2014   1 Abstract The purpose of this paper is to identify best practices for achieving positive, measurable impact in the for-purpose sector, which includes non-profit organizations and social enterprises. Through an analysis of secondary sources (case studies, evaluation reports, government documents, etc.), six processes were identified which differentiate successful organizations from organizations that failed. These processes are (1) analyzing relative advantage, (2) analyzing cultural compatibility, (3) identifying impact metrics, (4) identifying and addressing barriers to adoption, (5) instituting probationary trials, and (6) regularly reviewing social impact and cost effectiveness. These findings can serve as a framework for budding non-profit organizations and social enterprises, ensuring efficiency and high impact.    2 Contents I. Introduction ................................................................................................................................. 3   II. Literature Review ....................................................................................................................... 8   III. Methodology ........................................................................................................................... 17   IV. Case Studies: Learning From Failure ..................................................................................... 20   V. Case Studies: Learning from Success ...................................................................................... 44   VI. Conclusion: How Social Enterprises and Non-Profits Succeed ............................................. 59   VII. References ............................................................................................................................. 60      3 I. Introduction   The for-purpose sector includes non-profit organizations and social enterprises, and holds immense potential to create positive change in the world. With growing populations and diminishing resources, creativity and efficiency in this sector are the keys to human progress. However, few organizations report their success in terms of measurable, statistical impact. Instead, they tend to appeal to donors' and funders' emotions by sharing heartwarming stories of beneficiaries. Admittedly, a personal, human story is more powerful than a statistic. However, this tactic leaves the public to extrapolate that similar effects are taking place across the organization's area of social need. While measuring social impact requires customization, the organizational processes that maximize positive impact can be standardized, and will be explored in this thesis through a secondary analysis of six case studies. The non-profit sector is a significant portion of the United States economy. Defined as formal, private, non-profit-distributing, self-governing and voluntary (Anheier & Salamon, 1997: 394), non-profits are often accused of inefficiency. According to the National Center for Charitable Statistics, in 2012, non-profit organizations made up 5.5% of America's GDP with $1.59 trillion in revenues, and employed 10% of America's workforce. And yet, a 2013 Nonprofit Finance Fund publication showed that 56% of nonprofits reported an inability to meet demand for their services. How can we ensure that these resources are utilized to maximize impact? Curiously enough, the donor and funder market has yet to demand transparency from non-profit organizations regarding statistical impact on their chosen area of social need. To fill    4 the gap, independent evaluators such as CharityNavigator and CharityWatch have sprung up to grade organizations' efficiency. However, efficiency is standardized and measured most prominently by the ratio of administrative costs to program costs. At the end of the day, a healthy CharityNavigator rating conveys little about the organization's actual impact. The most promising approach to fill the gap comes from companies that evaluate impact on a customized basis, tailoring methodologies and criteria to each organization. GiveWell does this for non-profits, and B Corp for social enterprises, though it seems that the sector has room for more players. GiveWell, for example, honors no more than five organizations per year with its Top Charity distinction, primarily due to the time and effort required to thoroughly investigate each non-profit. However, these organizations are only part of the solution. If we want to maximize impact while minimizing costs, it is necessary to identify best practices for success in the for-purpose sector. The social enterprise sector is difficult to measure in size, primarily because the definition alone has been the subject of controversy. For our purposes, this paper will rely on a definition by social enterprise pioneer Gregory Dees, who stated that, “Social entrepreneurs play the role of change agents in the social sector, by: (1) adopting a mission to create and sustain social value (not just private value), (2) recognizing and relentlessly pursuing new opportunities to serve that mission, (3) engaging in a process of continuous innovation, adaptation, and learning, (4) acting boldly without being limited by resources currently in hand, and (5) exhibiting heightened accountability to the constituencies served and for the outcomes created.”
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