INDEV308 Class 6 - HR, Operational and Legal Considerations for Social Enterprise


Published on

Theory: What are the unique HR and operational considerations that social entrepreneurs need to incorporate in their social enterprise?

Practice: What strategies and techniques can social entrepreneurs apply to effectively execute the operational and HR aspects of their social venture?

Published in: Business
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

INDEV308 Class 6 - HR, Operational and Legal Considerations for Social Enterprise

  1. 1. INDEV 308: Introduction to Social Entrepreneurship Class 6: Operational, HR and Legal Considerations Monday, June 13, 2011Instructors:Norm Tasevski ( Harji ( 1
  2. 2. © Norm Tasevski & Karim Harji
  3. 3. © Norm Tasevski & Karim HarjiAgenda•  Greyston Bakery•  HR Considerations•  Operational Considerations•  Legal Considerations•  Guest Speaker – Mary McGrath (Small Change Fund)•  What did we learn?•  Next Week 3
  4. 4. HR Considerations… 4
  5. 5. © Norm Tasevski & Karim HarjiWhere does HR Fit? 5
  6. 6. © Norm Tasevski & Karim HarjiA Caveat… Think of your HR from the perspective of “running a business”, not “running a charity” 6
  7. 7. © Norm Tasevski & Karim HarjiA Second Caveat…Your HR Strategy must align with your business model and align with organizational values 7
  8. 8. What if you were a…Product-based, for-profit Social Business…! “Purpose-built”, non-profit Social Enterprise…!“Fee-for-service” Social Business…! “Virtual” Platform…! 8
  9. 9. © Norm Tasevski & Karim HarjiWhat If you were a….Product-based social business!•  Types of Employees?•  Volunteers?•  HR/volunteer management? 9
  10. 10. © Norm Tasevski & Karim HarjiWhat If you were a….Purpose-built social enterprise?!•  Types of Employees?•  Volunteers?•  HR/volunteer management? 10
  11. 11. © Norm Tasevski & Karim HarjiWhat If you were a….Fee-for-service Social Business? !•  Types of Employees?•  Volunteers?•  HR/volunteer management? 11
  12. 12. © Norm Tasevski & Karim HarjiWhat If you were a….Virtual platform? !•  Types of Employees?•  Volunteers?•  HR/volunteer management? 12
  13. 13. © Norm Tasevski & Karim HarjiOther HR Considerations…•  Who/what do you need?•  How do you find the right people?•  How do you define what they do?•  How (and from where) do you pay them? 13
  14. 14. © Norm Tasevski & Karim HarjiExercise:What HR Strategy makes sense for…!Your venture???! 14
  15. 15. © Norm Tasevski & Karim Harji 15
  16. 16. © Norm Tasevski & Karim HarjiBalancing Financial and SocialTensions•  “Social cost”•  Business acumen•  Two missions – may lead to confusion/conflict 16
  17. 17. © Norm Tasevski & Karim HarjiSummary: Key Questions•  Who will manage the business?•  How do you plan to staff the venture?•  Will staff require special training or accreditation?•  Will the non-profit’s clients be hired? If so, are there any special accommodations that will require additional staff or other resources?•  Will staff work on contract, for honoraria, or on a permanent basis?•  Do you have a person with business experience and/or training on staff and how will that person be utilized?•  Does the staffing plan match your operational needs and revenue growth projections?•  How will the staffing needs change as the enterprise grows?•  Are any of the positions transitional by design? If so, how will the high turnover rates be accounted for in the enterprise?•  How easy will it be to attract qualified staff with anticipated working conditions and salaries?•  What is the organizational chart? What is the accountability of each staff member?Source: 17
  18. 18. Operational Considerations… 18
  19. 19. © Norm Tasevski & Karim HarjiHow do you…Operationalize your Value Proposition?!Your venture???! 19
  20. 20. © Norm Tasevski & Karim HarjiHow do you…Operationalize your “Customer” function?!Your venture???! 20
  21. 21. © Norm Tasevski & Karim HarjiHow do you…Operationalize your Channels?!Your venture???! 21
  22. 22. © Norm Tasevski & Karim HarjiHow do you…Operationalize your “Relationships” function?!Your venture???! 22
  23. 23. © Norm Tasevski & Karim HarjiHow do you…Operationalize your Key Resources?!Your venture???! 23
  24. 24. © Norm Tasevski & Karim HarjiHow do you…Operationalize your Key Activities?!Your venture???! 24
  25. 25. © Norm Tasevski & Karim HarjiHow do you…Operationalize your Partner Development?!Your venture???! 25
  26. 26. © Norm Tasevski & Karim HarjiSummary: Key Questions•  How will you operationalize each segment of the business model?•  How will you ensure that you adequately understand and capture your considerations and assumptions? 26
  27. 27. © Norm Tasevski & Karim HarjiSome Resources: MaRS workbooks1. Building an A-Team•  What values do you seek in new hires?•  As the company grows, what new hires will you need and when?•  What skills do successful employees at your company require?•  What qualities do your employees need to make them excellent?•  How should you screen and interview to find the best candidates?•  How do you make an official offer of employment?2. Compensation•  What forms of compensation are most effective for a start-up?•  How do I structure my employee stock option plan?•  What benefits am I legally required to provide and how much will they cost?•  How do I build a realistic and comprehensive HR budget?3. HR at Work•  How do I effectively bring new people on board?•  How do I establish and conduct performance reviews?•  What are the essential HR policies and procedures I need to have in place?•  How do I create an effective employee handbook? 27
  28. 28. Legal Forms Applicable to SocialEnterprise… 28
  29. 29. © Norm Tasevski & Karim HarjiA Caveat…There is no defined (national or provincial) legal form for social enterprise in Canada 29
  30. 30. © Norm Tasevski & Karim HarjiA Second Caveat… Form follows function 30
  31. 31. For-Profit Non-Profit Corporation! Corporation! Partnership! Charity! Sole Co-OperativeProprietorship! Corporation! 31
  32. 32. © Norm Tasevski & Karim Harji For-Profit Corporation! •  Incorporated under the Business Corporations Act (Ontario) (the “OBCA”) or the Canada Business Corporations Act (federal) (the “CBCA”)! •  With share capital!•  Most flex in terms •  Pay corporate tax! of profit-making •  Cannot access grants! activities! •  Cultural/•  Can access all forms of investment psychological barriers (debt, equity, etc)! with operating a “for-•  Provides clarity of profit social purpose (i.e. the business”! financial bottom line)!•  Limited personal liability! 32
  33. 33. © Norm Tasevski & Karim Harji Charity! •  Incorporated via Letters Patent under the Corporations Act (Ontario) or Canada Corporations Act (federal)! •  Without share capital!•  Don’t pay corporate •  Least flex in terms of tax on earnings! profit-making activities! •  Limited in the types of•  Can issue tax investments you can receipts! access (e.g. equity)!•  Can access many •  Time-consuming!! government/ •  Psychological barriers foundation/ with operating a “social corporate grants! business”! •  An aversion to “risk taking”! •  Can lose status if “too successful”! 33
  34. 34. © Norm Tasevski & Karim Harji Sole Proprietorship! •  Registered via Business Names Act (Ontario) or Canada Corporations Act (federal)! •  Without share capital!•  The simplest (and •  Unlimited liability!!! quickest) legal form! •  The business is the•  You have full entrepreneur! control of business •  Hard to find investors! decisions! •  Limited creative input•  Flexibility to make (i.e. you’re the only business decisions one with ideas!)! quickly! •  Less “professional”•  No separate filing than other forms! for income tax! 34
  35. 35. © Norm Tasevski & Karim Harji Non-Profit Corporation! •  Incorporated via Letters Patent under Corporations Act (Ontario) or Canada Corporations Act (Federal)! •  Generally without share capital!•  Can access grants! •  Can’t issue tax•  Can access debt receipts! financing! •  Limited in the types of•  Tax exempt as long investments you can as organized and access (e.g. equity)! operated for defined •  Psychological barriers social/community with operating a benefit! “social business” !•  Some NPs are more •  Can lose status if open to (limited) “too successful”! risk-taking! 35
  36. 36. © Norm Tasevski & Karim Harji Partnership! •  Registered under the Partnerships Act (Ontario)! •  With or without share capital! •  Usually organized using a Partnership Agreement!•  Similar benefits to •  For most sole proprietorship! partnerships, unlimited•  Combines skills/ liability! (at least in competencies of Canada…)! two people! •  Acrimony between•  Can sign contracts partners is common! and borrow money in •  Difficult to find its own right! investors! 36
  37. 37. © Norm Tasevski & Karim Harji Co-Operative Corporation! •  Incorporated under the Co-Operative Corporations Act (Ontario) or Canada Cooperatives Act (Federal)! •  Wither with or without share capital!•  Well-established •  Cannot issue tax structures! receipts!•  Integrates the •  Generally not exempt concept of from paying tax! “community benefit” •  Psychological barriers already! with operating a “social business”! •  Difficulty making decisions (too many people at the table)! 37
  38. 38. © Norm Tasevski & Karim HarjiExercise:Which legal form makes sense for…!Your venture???! 38
  39. 39. © Norm Tasevski & Karim HarjiCRA Guidelines•  Direction (law, regulations, guidelines, precedents) around social enterprise are not completely clear•  Community economic development (CED)-specific exemptions: –  Relief of unemployment: training business. –  Relief of poverty through operating stores: business that provides low-cost necessities. –  Relief of people with disabilities: “social business.” –  Relieving suffering in economically challenged communities•  Federal view of the business activity may differ from any provincial position 39
  40. 40. © Norm Tasevski & Karim Harji 40
  41. 41. © Norm Tasevski & Karim HarjiAn Evolving Conversation… 41
  42. 42. © Norm Tasevski & Karim HarjiHybrid Structures 42
  43. 43. © Norm Tasevski & Karim HarjiTalk to a Lawyer! 43
  44. 44. Legal Innovations… 44
  45. 45. © Norm Tasevski & Karim HarjiLegal Innovation: CIC (UK)•  Established to trade (goods or services) for the community good•  Requires “community interest statement” application to the CIC Regulator. Publically-available annual reports required to confirm (adherence to) community interest requirement•  May issue shares in order to raise capital•  Cap on returns (dividends paid) set by the Regulator•  Subject to an “asset lock” –  Assets and profits must be permanently retained by the CICs for community benefit, or transferred to another CIC subject to an asset lock, or to a charity•  Taxed in the same manner as other businesses 45
  46. 46. © Norm Tasevski & Karim HarjiLegal Innovation: L3C (US)•  Variation on American Limited Liability Companies (LLCs)•  LLC investors are members rather than shareholders•  Terms of the operating agreement guarantee the public benefit nature of the entity’s work•  Like LLCs, L3Cs are not subject to federal income tax themselves, but the income they pay to members is taxable according to the rates applicable to each member•  Able to attract private capital through the sale of shares and other securities, various forms of loans, or other commercial financial arrangements.•  Ability to receive Program Related Investments from foundations•  No asset lock and no dividend cap 46
  47. 47. © Norm Tasevski & Karim HarjiLegal Innovation: B Corp (US)•  To be certified as a B corporation under the B Lab system, the corporation must: –  Achieve a minimum score of 80 (out of 200) on the B Ratings System, a tool to assess a companys social and environmental performance. –  Agree to make legal changes to its articles of incorporation to expand the responsibilities of the company to include consideration of stakeholder interests. –  Pay B Lab an annual licensing fee. –  Recertification is required every two years. 47
  48. 48. © Norm Tasevski & Karim Harji 48
  49. 49. © Norm Tasevski & Karim HarjiSummary: Key Questions•  Is the venture’s primary mission mostly social or profit?•  What are the founders’ views, skills, motives, and intentions? How closely held is the organization?•  What is the market for the primary activities (goods/ services)?•  How much money is needed and where will you get it?•  What level of risk and liability is your organization willing to take?•  What will be the relationship between the enterprise and the parent organization? Will the enterprise be a separate entity? What is the governance structure of the enterprise (separately and in relation to the parent organization)? 49
  50. 50. Break 50
  51. 51. © Norm Tasevski & Karim HarjiGuest Speaker - Mary McGrath 51
  52. 52. © Norm Tasevski & Karim HarjiWhat did we learn? 52