Social Enterprise and Michigan's Legacy Cities
By: Scott Lyman, MSU CCED, Research Assistant, lymansc1@msu.edu
Social enterprises have become increasingly prevalent across the business landscape over the past two decades. While social enterprises are not new, many do not know how they operate, their core principles, or how to identify a social enterprise in their own community. The Center for Community and Economic Development (CCED) recently sponsored Jason Ball and Steve Wolbert from Social Impact Philanthropy investment Inc. (SIPI) in Flint to author a Co-Learning Plan. Their piece focused on how to better define social enterprises and examine the role they play in the economies of Michigan's legacy cities. This Co- Learning is part of the Federal Economic Development Administration's Regional Economic Innovation (REI) program here at the CCED.
Titled, Defining & Advancing Social Enterprise in Michigan's Legacy Cities, Mr. Ball and Mr. Wolbert define a social enterprise as an "organization that generates revenue by selling a product or service to serve their mission of delivering social value". Expanding on this framework, a social enterprise can be identified with a two-part test: 1) the organization must have an official social purpose and 2) the organization must sell products or services. This two part test results in four basic types of organizations:
- Contribution Nonprofits (Not Social Enterprise)
- Commercial Nonprofits (Social Enterprise)
- Social Businesses (Social Enterprise)
- Traditional Businesses (Not Social Enterprise)
While there is a clear definition of what constitutes a social enterprise, applying this definition to a specific organization can become challenging. Thus, in their Co-Learning Plan, Ball and Wolbert offer a social enterprise spectrum (pictured below) to better understand and identify different types of social enterprises. Ball and Wolbert feel it necessary to better define social enterprises because they have played—and will continue to play—an important economic role in Michigan cities that have experienced a sustained decrease in population and economic activity. Places that suffered more extreme population disruption are known as legacy cities: areas with at least 50,000 residents that have lost more than 20% of their peak population. According to this criteria, there are currently eight legacy cities in Michigan: Detroit, Flint, Saginaw, St. Clair Shores, Royal Oak, Pontiac, Dearborn Heights, and Warren.
These cities face aging infrastructure, declining tax revenue, and a poorly equipped workforce. Put together, these factors can hinder economic development and opportunity. This is where social enterprises come in. As a part of their Co-Learning Plan, Mr. Ball and Mr. Wolbert compared the performance of several social enterprises within legacy cities to traditional businesses in the same area. From their study, it was found that within legacy city populations, social enterprises had an 81% employee retention rate while traditional business only had a 68% retention rate.
This is important to note considering social enterprises tend to recruit and employ individuals who generally have fewer skills, little experience, and face significant hurdles in obtaining stable employment. Though the sample population was small, this conclusion is important because it demonstrates that social enterprises are more successful than traditional business at retaining employees in legacy cities across the state. Moving forward, social enterprises have the potential to fill this economic gap in Michigan's legacy cities to ultimately provide economic opportunity for disadvantaged populations. To view the entire Co-Learning Plan, click here.