Shared Services: Why is it crucial for social enterprises to adopt new practices?

Like any start up, young social enterprises face the lack of expertise in managing business support functions; limited resources and the inability to attract and retain talent. This inhibits the ability of social enterprises to scale up their operations and impact.

Ashoka partnered with a leading consultancy company to better understand operational challenges faced by social enterprises to explore possible solutions particularly for enterprises in the agriculture sector. Our effort focussed on seven organizations working in the agriculture sector: Covenant Centre for Development (CCD), ekGaon, eKutir, Farms and Farmers, Kaushalya Foundation, Mushroom Development Foundation (MDF), and Sambandh. While all the organizations work in the agriculture sector, each one of them have different business focus areas. For example, Kaushalya Foundation is engaged in sourcing farm produce and direct retail to end customers, eKutir provides inputs and ICT-based advisory services through micro-enterprises, and CCD organizes farmer groups and aggregates agricultural produce for primary processing and sale to large food processors. 

 

Photo courtesy: Indiacsr.in

The varied focus areas and operational challenges of social enterprises make it difficult to formulate a common solution for all agri-social enterprises. However, the team identified few areas such as HR, legal expertise and IT that were common challenges across the organizations. We also identified some areas that require specialized expertise which were not common. For eg. Technical experts were sought by ekGaon and MDF. Therefore, we segregated their different functions/requirements into following three categories:

1. Transaction based functions: Operations, IT, HR and accounting which have a standardized process require less interaction with the end customer.

2. Expertise based functions: Functions requiring specific expertise like legal services, technical experts, market assessment, supply chain, sales and business development were skills-based.

3. Strategy functions: Strategy development, strategic planning and assurance (monitoring) which require business acumen and understanding the market context were grouped in strategy based functions.

For each category of functions, different solutions were evaluated and recommended. 

For transaction-based functions, establishing a centralized and dedicated shared service centre (SSC) would be most appropriate. However, this does require social enterprises to standardize their processes within their own operations and across organizations.  This can be challenging for enterprises who have not yet achieved stable operations and processes. However, once standardized, the processes can be handled more efficiently and at lower cost through a shared service centre.

For the expertise based functions requiring market context such as sales and business development etc., a centralized hub and localized spoke model was proposed by the consultants. In this model, a central hub is aided by on-field execution by respective social enterprises staff. However, it is advised to have a clear segregation of customers to avoid conflict of interest among social enterprises.

For strategy functions a centralized SSC is recommended which will be aided by on-field executives from fellows’ organization for implementation. However, partnership with professional consultancy firms is advisable in order to ensure quality of resources and functions that are critical to organization's performance. It is important to note that while a SSC can provide much needed impetus to the social enterprises and help them in expanding their operations, the success of SSC models depends a lot on the following factors:

1) Clarity on role and responsibilities of SSC
2) Clear work division between SSC and social enterprises
3) Standardization of processes across different organizations, especially for transaction based services
4) Involvement of leaders in providing direction and vision to strategic function such as strategic planning, finding business partners etc.
5) Effective implementation of strategy by social enterprises
6) Timely decision making by involved organization for activity kick-off
7)Constant program review and monitoring by promoters and other stake holders

The consulting company prepared a budget and evaluated the feasibility of setting up such a centre. Its analysis showed that the shared services model works best if at least 20 organizations use its services. To achieve this, non-agri social enterprises can also be included.

By Siddharth Dixit

Siddharth Dixit is an engineer and a Young India fellow. He works with the Rural Innovation and Farming team at Ashoka India.