Module 4.2 - Performance management The SENSES project co-funded by the European Union funds (ERDF and IPA) For more information check the official website: http://www.interreg-danube.eu/senses

1. Module 4.2.
PERFORMANCE MANAGEMENT IN
SOCIAL ENTERPRISES
NESsT
2018
Project co-funded by the European
Union funds (ERDF and IPA)

2. 1. Impact and Performance
Management
Project co-funded by the European
Union funds (ERDF and IPA)

3. Why is it important?
• To understand the need to measure the impact and the performance of a
social enterprise
• To become informed with regard to the available methodologies and
approaches
• To foster a measurement culture among social entrepreneurs

4. Measurement Goals
• To capture and demonstrate impact and performance:
– rigorous measurement is needed to manage the multiple bottom lines of the
social enterprise (social, environmental, financial)
Source: UNICEF, adapted from Patton 1997:220

5. Measurement challenges
• Understand exactly what change you want to make.
• Long-term commitment – change does not happen over night.
• Need to build a measurement culture and habit within the organisations.
• Use the appropriate tools & processes to measure and manage the social
impact and the performance metrics.
• Limited resources – human and financial.
• Attribution – what would have happened anyway? How much did others
contribute to the same result?
• Tracking progress: decide on key indicators. collect data systemically. gather
evidence.

6. Social impact
• The ultimate change the social enterprises aim for, often intangible on the
short or medium run:
– Improved quality of life for a marginalized group of persons (social problem:
exclusion)
– Changed societal attitudes towards a certain issue or group (social problem:
discrimination)
– Demonstrated new models that are more inclusive of marginalized people
(social problem: lack of access to employment/health or social
services/education, etc)
– Policy change that shifts an entire paradigm or legal framework to provide
chances of inclusion for marginalized people (social problem: systematic
inclusion)
– Positive environmental effects and pollution reduction (social problem: climate
change)

7. Business performance
• Sustainable business models are needed to achieve social impact:
– Need to have the necessary financial and human resources available to lead to social
change => business performance needs to be monitored against established targets.
– Why using a monitoring tool? To let you:
• Set meaningful goals and targets
• Organize them into a comprehensive framework
• Monitor results and track progress
• Make informed decisions and manage the SE
• Identify problems early on
• Stay focused
• Disseminate documented results.

8. Social impact and
Business performance
• When developing a measurement practice, have in mind:
– Your objectives – what will be the use of the tool and data, e.g. management or
reporting to external partners
– Audience – who does the data target, e.g. board of SE or external stakeholders
– Capacity for data collection & interpretation – resources (financial and human) that the
SE has for regularly collecting the data for all indicators
– Time frame: long vs short term
– Validation – what is needed to check the data and interpret the information
– Stakeholders that need to get involved: staff, beneficiaries, other partners (University,
volunteers, experts etc)
– Benchmarking – with whom would you compare results? (is other data available?
Statistics? Control groups?)

9. Goals and indicators
• Establish annual goals (broken down from the long term projections in your
business plan) and monitor results on a timely basis, depending on indicator
(daily, weekly, monthly, quarterly).
• Social impact
– Quantitative
– Qualitative
• Environmental impact
– Value chain
• Business performance
– Financial results: turnover, profit / loss, break even, on track with projections

10. Goals and indicators
• Know, for each business relevant area, the following:
– Goals  strategic objective (what you want to happen)
– Indicators  the way to measure your progress
• relevant, possible to track regularly, assess if quantitative (figures) vs
qualitative (scales, YES/NO). SMART
– Baseline  snapshot of the beginning stage, provides basis for
comparison
– Targets  concrete achievements to be reached - motivating, but
realistic
– Updates regular measurement of indicators - actual achievements.

11. Goals and indicators
• The general goal: increase sales revenue
• Could be measured by the indicators:
– Sales revenue per month
– Sales revenue per product
– Sales revenue per customer
– Sales revenue per distribution channel / business location
– Number of customers
• The specific target: increase sales revenue from chairs by 25% by end of the
year.

12. Why is a tool / system needed?
• Identify risks early and mitigate them
• Keep realistic objectives
• Contributes to good strategic decision making
• Highlights gaps and support needs
• Allows to share results and promote the social enterprise.

13. Goals of the process for NESsT
• NESsT invests in social enterprises that:
• Provide decent jobs and income to marginalized persons
• Do not harm the environment
• Reach break even or are the path to financial sustainability
• NESsT is driven by impact and performance => the need to have a tool across its portfolio to measure impact and performance.
• NESsT created the Performance Management Tool – shared with its investees. Online survey, connected to the CRM system
(Salesforce).
• Goal: to aggregate the impact results, to understand their financial performance and their contribution to the sector. To allow the
comparison results vs plans.

14. NESsT Measurement
Quantitative Qualitative
• Number of jobs created for marginalized groups
• Number of people placed in jobs
• Number of people generating income
• Number of people trained for jobs; career
development
• Number of people accessing affordable
technology
• Number of people directly affected by the SE
• Number of people indirectly affected by the SE
• Increase in income
• Income level (benchmarked against minimum
wage and median wage in country/type of job)
• Job longevity (hold a contract, length of time
already in that job, expectation of the
beneficiary)
• Improvement in environmental impact
product/service cycle (value chain analysis:
procurement, operations, distribution, reverse
logistics)*
• *Simple survey. Generates a score per stage and overall. Each entrepreneur will
develop a plan to improve scores
+

15. NESsT Measurement
Field Building Financial performance
• Number of blogs, articles,
publications
• Number of events spoken at
• Annual income
• Annual profit / loss
• Total investment raised
• Breaking even
• Meeting financial projections
+

16. Further reading
• Numerous systems and standards
– IRIS
– Social Reporting Standard
– Social evaluator
– SROI
– BCorp
• Vast literature: EVPA, Social Impact Investing, Social Value International,
SSRI,
• Chose one path or create your system – make sure you can benchmark
externaly at least key indicators – and use it consistently!

17. 2. Talent Tool and Green Tool
Project co-funded by the European
Union funds (ERDF and IPA)

18. Goal of the Talent Tool
1. Assess the entrepreneurial capacity relative to the stage of
enterprise development
– Then determine their talent profile and capacity needs
2. Assist entrepreneurs, and the intermediaries that support them, to
design and implement a talent building plan to best respond to the
enterprise needs:
– Strengthening own leadership skills
– Building the leadership team to bring in missing skills

19. 45%
of late-stage entrepreneurs find accessing
talent to be extremely difficult.

20. the greatest business plans need
the right competencies to be
implemented successfully.

21. What the Ecosystem is Saying
“There’s a growing appetite for measurement in the sector”
“It’s difficult for entrepreneurs to benchmark themselves – are they on track?”
“After entrepreneurs are rejected from an accelerator or incubator, we have limited
bandwidth to advise SGBs on areas of improvement. This tool provides entrepreneurs with
a roadmap that can help them to prepare and apply again.”

22. Framework
Self-Discovery Stage
- Assess Core
Competencies
Self-Discovery Stage
- Establish a Baseline
Self-Discovery Stage-
A Conversation on
Talent
Needs/Coaching
Implementation
Stage- Filling the
Talent Gaps
Reassess Talent on
an Ongoing Basis
• Designed to be a dynamic process and
should be revisited at each stage of
enterprise development to ensure that the
enterprise´s talent continues to align with its
goals.

23. 23
What do investors look for?
Unique Value Proposition, Exceptional Team, Unbounded Market Opportunity, Social Impact
Strategic & Planning Functional & Operational Entrepreneurial Social Capital & Market
Knowledge
• Business model
• Ability to chart a path
forward
• Cost/revenue structure
• Standard processes
• Customer and
beneficiary feedback
• Recruitment
• Measurement
• Judgement
• Credibility
• Networking
• Partners
• Knowledge

24. RESULTS & IMPACT
Social Challenge: Small-scale fishing communities are among the 54
percent of people living below the poverty line in Peru, even though the
sector is the country's second highest generator of foreign currency.
Social Enterprise: Sustainable Fishery Trade is the first
social enterprise dedicated to just and sustainable
trade for artisanal fisheries in Peru. The company
sources directly from small fishing communities
and sells to restaurants and retail shops. The
enterprise also furthers conservation practices
and minimizes overfishing of marine species by
training fishing communities in sustainable
practices.
NESsT Investment:
• Leveraged over USD $200,000 in funding
• Provide business mentoring in areas such as governance, logistics,
finance, impact measurement, and operational processes
• Connect management team to pro-bono consulting
• Supporting in scaling to Chile by funding feasibility study and pilot
Sustainable Fishery Trade
LIMA, PERÚ | JOINED NESsT PORTFOLIO: 2017
30-50%
higher
income
received by
fishers
90
fishers
trained in
sustainable
fishery &
aquaculture
techniques
90,000
lives
improved in
Sustainable
Fishery
Trade
communities

25. Key Learnings – Sustainable Fishery Trade
Discoveries NESsT Support & Workplan
1. Strategic & Planning: Delegate
operational tasks so that the
management team can focus on
strategic areas to grow the business.
2. Functional & Operational: Create a
system to collect feedback from
clients and beneficiaries
3. Investment readiness: Fundraising
is a strength of the team.
Nevertheless, they needed to learn
how to pitch to investors.
• Supporting the enterprise with
scaling to new geography (i.e.
conducting feasibility study and
funding pilot)
• Supporting with hiring and
recruitment
• Refining financial projections and
supporting with leveraging new
funding
• Ongoing business mentoring on all
competencies based on priorities

26. Green Tool
• Separate set of questions for enterprises with services and those with
products
• Survey is accessible to non-NESsT entrepreneurs:
https://www.nesst.org/i2e-green-tool/

27. 3. Leadership – Good Governance
Project co-funded by the European
Union funds (ERDF and IPA)

28. A tool ensuring the success of the SE
A way of thinking and living as a business
A way to show accountability in front of shareholders and society in
general
- “The company is “bigger” than its founders and its management teams /
staff members”.
Good Governance – what is it?

29. Social enterprises address critical social problems through scalable, self-sustaining and innovative business models.
The Challenge of a Social Enterprise
Beatriz Boza / Renzo Valera, EY – apud: Schwab Foundation for Social Entrepreneurship,
“The Governance of Social Enterprises”
Must ensure the balance between:
Financial
responsibilities
Social impact
Stakeholders’
coordination
A carefully selected,
Well-structured and
Well-intended
governance structure helps the
achievement of the social
enterprise’s objectives.

30. How do we see an enterprise?
Business
world
CEO
Management
CFO COO Managers
Leadership Team
Middle Managers
Financial Logistics
Quality
Human
Resources
Internal
Controls
Staff
Beatriz Boza / Renzo Valera, EY

31. How do we see an enterprise?
General Assembly (founders, owners)/ Stakeholders /
Members (depending on legal structure)*
Board
President
Members (1/3
non-owners)
Secretariat
Specialized comittees
Audit
Fundraising
Others
*they propose a governance structure and invite board members
Beatriz Boza / Renzo Valera, EY
CEO
Management
CFO
COO Managers
Leadership Team
Middle Managers
Financial Logistics
Quality
Human
Resources
Internal
Controls
Staff

32. What is a stakeholder looking for?
Social
impact
Participation /
Equal
treatment
Transparency
/ Access to
information
Accountability
Sustainability
/ strong
business
strategy
Beatriz Boza / Renzo Valera, EY
As per La Voz del Mercado, there is a high correlation (R2 76%) between the development of these five
pillars and the quality of the governance structure of an enterprise.
A good
governance
structure

33. - Formal and informal practices regulating the relations between owners and administrators of a
business (CAF)
- Way to grow in a sustainable way and to create and share value (IFC)
- Key element to increase the economic efficiency and growth of a company, while boosting the
trust of investors (OECD)
- Systems and processes ensuring the general direction, effectiveness and supervision &
responsibility of an organisation.
- Governance mechanisms include board of directors, monitoring systems, reporting mechanisms and
codes of conduct (The World Bank).
Good Governance – what is it?

34. • A recognized good business practice:
• Well managed organizations – with carefully selected and managed board members -
generate better financial and social outcomes
• Responsible for:
• Defining strategies and overseeing their implementation
• Hiring the CEO & key talent
• Reviewing financials
• Promote the success of the SE, by directing and supervising its affairs
• Key to access investment capital
• Formalize the business (as opposed to informal, ad-hoc management)
• Reinforce legal provisions
• A way for the owners to:
• share responsibility
• balance decision making processes
• manage strategic risks
• Increase reputation & visibility
How does a board help strengthen your governance?

35. Evolve as the SE evolves
No one size fits all!
The roles of the board
Advisory
(support)
ControlStrategic
development
Few
investors /
stakeholders
Co-owners
and investors/
stakeholders /
members
Founder
Beatriz Boza / Renzo Valera, EY

36. Boards contribute to:
 accountability
 strategical thinking
 professionalism
 sustainability
 responsibility
 efficiency
 predictability
 ethics.
The roles of the board

37.  Understand the legal requirements related to boards.
 Define the role of the board for your social enterprise
 Assess your current board:
Structure
Individual board members and their skills
Level of involvement
Quality of their involvement
 Define your current board gaps - what is missing from your own board?
 Agree on the ideal size - agile and able to make decisions (5-9 members)
 Agree on the ideal composition - ensure diversity (the shareholders are by default board
members; ideally – 1/3 of them are independent / non-owners)
 List immediate next steps in order to strengthen your board
Good Governance

38. Some common questions ...
 Whom to call?
 How to identify the right persons?
 Do I have to know well the persons before?
 When to call third parties?
 How to call upon them?
 For how long to appoint them?
 Once they are on board, would they fit with
each other / the existing members?
The challenges of creating a board
Beatriz Boza / Renzo Valera, EY
• Criteria for selection:
• Experience
• Personality
• 3 C’s for board members (Social
Enterprise Association, Singapore):
• Character
• Commitment
• Competency

39. Criteria:
 Match between the sector / market experience and current gaps
 “Fit” with other board members, owners and management (take into account local language barriers):
someone with strong interpersonal behavior skills
 Time availability, based on the needed length of the mandate
 High ethical and moral standards, able to represent the interests of the SEs
 Able to build credibility in the board and trust from the other board members (not saying too much, not
saying too little, but saying enough to impact).
Who should sit on the SE board?

40.  Define what falls under the solidarity, collective responsibility of all the board members and what’s
under individual responsibility of each member. Being a part of a board, implies personal liabilities
(even if not all the time fiduciary). Be clear on what they are.
 Committees –based on the needs of the SE and the expertise of the board’s members.
 Define internal auditing procedures
 Define conflict of interest
 Establish annual work plans, with milestones and board evaluation procedures.
 Clear agenda and outcomes for each meeting.
 Documentation for meetings sent ahead of time indicating what will be discussed and what is
there for background purpose
 Clear processes for calling a meeting and adding new members.
 An induction process for new members.
 Evaluation criteria and formal assessment of the board performance
Good Governance – Board Best Practices