Definitions of social enterprise vary. If we include in this definition “market/fee based services for social goods”, I would list some ‘government functions’ under the umbrella. Government isn’t normally thought of as good at business or efficient. But, these are large institutions with a multiple bottom-line approach. In the U.S., you may have heard that the postal service is in trouble. As is Amtrak, the train company – both of which are ‘government’, even if they don’t fall directly under the federal bureaucracy.
I support government providing services, as well as the importance of union labor. So I want to be a believer and a consumer of these entities. And, yet, these institutions are often complained about. Why is this? Please help me with your balanced and thoughtful input as to why this is and what to do to make them successful social enterprises.
Take USPS, the United States Postal Service: It has a brand. It sponsored bike teams, before drug-taking. It supports a huge bricks-and-mortar presence (does it own or rent those properties is a question). It runs an incredible operations to get letters everywhere six days a week. It is ubiquitous. Then there’s Amtrak. It has a virtual monopoly, at least on long-haul service. It has a long history of service. Amtrak trains are well-known in the U.S but its tracks, funded by the government, are privately owned – Amtrak has to lease them. The car is king in the U.S. But does it have to be faster?
In evaluating these government services and their limitations, here are 5 business and social enterprise learnings to keep in mind:
1. Adapt to the competition
Amtrak has chosen to be an alternative to air travel. At least, that’s how it’s priced. And, yet, it is rarely faster or better. It’s pricing is supply driven. It offers the Acela (at least on the East Coast). I recently looked at travel between NY and Boston. Air travel $150 one way – 1 hour (in theory), closer to 3.5 hours door to door. Train started at $119 but by the time I was going to purchase it went up to $189 – for four hours. Bus was $25 for 4.5 hours. Bus won.
–>Make sure you know what the competition is doing and check periodically on your customers’ experience with alternatives. In fact, buy from the competition yourself, if you can.
2. Value customer service
I mailed a box over the summer with USPS. I had a tracking number. Yet, it still got lost – even though they could tell me where it was. OK, that happens. But, my process to try to find it and register a claim was epic, surreal and Kafka-esque. It involved a postal clerk having no idea what to say to me, a mystical form to fill out which the postmaster had to fax over since they don’t email. There was no phone number, no human being, no contact information for the dead letter center – “A big warehouse in Atlanta where they catalogue everything”. In short, there is no accountability and no human system to whom to address this complaint.
–>Value customer service, listen, and respond. Have accountability.
3. Practice good financial management
USPS is actuarially bankrupt; the financial obligation to fund its pensions for retired workers exceeds its projected potential income. From a financial standpoint, it can’t balance its own budget. There are some reasonable explanations for this: workers live longer, revenue has decreased. A more conservative handling of the financials and labor contracts that reflect revenue would help.
–> Make sure you have good projections. Compare financials to actual performance and re-adjust frequently when necessary. Conduct stress tests of projections to identify potential risk.
4. Monitor cost increases
The price for Amtrak train travel seems to keep going up and up. Rate increases appear to be well above the cost of inflation. For today’s manager, this is a choice to do what is needed to make the organization viable. So, it may be historically bad management that didn’t realistically address commerce realities and the evolution of the marketplace.
–> Manage costs and revenue. Track performance and make changes in a timely fashion that respond to market needs. Set goals, and adjust regularly.
5. Anticipate the changing marketplace
The USPS’s primary moneymaker was bulk or direct mail. With email and the internet, this has decreased a great deal. First class mail and regular letters are also in decline. A social enterprise can’t continue to have the same fixed costs with reduced income. USPS is a high fixed-cost business with labor and bricks and mortar. A business or social enterprise needs to place itself in the marketplace, with a look to the future trends. New products and services innovate to build future revenues.
–> Invest in R&D or product development. Have a next thing and work towards building capacity for that.
There are undoubtedly more issues today that these social enterprises face. Their work isn’t easy. I support them; let’s see how we can make them better. What else can we learn from them that can help our own efforts? Tell me what you’ve learned from government revenue generating programs. And, extra points for any ideas on how to improve them! Thanks and best of the New Year.
Drew Tulchin is Managing Partner of UPspring (www.upspringassociates.com) – formerly Social Enterprise Associates – a network of consultants working to leverage the power of the marketplace for good. This registered B Corporation works with entrepreneurs and their organizations to put ideas into action, raise capital, and measure results to advance the ‘triple bottom line’. Reach him at firstname.lastname@example.org. Tweet at GoUpSpring! #social enterprise