Fabindia, a fabric, apparel, handicraft retail outfit, began as an experiment with community-owned companies nine years ago in an attempt to include artisans in the wealth creation process. Today, Artisans Micro Finance, a venture fund and a fully-owned subsidiary of Fabindia, facilitates the setting up of these companies—the pattern is that the fund owns 49%, the artisans, 26%, private investors, 15%, and employees, 10%. Fabindia is the principal buyer of the products, which are retailed in cities. As the valuation of the company grows, the value of artisans’ shares goes up and they earn dividends when the company is in a position to declare them.

 

Eventually, the company will try and offer loans to the artisans, arranged through banks. So far, 18 community-owned companies have been set up with 6,000 artisan shareholders. Fabindia hopes to set up 100 such companies by dividing its supplier base into clusters.

 

The increase in company participation in the social sector has also been reflected in the work being done by corporate foundations which are becoming legitimate players in the social space by supporting non-profit initiatives or turning funders of social initiatives. The Bill and Melinda Gates Foundation, the Dell Foundation and the Infosys Foundation, to name a few, are funding and creating social initiatives aimed at having a long-term impact. Their involvement has created a separate area of market-funded social change that is driven by professionalism but supported by the need to give back to society.

 

What emerges from these experiences is an innovative chain of scale, professional management and funding support that enables sustainability— resulting in the emergence of development-oriented “enterprises”, complete with corporate-style teams working with the founder. The inflow of capital from international funds has created an environment not dissimilar from the corporate sector, with Indian and international organizations working together in an environment driven by increased monitoring as well as mentorship. This has resulted in stronger internal processes—IT, HR and particularly finance, reflected in the growing demand for CFOs and even CEOs. It will also help non-profits if they work together more effectively to align efforts, share learning and best practices and consolidate their power.

 

While there has been progress in creating sustainable non-profits, human resource challenges remain, especially with the focus on accountability and transparency. As non-profits scale up, fund-raising becomes global and operations include professional teams, a common need that has emerged is leadership development.

 

The need of the hour is to create a strong culture of inclusive leadership through the development of staff throughout the organization. This will result in engaged, satisfied and committed workers, which is critical to maintain continuity and motivation levels. And there is a positive transition taking place where enlightened founders are

recognizing the need for another kind of leadership and are bringing in an outsider “CEO” to drive operations and growth.

 

This is particularly true in the rapidly expanding microfinance sector, where entire management teams have come from the corporate world. At the operational level, some institutions hire recent graduates and provide them with year-long training with the expectation that they will stay on. Another approach is recruiting talent from rural communities and providing training to enable them to work in the field. While commitment to the cause is likely to be stronger in this case, managerial skills are often the gap here.

 

In recent times, there has been a growth in the number of management graduates entering the social sector, either to set up their own ventures or to join existing institutions. While this is commendable, awareness about the distinctive needs of non-profits is essential. Even though the same skills are utilized on the job, the context of the work is very different and this is a very important difference. The opportunities and challenges in the field of social entrepreneurship require not only the creative combination and adaptation of social and commercial approaches, but also the development of new conceptual frameworks and strategies tailored specifically to social value creation. This unique skill set lends itself to motivation and hence is essential for successful leadership in the social sector.

 

Successful non-profits are not only innovative and adaptive but they continually learn and reflect on how much impact they are having and modify their programmes to continue to increase their impact over time. At the same time, successful leaders in the sector are those that provide inclusion, while sharing knowledge and information—recognizing that the prime objective is for the maximum number to benefit from their efforts.