How Rick Aubry changed the world - Lessons in Social Entrepreuneurship by a Stanford Don

Article contributed by:
Baba Seth
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Organisation: Seniors in Society Club
Address: Chiswick Circle London UK

October 19, 2005

Entrepreneurs in the corporate world have a single focus -- higher profits and revenues. And there's almost nothing they won't do to get there. There's another breed of entrepreneurs -- social entrepreneurs -- with an altogether different set of goals.

Their mission is to change the world to make it a better place. But their zeal for change is no less than that of a corporate CEO, and they often use management models to get the best results.

Rick Aubry, who runs Rubicon Programs, a California-based non-profit organisation, is one such entrepreneur. Rubicon provides jobs and living assistance to over 3,000 people a year in the San Francisco Bay Area, all of whom are either homeless, have very low incomes, or are disabled. It has been ranked this year among the top 20 social capitalist organisations in the world by Fast Company and has grown from $980,000 in 1986 to an annual revenue of over $15 million.

Aubry, who is also a faculty member and lecturer at the Stanford Graduate School of Business, and was selected in 2001 as one of the world's leading social entrepreneurs by the World Economic Forum and the Schwab Foundation, spoke with Amit Ranjan Raion social entrepreneurship and what makes Rubicon a success story.

Excerpts:

How are organisations running on social entrepreneurship models different from other non-profit organisations?

The big difference between social entrepreneurship and other non-profit organisations, say, NGOs, is that the former is constantly looking at innovations -- new and better ways to solve the challenges we face in our mission.

Traditional NGOs focus on doing one thing and they continue doing the same thing again and again. The Red Cross will always show up whenever there is a disaster and help feed people. That's a great and important thing, but that's what they do. Social entrepreneurs usually take up a bigger task, say, to move people out of poverty to a decent living, help them become a part of a bigger community.

And to achieve such goals they constantly change their business practices to get the best results. For instance, at one point of time, Rubicon ran clinics; it doesn't anymore because it wasn't solving its business goals, which were essential to meet its mission.

Unlike other non-profit organisations, we are much more focused on the impact -- have we really made a significant difference -- of our services. We are quite ruthless in closing programmes and services if they don't have a long-term impact. Most non-profit organisations continue with what they are doing, bringing in money for what they do, but they don't focus on measuring the impact of their work.

We borrow many of the concepts from the business world. We focus on metrics, on outcomes, on impacts; we borrow the concept of developing a strategy, of figuring out what really are our competitive advantages.

Organisations like yours seem to borrow a lot of concepts from profit-oriented corporate businesses. Do you also have similar revenue models?

Let me take Rubicon's example here to explain this in the context of social entrepreneurship. Rubicon runs two full-fledged successful business -- a landscape business and a bakery business.

So we actually create long-term sustainable jobs for people -- that's the social side of the revenue model. On the financial side, we measure what our costs of goods are to keep our margins in place in such a way that our business is sustainable, which is similar to any other business, profit or non-profit.

But what differentiates us is that we keep our margins much smaller to provide maximum social returns. We measure our success not in terms of profits, but on how many people got jobs, how many people kept those jobs, say, after two years, how many people got a house, how many people stayed in the house two years later.

We measure our success based on the impact of our work and if we have been able to sustain that impact. We don't promise our investors enormous returns but we say that the businesses that we run will be sustainable and fundamentally deliver social returns.

How do you ensure your businesses deliver sufficient returns? Are the products actually able to compete with those from profit-oriented businesses?

In our initial years, we didn't quite focus on income or growth. We started a training organisation so that the disadvantaged could get some job somewhere.

But then 20 years ago, we went through a flip in our thinking that rather than conducting training activities, if we run fundamentally successful businesses, these can then provide sustainable jobs and a sustainable way to raise money. Our landscape business has some 100 full-time workers, all drawing good wages and health and other benefits that the government doesn't provide.

But then again, people didn't really know about landscaping, so we decided to start a bakery and created a retail brand. Now, our bakery -- Rubicon Bakery -- makes high quality, expensive cakes and tortes that are sold in the finest gourmet supermarkets where the wealthiest communities shop.

We positioned our product this way because we knew that if we were try to compete with very large companies that can always make thing more cheaply, we would never win.

We focused on quality and value because, one, we knew that would be a business in which we could succeed, and two, it would transform the way people think about poverty and homelessness. The social message gets into people's mind in a positive way, and makes people think differently about us and social entrepreneurship.

What are your strategies to mobilise resources -- both monetary and human?

Part of it is by continuing to have compelling stories. It is very similar to any sort of business. Our fundamental strategy is to be as transparent an organisation as possible. We are different from those NGOs where you can't tell what happens as result of the donations, and we invest significantly in our valuation system.

I think that's a strategy for helping people in the organisation feel good about their work. They can then see the results and help people within the organisation take better decisions about where to spend time and resources, the programmes that will work and those that don't.

Also, that's a compelling reason to get foundations and governments to give us more money because we can prove that when they give us money, something changes for the better.

What motivates managers to work with organisations like yours?

Managers here have two main objectives: one, the need to make the business viable, and two, to achieve the social mission of the organisation. They just don't have to build a bigger bakery, they have to build a bigger bakery that takes people out of poverty.

But on a practical basis they still have to manage their labour costs. To their credit, most managers who work in this field, choose to embrace these contradictions. What drives the managers is the social mission and the challenge to achieve the goals in a more cost-effective and balanced way.

How different is the functioning and management style in such organisations?

Social services functions that governments usually provide are often very complicated. For instance, in the US, you have one agency dealing with the homeless, another with the jobless and so on. That's too complicated for anyone looking to change his life.

Social entrepreneurship organisations like ours follow the strategy to be a one-stop shop to deal with all such problems -- this makes the affected more ready to change his life. He can stay focused on the work he does and we handle the different problems in an aggregated way.

In the long run this helps us transform more lives than, perhaps, different agencies would. The benefits are two-fold -- one, it's a better way to provide service to a larger number of people, and two, the impact is more sustainable.

Obviously, better results help us attract more funding. In fact, we have about 200 different funding sources. It helps us in that if one goes away, we are not affected.

So social entrepreneurship organisations like ours must learn to master complexities. If they can manage complexities that other organisations and agencies cannot, they can help a lot more people and grow.