CDB staff writer Stephanie Wang talks to Ruth Shapiro about her book on social entrepreneurship. Ruth was in Beijing to mark the release of the Chinese version of the book and Stephanie met her at the end of March, the day after she gave a talk at Beijing Normal University.
Stephanie Wang: Compared to more traditional types of NGOs in China, what do you think are the distinct characteristics of social enterprises?
Ruth Shapiro: Well, as I said yesterday, it’s really that social enterprise and social entrepreneurship is not the same thing. So I am not necessarily advocating one vs. the other. What I am saying is that whether you have a non-profit or you have a social enterprise, you need to incorporate certain business practices. You need to have good management, you need to have good finances, good accounting, good marketing, good human resources, all of these things are business things. These are classes you would take if you were getting an MBA. And in a social enterprise, yes, you need to ‘do good’ and you also need to be able to make money. In a non-profit you may be relying on some grants. In a social enterprise, you need to make enough money to pay for things because you’re not getting grants but you don’t have to be making a big profit. But non-profits are fine too, but they need to still use business skills and business tools in order to get better at what they do and to be professional about what they do, and to be credible with what they do. I’m just advocating being a good manager, a good professional, and not assuming that if you’re doing non-profit work, that somehow you don’t have to be as accountable and as professional as someone who is working in a business.
SW: That really says something to the Chinese NGOs that are operating right now. So I see that you’re advocating this model of business thinking and also marketing strategies for NGOs, right?
RS: Well, all business tools. Really when you think about it, should they be better at marketing? Sure, it helps with fundraising. Should they have great accounting systems? Yes, they need to explain where the money is coming from and where it’s going. Should they have good management systems? Sure, that means they’re more efficient, more effective, the employees are happier, they have better results. So all of these things should be true. The difficulty is that many people who have great hearts and really want to help people may not have these skills. So I think that the challenge here in China is helping those people who want to work in the social delivery space, whether it’s in a social enterprise or non-profit, to get these skills. And also to get some people who say, “I don’t want to work in an investment bank anymore,” or “I don’t want to be in management consulting anymore,” “I want to start doing this kind of social good.” So we need more people who have both sets of skills, all these skills, plus their humanity.
SW: So, can you tell me what you think are the challenges that need to be addressed in the development of social enterprises globally?
RS: Are we talking only social enterprises or social entrepreneurs?
SW: Both, if you like.
RS: I think that there’s a lot of innovation going on all over the world in this space and that’s great. And I think that we need to create an enabling environment whereby people feel like it’s OK to take risks, it’s OK to try something new. Even if they might fail. And in many countries, failure is terrible! You cannot recover. But an entrepreneur, whether he or she is creating a social enterprise, or a non-profit, has to take some risks. So globally I think we need to create environments that accept failure. That’s one.
Two is those countries that have clear laws that help people to understand the value of philanthropy, the value of non-profits, that essentially allow people to understand that the government is supportive of these kinds of activities, that’s good. And I can tell you that across Asia, there is a great variation in the type of laws that countries have in this space. It’s useful to have clear laws so people can understand and adapt to those laws. And I think in China, there is a lot of work being done in this regard.
SW: So the Charity Law is now being discussed a lot. Do you think it will help?
RS: Of course. I think it will help.
SW: Can you give some examples of Asian countries that have this type of law already?
RS: In Singapore when there was a clear charity law put into place, including the creation of tax subsidies for people who gave, the amount of philanthropy went up. And I think it went up for two reasons. One, because people got a tax benefit from giving but also because the government was signalling, “we want you to get engaged in this way. We support this kind of activity.” And that’s important too because you don’t want to do something that you think might get you in trouble. So the government support, both financial support but more spiritual support, is helpful.
SW: So it’s about the way of cooperating with the government and if they can accept these requests.
RS: Yeah and I think that really best practice is working with government in such a way that you don’t just become a government contractor. Because the government now in China is trying to help a lot of non-profits and they do that in some ways by making contracts available to them, funding available to them. And then some non-profits, all they do is spend their time then fulfilling those government contracts and they lose sight of their goals. It’s called “mission drift.” So a really successful non-profit is one that can stay true to its mission but also work cooperatively with government and in the book I think Lifeline Express kind of exemplifies that. That ability to do both of those things.
SW: So you mentioned about the five entrepreneurs in your book. So can you tell me the greatest impression that you have about them as social entrepreneurs in China?
RS: Yeah. Well all five of them have been doing this work for quite a long time. And as I said in my talk yesterday, the terrain here has changed dramatically in the last seven or eight years. So when I look at these people who have been doing work from before, I’m admire their perseverance and their willingness to keep going, their tenacity, their perseverance, their strength. Because in the past it was much harder and I think the government is becoming much more open to working collaboratively when in the past they weren’t. So I think that now, if you’re entering into the field now, you would experience a very different set of circumstances than you would have ten or fifteen years ago. So the people in my book are kind of pioneers.
SW: So your greatest impression is that they are pioneering?
RS: Yes, also I think they’re very admirable people. But I think the greatest impression from doing this work is that there’s a lot of stories now out in the world, negative stories about China. Chinese tourism, the relationship with other countries, and there’s also a lot of stories about big money philanthropists from China. There are not as many stories about people who are just essentially on the front line, trying to do an education or a healthcare or an environmental intervention, or innovation. And I think the biggest reward for me in doing this work is to meet some of those people. Because China’s humanity and the goodness of the Chinese people has come out. And it’s very important.
SW: So I think it’s important that your book documents these people’s stories. You include their stories in your book.
RS: In fact that was one of the requirements that I made with Cheers [a publishing company]. Because Cheers wanted to publish The Real Problem Solvers, which was published by Stanford University Press at the end of 2012 but I said that if we’re going to publish in China, we have to add in these stories about China.
SW: Oh, so there is not a section on Chinese entrepreneurship in the Stanford Press book. Oh I see, that is interesting…
RS: Because I thought it’s much more interesting for people to read here if you’re reading about what’s happening here and I also thought, why should we think that there’s just these kinds of people elsewhere? Of course there’s many great examples. My biggest challenge was just limiting to five.
SW: Because the five entrepreneurs and there are also social enterprises, also there are a lot of social enterprises in China. So how did you figure out to include just these five?
RS: I wanted to look for people who had different experiences, who had been around for a while, could see the changes, who were inspirational, their stories and the way that they talked were inspirational. And who had some kind of really important lesson to share. So that still would be thousands of people but how long can it be? And also I don’t have many lifetimes to spend doing it.
SW: The examples given in the book, the international ones, are a bit different from the Chinese ones.
RS: Well, it depends. There are four social entrepreneurs in the English section. Kiva is a non-profit organisation that does microfinance but it’s a non-profit and in it, that author talks about why it’s important to be a non-profit. Conchy Bretos, who is working with helping the poor elderly stay in their homes, that’s a social enterprise. The woman who works with the church, Louise Burnham Packard, that’s a non-profit. And then what’s the fourth one? Oh, the bank, ShoreBank, is a social enterprise, so it’s two and two.
In the case of the five Chinese, they’re almost all non-profits except that Lu Jiao also has an incubator for social enterprises. But I think of them all as social entrepreneurs because they’re all utilising business thinking and business skills to do their work. Zhuang Ailing and Lu Jiao, they teach these things, that’s what they do, they try and build up the capacity and professionalise the sector. Michael Chen at Handa has very sophisticated evaluations and analyses about his work, his books are very clean and Nelly and Ma Jun are also very clear where their money’s coming from, they’re transparent, they use business. Ma Jun uses really sophisticated strategic marketing to get his message across. Nelly worked at Price Waterhouse, so her books are world-class. So they’re using business in ways that I think could be helpful and constructive to others in China.
SW: So I see there’s a blurring of lines, what is social enterprise, non-profit. Since they utilise such business-like thinking.
RS: Well yes, but social enterprise is essentially relying on the money that it makes but doing its business to pay for itself. A non-profit also usually gets grants. But it should have a diversified set of funding streams.
SW: So another question for you is that some social entrepreneurs used to be businesspeople and in recent years more and more Chinese entrepreneurs are starting to get involved with social issues. So what do you think are the necessary qualities if one wants to become a good social entrepreneur and do you have any expectation to the Chinese entrepreneurs?
RS: Well I think the most important characteristic is to care about people and care about the world. That should be the biggest driver, right? But beyond that, I think it’s really great that businesspeople want to get into this space, because they bring with them a lot of the skills that we’re talking about and when they sit on boards or when they’re actually working with organisations themselves, they help bring the calibre and the capacity of the people they’re working with and that’s very helpful because I think that there is a lack of trust in China for non-profit organisations and philanthropy and we need to build back the trust and how do you do that? You do it by being transparent. You do it by being accountable. You do it by having clear laws so that people know what kind of organisations you are. And I think that social media, as I said yesterday, can play a really important role in increasing trust. So as trust increases, it’s better for the society as a whole.
SW: And another question is that from a legal and institutional perspective, what are the motivation mechanisms for social enterprises? For example in America. And what can China learn from that source of motivation.
RS: Well I think that first social enterprises, they’re essentially saying “we want to operate this organisation as a business.” It’s very difficult to rely on grants because it means that you’re constantly having to beg for your supper, you’re constantly having to hope that this foundation is going to not change their minds and give you another year of funding. So it’s very attractive to run something that if you do your job and you do deliver good product, you’re going to continue to be able to pay the bills. That’s an attractive value proposition. So I can understand why people want to do that. And I think that the danger for social enterprises is that it’s hard to keep finding that balance between doing good and doing well, right? And sometimes there are stories about people getting carried away. And so I think that once again, having a good regulatory environment is helpful. In the United States now, there is a separate listing for B-Corporations or Benefit Corporations that create some parameters about how to act and when you list your social enterprise or your B-Corporation on that exchange, you’re agreeing to certain priorities and certain ways of acting. And that’s very helpful. So far there have not been other examples of those kinds of exchanges created in the world, but it’s only a matter of time.
SW: And how do you suggest society nurtures an environment that is good for the development of social enterprises in China? Because for non-profits it’s also very difficult and for social enterprises people will think, “oh, you are making money and you are suggesting you’re doing good.”
RS: Well first of all, once again I’m advocating that whether you’re non-profit or whether you are a social enterprise you think more businesslike, because it’s a way of engendering more impact and more trust. I think that there are always people who are unscrupulous, who are just out for themselves. And whether they’re running a non-profit or a social enterprise, or a for-profit company, there are those people. And so we need systems in place to check against them because for every Guo Meimei, there are ten thousand people in China doing good work. But she did some serious harm, and so we need some systems to discourage that kind of behaviour and I think the Chinese government is putting into place those systems and I think that social media helps guard against that kind of behaviour. There’s a watchdog function that’s useful. But I also think that philanthropists, when they give money out, they need to really be thoughtful about what are the goals that they want to have? What kind of problem are they trying to solve? And it’s not enough just to give money away. You need to be thoughtful about where it’s going, who’s getting it, what outcomes you’re hoping for. So it’s much more of a process than writing a cheque and I think that those people who advise philanthropists need to be able to understand both the supply and the demand, they need to be able to guide someone, not only to figure out what she wants to give on, but what are the best processes and what are the best partners to get that done? And that’s only now really beginning in China.
SW: A lot of citizens, or netizens, they are also paying close attention to this, since the Guo Meimei issue and now a lot of people are starting to pay attention to where the money comes from.
RS: Yes, I think that right now in China, there is a culture of fairness that is pervasive. People want fairness.. They want fairness from their government officials and they want fairness from their companies and they want fairness from their fellow citizens and non-profit organisations too. So they’re looking to see what kind of watch you wear, they’re looking to see what kind of car you drive and they’re looking to find those people, regardless of where they are in the society, who are exploiting the system, and that’s a good thing.
SW: OK another question is for social enterprises. Since China and America differ greatly in terms of history of philanthropy, institutional environment, and public awareness, what are the areas that need to be improved in China to promote the development of social enterprises as you’ve just mentioned a few, the laws the regulatory environment, what else?
RS: Ok, well first of all, I am a real believer that not everything from the United States necessarily should be considered ‘best in class’ and effective in China. It may be ‘best in class’ in the United States but that doesn’t mean that it’s the best mechanism or strategy here. So I think what needs to happen here is that there needs to be a lot more awareness about what works here so that you can pick those strategies that are most effective here and innovate the ones here that maybe get used in other places or maybe not. So I think that it’s really important to think very seriously about what goals an organisation or individual wants and what are the best strategies to get there. And not focus on where they’re coming from necessarily or who’s telling them to you, but to use one’s experience to think about what’s going to work in this circumstance. It’s much more a case by case mindset. Not to say that you shouldn’t learn from others, you should. But you have to be thoughtful about what you want to try yourself.
SW: So to think in context maybe? Best in China.
RS: Right. It’s like saying, “I want to study how to cook Chinese food, Japanese food, Mexican food, French food” but it doesn’t necessarily mean that one of them is the best. And for me, I’m probably going to be best at one kind or another or I’m going to enjoy eating one kind or another but that doesn’t mean you shouldn’t try them all first. So I just think that it’s important to be open-minded and experiment.
SW: You are the Executive Director of CAPS, a Hong Kong based non-profit organisation. Can you say a little about your work there?
RS: So CAPS is a new organisation, we only incorporated about a year ago. It is called the Center for Asian Philanthropy and Society and its goal is to improve the transparency, accountability and impact of both philanthropy and social delivery organisations throughout Asia. Right now we are working in ten economies, we do partner with a number of non-profit organisations, corporate foundations, GONGOs (Government Organised Non-Governmental Organisations) but we also partner with philanthropists. So all of our donors come from throughout Asia. Thus far it has been a policy not to accept any funding from Western sources. So all the money for CAPS comes from Asian sources, either companies or individuals. And we’re going to continue that for at least the near term future because it’s the belief of our donors and our board that Asia is rich enough and sophisticated enough to be funding these kind of efforts without relying on Western support at this time. In the future we may get some matching money, but the impetus, the motivation and most of the funding will always come from this region. The only Western aspect of CAPS is me!
SW: You are the only person working there from a Western country?
RS: Well we have an editorial director on contract. But all of our partners are Asia-based, all of the non-profits we are working with are Asia-based and all of our donors are Asia-based.
SW: I see. So when you talk about transparency, what kind of programmes do you operate?
RS: Well right now we’re doing a very major study, We’re doing 30 case studies of really good non-profits and social enterprises throughout Asia. We are trying to understand what are the characteristics and strategies of successful social delivery organisations. Are there trends across the region that we can see, and if so what are they? And each case study will be available for free on our website and the first five will go up in the next couple of weeks, but eventually all 30 will be available for free. And then we are doing an analysis across all of them, so when that comes out, I want to come back and tell you our findings.
SW: Yes, we would love to hear that.
RS: We have some really interesting findings about trends across the region and strategies that are used in Asia that make organisations more effective and they’re important for philanthropists to understand and they’re important for the non-profits and the social enterprises to understand. So those findings I think, I hope, are going to be really useful. And it’s all empirically based. It’s based on all of our work in doing these case studies.
SW: So you talk about Asian countries, do you think there are commonalities or differences, which is bigger, commonalities or differences?
RS: Well there are both of course. There are very important differences but I think that there are some very clear commonalities. One of course is that throughout Asia, relationships are really important and I think that relationships are important in the United States and Europe too of course, but I think they’re more important here. And we will explain how that works. And I think that the way that philanthropists and social delivery organisations cooperate with government is different in Asia than in the West. And the motivations may be different between India and China, but in both countries there tends to be this partnership. Not always, but often. And so our findings will share when it comes to partnering with government, what is best practice? What’s the best way to do it? And what are some lessons learned about how to effectively do that? Because that is across Asia that’s true. Across Asia a lot of this was pretty new. So the Philippines and India have the longest history in this regard but everybody else is kind of catching up and so a lot of this is relatively new. Philanthropy is relatively new across Asia because there’s a lot of money here that wasn’t here before. So I think that while of course there’s a difference between Korea and Indonesia, there are some really important trends and similarities that are useful to understand.
SW: So what do you think caused these kinds of trends and improvement of developments across Asia?
RS: Well, the fact that Asia has money now is huge, right? You can’t think about these things if you’re just worried about what you’re going to have for dinner? If you’re worried about what you’re going to eat. So I think we are now in Asia in a really pretty wonderful place, that there’s the financial resources to be able to think about volunteering, about helping, beyond your immediate needs. So that’s true all over and that was not true 50 years ago.