The UCLA Center for Civil Society—led by Professor Zeke Hasenfeld, and in partnership with Professor Benjamin Gidron, The Israeli Social Enterprise Research Center (ISERC) Beit Berl Academic College (Israel) and Professor Eve Garrow (School of Social Work, University of Michigan)—has launched a project on social enterprises in order to better define this emerging model. 

The global economic crisis is challenging and putting at risk one of the fundamental driving forces in the nonprofit sector, namely corporate philanthropy. The collapse of the system of financial institutions and its derivatives, as well as many philanthropic foundations which were anchored in that system has major implications on the future of the nonprofit sector and its funding sources, not only during this crisis period, but likely for a long time after the crisis will be resolved. The idea that nonprofit organizations will again be able to rely on philanthropy the way they did in the past is unlikely.

The dominant paradigm by which citizen groups and other forms of grass-root activity organize to deal with a community problem and are funded by philanthropy will have to be modified or at least supplemented by other paradigms. These will include greater reliance on self-generated income and new hybrid organizational forms that combine a social mission with commercial entrepreneurship. Actually such organizational forms, known as “social enterprises” already exist and are likely to grow significantly. They vary from regular businesses that donate all their profits to a specific  social cause (e.g., Give Something Back), to organizations that operate commercial enterprises in which the clients are also the employees (e.g., Goodwill industries) to cooperatives that engage in economic activities for the benefit of their members (e.g., housing cooperative). It is expected that social enterprises will expand in the coming years because of the changing economic and political environment.

These different forms of social enterprises are characterized by two sets of intertwining and potentially competing activities–the production of goods and services to generate profits coupled with the provision of social benefits to their clients or members. Balancing between these two sets of activities is a major challenge. Organizations must avoid being overwhelmed by profit maximization that could compromise their social mission; yet, they have to ensure that the social mission does not undermine the viability of their business activities. The fundamental research issue of this project is to identify organizational strategies that enable such social enterprises to balance between these two sets of activities and be able to achieve their mission. We want to identify the environmental and organizational factors that shape the particular organizational forms selected by these organizations, and the ability of such forms to sustain both the business and the social mission of the organizations.

Professors Garrow and Hasenfeld are currently conducting a comparative study of business enterprises known as WISEs (Work Integration Social Enterprises) which combine social services and business enterprises to provide employment experiences to vulnerable clients.