Transcript: Lessons from Failure: Shaping Social Enterprises | Part 1

Music by: Shake it Out - Florence & the Machine (instrumental) and  Lose Yourself to Dance (instrumental)– Daft Punk

Liz Armitage: Hi, everyone and thanks for joining us today. It's great to see so many of you wanting to learn more about the topic of lessons from failure. Some of you have shared with us that failure can be the source of the most powerful learning and that's something that's often not recognised and we're really looking forward to diving into that today.

My name is Liz Armitage and I'm the Communications Lead at Social Enterprise Australia. I'm excited to be here with you and to introduce this session that is funded under the Australian Government's Social Enterprise Development Initiative. Our aim today is to create a space to share knowledge and strengthen connection and collaboration. 

Today's session is convened by Think Impact in collaboration with a bunch of incredible social enterprise leaders. Kevin Robbie and Sofiah Mackay will be in conversation with Ifrin Fittock, Jaison Hoernel, Mick Cronin and Pablo Gimenez. Thank you to all of you for your generosity and care in sharing your time and your experience.

Before I hand over to Kevin and Sofiah, I'd like to acknowledge the Traditional Custodians of the land from which we're all joining today. I'm joining you from Dharawal Country, south of Sydney, and I pay my respects to Elders past, present and emerging. This always was and always will be Aboriginal land.

Now, it's an absolute pleasure to hand over to Kevin and Sofiah. 

Kevin Robbie: Thank you, Liz, for that introduction and thank you, everyone, for joining us today. 

As said, my name is Kevin Robbie. I'm the Managing Director of a company called Think Impact. We are a Melbourne-based social impact sustainability consultancy, and I'm joined by my colleague Sofiah. Between us, we'll be facilitating the session, but we're also going to be partly participants. We're hoping it's a participative event where we hear honest stories about failure in social Enterprise. We want to understand that failure is normal and take away practical lessons that you can use.

I suppose my interest in this space dates back quite a long time. The first time I did a presentation on failure was in 2003/2004. At the time, I was running social enterprises in the UK. We had a set of social enterprises that I was running in my organisation, and we also hosted a company called Social Firms Scotland, who were a start-up peak body for the social enterprise sector in Scotland at the time. Their coordinator came to me one day and said we want to run a session on failure, I thought you're the best person to speak about this. 

It was an interesting journey, saying, yes, we had seven successful social enterprises, but we'd run four that hadn't worked. So I started talking about what the lessons were from those four. As we're having our conversation today, I might weave in some stories for myself, and Sofiah will for herself in terms of the failures that we've experienced. 

I'm going to get the participants to introduce themselves in terms of the questions I ask them. So let's kick off. To set the scene, can you tell us a bit about yourself and your journey into social enterprise? What drew you into this work, and how has that changed over time?

Ifrin Fittock: Hi everyone. How did I end up in the social Enterprise? I spent 23 years of my life, before SisterWorks, in management consulting. SisterWorks is actually my first not-for-profit social enterprise gig. I came to SisterWorks in 2017 as a volunteer. My three kids were young, but the youngest was ready to go back to school. I thought, let's just get into the routine, and I found SisterWorks as a place to volunteer. It's actually just down the road from where I live. 

It was a choice that I call a serendipitous way of leading to SisterWorks. I started delivering digital training, or computer lessons, to the women, to the sisters. At that time, SisterWorks was a three-year-old organisation. So pretty small, no system, no process. I said to the founder at that time, Luz, if you are going to grow, you need to put all of this into place. He said can you help? And I said yes. That sealed my fate. 

But really, what draws me in, is that social enterprise model, is the business for good, where you can actually make an impact. At the same time, there is that commercial element that really draws me. I think naturally entrepreneurial is really what draws me into it and the cause of it. 

Kevin Robbie: Great, thanks. Jaison. 

Jaison Hoernel: Hi. Thanks, Kevin, and hello everyone. 

About 13 - 14 years ago, I'd had a background in my own businesses and was doing a lot of international and commercial work, corporates, and a bit of consulting. I had this idea that I wanted to go into the not-for-profit sector, but I didn't really know what that meant. I actually didn't even know what a social enterprise was. I just landed in it. 

I actually tried to get into the not-for-profit sector, and I had a few challenges. There was a fairly sort of closed door, and I got that opportunity through Good Cycles, which was because I knew about bikes. That was fundamentally what opened the door for me there. 

I didn't know what a social enterprise was. Even as I stepped into it, I was a bit unsure. I think my first encounter was that you have to make money and create impact. I thought, " That sounds pretty easy”. A few months later, that's not as easy as it sounds. I think I recognised my values align with people, impact and equity, and that was really what drew me in. It wasn't about any specific challenge. I ended up in a youth organisation, which was really important, but it was really more about being values aligned. I think it's largely been the complexity of that which has kept me interested, and the social equity piece of it. It's been an interesting journey, though, that's for sure. 

Kevin Robbie: Mick. 

Mick Cronin: Thanks, Kevin. Hello to everyone. 

I think you said what drew you into social enterprise? I wasn't drew, I was threw. So I was thrown into social enterprise. Yeah, a little bit different.

My background was that I was manager of the YMCA Bridge Project, and it's going back about 13 years. At that time, I inherited YMCA Rebuild, which was the social enterprise side. Like Jaison, I had never managed a social enterprise. Never managed really in the business. The social side and the impact side, I was doing anyway because I was doing employment placements and doing that for a wide range of young people in the justice system all across Victoria. That part I had down. The part that was completely new to me was managing a social enterprise. And a bit like Jason said, I was wondering what is this? How does this work? And how do you balance the social impact with making money? Also what I thought I inherited and what I actually inherited were two different things. I was thrust into it and away you go. So that's how I got into it.

Then I quickly realised how much I love the sector. Then when I started to grow connections in the sector, I realised that it aligned with the mindset that I have or if it was like entrepreneurial mindset. Then I got to share that and meet with a lot of people in the sector who I could learn from and share with, which was like finding your family as such. That was what really kept me in. 

Fast forward, I stepped away from YMCA Rebuild a couple of years back. Then I set up my own social enterprise last year, we can unpack that one. I don't know. Every day I wonder why I did that. I know why I still do, it's the passion. I sit as a Director of that and a Co-founder now, and I've helped govern that social enterprise. That's how it started, and that's how it is today, and there's been a lot in between that have been amazing and a rollercoaster. As I'm sure that everyone here has been through as well.

Kevin Robbie: And Pablo. 

Pablo Alfredo Gimenez: I guess my journey is a little bit different to others. I don't come from a business sector; I come from a community sector. I had worked in community, I was committed to social justice and had been working in the community legal sector, using the legal system to get people justice. I went to a conference in Southern Mexico and lived with some Indigenous communities, and saw that they had set up a whole social economy. They were financially the poorest people in Mexico, had the most resources, but they were taken by other people. I was inspired by seeing that in action, and being able to achieve social justice through economic participation. 

I had my own personal experience as someone from a migrant background. I came out as a four-year-old from Argentina after a military dictatorship. I saw my parents and what they went through being exploited, their bodies were broken by the time they were 50. I guess that's why I got into social justice, and social enterprise was a really good fit. 

When I came back with a group of friends, four of us in our early 20s, we set up an organic fruit and veg shop and cafe in Footscray way before its time. If you know Footscray, it's an inner-city, hipster place that Kevin calls home. There weren't many Kevins back then. We set that up, and the purpose of it was to raise money for innovative community projects. It was during the time of Jeff Kenner, a liberal conservative government that was cutting a lot of community group funding, so we're very proud. We funded the setup of the Asylum Seeker Resource Centre. 

We brought in a bookkeeper two or three years in, and they told us this enterprise is completely financially unsustainable. What you've done is borrow money from family and friends, and you've given it away. I then spent the next seven years paying off all the debts. It was a lot of learning from making lots and lots of mistakes. I'm really keen to talk about it today. 

I went on to an amazing job with the Brotherhood of St. Laurence, in their Community Enterprise Development Initiative. It is really interesting that SEA are now running the Social Enterprise Development Initiative. We were tasked to go into low-income communities across Victoria, public housing estates and other low-income communities and explore opportunities for those communities to set up their own social enterprises. That was amazing, I worked with dozens of groups. 

With all that I had learned, I went off and ran social enterprises or managed a portfolio of social enterprises in large charities, which had its own challenges. I can talk about that later. Then more recently, over the last 10 years, I've been focusing on working with smaller community groups who want to make their vision a reality through social enterprise. But they also run other community services. My focus is on working in regional and out-of-suburban areas where there isn't much support for this work.

Kevin Robbie: Great, thanks. Great diversity from the people who are here. Sofiah do you want to give us a little bit about your background and journey in the social enterprise space? 

Sofiah Mackay: I'll keep it brief. I've worked in several social enterprises, starting in my early 20s when I worked in one in Colombia, before we were talking about social enterprises. 

A quite formative time for me was working with the School for Social Entrepreneurs for five years, about a decade ago. I got to work with social entrepreneurs in the ideation and startup phase from all around Australia. The perspectives I bring are around some of the challenges that social entrepreneurs face in terms of mindset around failure. When people start out, often there is that big fear of failure. That was often what we were working around. 

There's a spectrum. Failure is not binary. It's a spectrum. There's a certain degree of failure at one end of the spectrum that you actually want to encourage, because it's about innovation, it's about trying things and then working out the better way to do it.

The other end of the spectrum you want to avoid. That could be someone's injured or death. That's the end of the spectrum of failure that you absolutely want to avoid. However, there's a whole other end, which is the space that social entrepreneurs play in. That's really important. 

Kevin Robbie: Thank you. Let's get straight into the nitty-gritty of this. When you think back over your journey, what's been your most memorable failure? A moment when something didn't work out as planned, and what did you learn from it?

Pablo Alfredo Gimenez: I kind of inherited a social enterprise when I was working for one of these big charities. They ran a social enterprise employing people seeking asylum and a cleaning enterprise. About two years in, I was brought in to review all their enterprises, and I looked at it and went, " You're actually employing more international students as cleaners than people seeking asylum. And it's financially struggling.” It was a really difficult decision. I had to make 30 people redundant in this cleaning enterprise. We worked around that issue, and we made sure that people were able to move on to other jobs. But that was one where the enterprise wasn't achieving its purpose, and it was financially struggling. The financial struggle bit is pretty common, but when you're not meeting your purpose at the same time. It was a difficult, but then again, an easier decision to make to say, let's shut this down.

Jaison Hoernel: Probably the most memorable one is when I first started, we had this idea that we would go into Dandenong and set up in Dandenong with Good Cycles, and we're just going to start working there. I didn’t realise just how complex the landscape was. Yes, three funders thought it was a great idea because we were flavour of the month and they gave us a whole lot of money. Then six months later, we looked at it and went, we literally could not make it work for so many reasons. Mostly because we just didn't understand. I didn't understand that the organisation didn't have the connections. You underestimate the time that it takes to build those relationships. Then, having to go back to the funders and go, this was a complete disaster. 

Underestimating the time it takes to build those relationships is something which I certainly found really interesting coming into the social sector, because in the commercial sector it's fundamentally transactional. So you have a framework that says if it all goes pear-shaped, we know where we stand. But the social sector doesn't have that. That was one of the really big challenges I found is, they use the expression, collaboration happens at the speed of trust. Which I hate, I will say, but it is a reality. That was a big mess. 

Mick Cronin: I think at the very start I said that I had inherited a social enterprise, and Pablo said a similar thing. The one thing that I remember, the fact that I can say from that initial first time, was that I was so naive that I didn't ask the right questions. I took a lot of things at face value, and I cruised into a position that I thought everything was fine and that the social enterprise was fine. Its business model was obviously good because I wasn't really across it. I didn't get at it quick enough. I took too much for granted, and I took what people said as actually happening, and it wasn't.

Then what happened really quickly when I started to realise was the social enterprise was going to be buried within six or nine months. It was going in an awful direction. I think that might be relevant to people. I don't know where everyone’s journey is at who's listening, but there might be some who might be in a position where you take on a social enterprise. If you haven't had the business savvy, like I didn't at that stage, then you have to take a step back, take a breath, and you got to actually ask the right questions.

I didn't do that quick enough, and it was nearly detrimental. That was one of the biggest learnings that I had in social enterprise, which was in those 4 to 6 months, and it was a horrible learning. I obviously did not want to ever repeat that, and hopefully I've shared that over time with people so that they hopefully don't end up in that situation as well.

Ifrin Fittock: What I'm going to say is going to be a little bit embarrassing here because I saw that there are some Westpac Foundation people here. Some of you might know that I got the privilege of being the Westpac Fellow, the Social Change Fellow. As part of that fellowship, I went to Europe and learned anything and everything fancy about the circular economy. It really sits deep with me that when I came back, I thought to myself, okay, I'm going to change SisterWorks to be the champion in this area.

I came home and gung ho, tell everybody we're going to be doing this circular economy business. Everyone just looks at me, including the board, like what are you talking about? Because I came back from that experience, and I’m thinking, oh, it's happening in Europe, it's possible, you got to be able to do it, we've got to be able to change this.

To cut the story short, no buy-in, no stakeholder buy-ins from anyone in the organisation. I actually have to reach out to Lauren who just gave me a heart and I said okay, I'm at my wits' end here, I want to do this. I ended up having some coaching on how I can get that stakeholder buy-in. I don't know whether that's a failure of me personally or as a social enterprise as a whole. I guess people often also associate the failure of the leader of that social enterprise to the social enterprise itself. I guess in that process of trying to get that buy-in, you hold everything up. You think that you want to move forward, but nobody wants to move forward with you because they don't understand. 

The lesson here is that just because you have a vision for the social enterprise that you lead or for the business that you lead or you own, that doesn't mean everybody understands what you actually want to do. What does it actually mean? I think the lesson from this is that you've got to be able to unpack it into a normal language for them, as opposed to fancy terms.That's the reality of it.

The fellowship is still really beneficial for me because I learned what is possible. And that is still the goal. Everything is now going well and going fine because we are continuing to move in that direction of providing those circular offerings from SisterWorks.

Kevin Robbie: Some of the things that people have said have chimed with me. I have a memory of when I was running a social enterprise in the UK. On the surface, we were seen as successful. We were growing, we were getting big. But it brought us to the brink of one of our almost biggest failures.

We had a catering business, we had a hotel, we had a laundry and all of them, the cash came in really quickly. As I grew the business, we grew it through what's now called social procurement, wasn't the term in the UK at the time. So we suddenly went from cash coming in on a weekly basis to waiting for the government to pay us, and it was sometimes months before they paid us. We got to a week within the organisation of trading insolvent because we didn't have the cash to pay all our debts. The businesses were growing, but the money wasn't there. I felt so stupid that I had just missed this obvious thing. Things were going well, but I had missed one basic thing in terms of running a business.

When you think about your experience of failure, at the time, what did it feel like personally, organisationally? And how did it affect how you showed up as a leader? 

Mick Cronin: What you said Kevin. I think at the early stage I felt a bit embarrassed. It kind of deflated me. I think when you're in a position, and you're doing really great impact stuff, you can buy into your own hype individually and organisationally as well. So I think I felt really embarrassed. I felt like a little bit of an imposter. It really knocked me. My confidence went back a fair bit in those early times. It made me question whether I was cut out to do this and whether I should do it.

Then the other instinct kicks in, into determination. If you know yourself as a person you have to lean into that and hope what you know about yourself as a person can maybe get you out of that. I kind of remember saying, right, I've got two things I can do here. I can walk away, let this happen, and it will always be under my record that the social enterprise basically fell apart within six months of your leadership. I wasn't going to go out that way. So I think the determination was just to be honest with it, ask for help and get people around me that could advise me on the financial side of things, the business acumen and all of that. And that's what I did. I brought in people around me in the team who actually had experience doing that. It took a lot of resilience. I had to dig in a little bit, but I had a lot of determination, and fight to go, yeah, I'm not going to go out this way. I'm going to at least give it a go and see if I can take this social enterprise out of what it's facing.

Lucky enough for me, the people and everything around me helped me to do that, but it could have been very detrimental to me. I leaned into myself a little bit in that time, which was not as easy as it can be for others. 

Pablo Alfredo Gimenez: One of the ones I share is the personal cost of being a Founder of an enterprise where you actually have skin in the game. The first social enterprise we set up was with no money. We borrowed money from family and friends to set up this cafe and grocery store. The stresses that brought, and the time. I had a girlfriend, and I was working 70-hour weeks, not earning any money. We couldn't afford to pay everyone. That relationship broke down. What's the point of being with you if you're never around and I'm always having to lend you money? I think people need to recognise that. I always tell people setting up, especially when they're Founders setting up their own new enterprises, that they just make sure they look after themselves and the people around them. It's really important. There is a happy ending to that; I ended up marrying this person, but it was really a traumatic time. So look after yourself. It's really important to do that.

I think what kept me going in running that enterprise is that I owed people money, and I needed to give them back that money. I kept going at it because I had skin in the game, which is missing from a lot of social enterprises. One of the things that I always raise is that if you run a small business, you have sweat equity. If you've mortgaged your house to set up whatever it is, then you have to keep on going. Whereas in social enterprises, that's not often the case. But there are real benefits to that sweat equity. There's the negative side as well.

Jaison Hoernel: It's interesting you say that, Pablo. I think the interesting thing about social enterprise in this space is that everybody comes into it, Mick came in with, as Mick said, he came in with a really strong understanding of the social piece of it. Then you have to find that balance. Before I came into this space, I've had a lot of failures. 

The first business I bought, we had two young kids, we mortgaged the last $5 out of our house to buy it. The first week of trading, we traded $100, and someone threw a blue stone brick through the front window and did $10,000 worth of damage that insurance wouldn't cover. I felt sick to my stomach. I thought I had made the worst decision. I went into partnership, which I thought was going to be a great partnership, and it was the worst two years of my life. When you take those things into it, it doesn't change social enterprise and social impact. 

That question, Pablo, you say, of that ownership, and I wasn't a Founder. That is really important. But the social sector also brings in that real desire for what they're doing. What they're doing matters. Most people are here because they're not here for money. They're here because it's a value. It has a really strong social value creation. They hold that in the same way. I used to feel both of those things all the time. It's a roller coaster. If you're trying to make change, which is what you're doing, none of this is easy. You have those moments of gutting disappointment, disappointment in yourself, disappointment for the people around you. Everybody says, just be kind to yourself. That's so much easier said than done. 

I had an opportunity to do a program a few years ago, which was peers and having those sorts of things is important. It doesn't change the feeling that you feel, because it matters to you. It takes its toll. For those of us who went through COVID and understand that there was no right decision. Things were going to fail no matter what you did. You still owned that. You still own that, whatever your role in the organisation, you own part of that. It's important to acknowledge that because the company's not going to wind up and you're just going to go find another job in a commercial enterprise. I've worn that a lot and I still don't know how you deal with it. 

Pablo Alfredo Gimenez: I think one way is having other people, talking to other people. In Victoria, we've got the Social Enterprise Network Victoria, and there are peaks where you actually get together with other people who are doing similar work. I think that really helps. I didn't have that when I started my first social enterprise in 1996. The word social enterprise wasn't even talked about. I think it can help having people who have gone through similar things. It doesn't solve the problem, but it can help you get through the tough times.

Ifrin Fittock: I think I will answer that question by reflecting on my reactions to the failures. Look, I think we often hide those failures. We know we’ve failed in something, but as a leader, you often think, I'm going to put on my brave face. I'm going to still appear confident, but actually inside you're crumbling down. It's like, what did I do? What have I done to these organisations? What have I done to the people that I'm supposed to, in a way, give back?

I've been with SisterWorks for almost eight years, been in the role for five years, more and more I realised that that brave face and hiding it yourself is not helping. That is actually really killing you from the inside. Jaison already touched on it. You feel gutted, you feel this, you feel that, and you lose sleep, that's for sure. I always gauge my well-being on how much sleep I get at night. That's how I know whether things are well or things are not well. 

From that time, I learned that sharing that fear and the feeling of failure is important. To have somebody that you can talk to or be able to talk to, finding that sounding board is really important because we may have, like any other social enterprise and like any other businesses, you have a good year, and you have a bad year. So you're going to have that moment where you need brain around you to work with you. 

Usually, as a CEO of a social enterprise, a leader or a social change leader, you feel that you can't fail. You have to be able to do this, and you have to put on a brave face all the time. I think that is wrong. I started off like that, but I got to the realisation that, no, you don't have to be like that. In fact, I think it makes you more human if you just say, well, I made a mistake, sorry, I report to the board. That's why I keep telling the team that when you do board reporting, I don't want good things. I don't want to report good things. I mean, you can always show something that you're successful in, because that's typically what we tend to do. We only talk about good things, but we also want to know what the problem is. What's the failure? We got 10 tenders that did not make it. Show the board. Tell the board. So it's all about just being human, and that is normal. I know, Jaison said before, it's easier said than done. I think it takes time, it really takes time. Because as a human, the natural thing is to hide that because you feel like you're ashamed, you're embarrassed, but it's not good for you. 

Jaison Hoernel: I think the sharing bit is important, and I think that matters. I don't discount that. One of the things that I think I was trying to say is you have to give yourself permission to sit in it. If you can give yourself permission to sit in that failure, it's okay. The better you get at sitting in that failure, as you said, being able to emotionally hold that, the stronger that you become at being able to do it, because we should be able to accept failure. 

There are two aspects of that. One is the externalities of it, which are the expectations of the organisation, the people around you. The other is the internal space that you sit in. What do you do to get better at sitting in that? People don't like discomfort. Failure is uncomfortable. How do we learn to get better, and how do we support people to sit in that? It's meditative. It should hurt a little bit. It doesn't matter to you if it doesn't hurt. 

Risk mitigation is critical. I laugh because I came into the sector, and now I say the most important thing is, you haven't lived unless you've got a good finance audit and risk committee that sits there and goes but what if, but what if, but what if, but what if? And actually drills into things and looks for continual improvement. As you said, Ifrin, focuses on what's not working versus what is working. 

Kevin Robbie: There's a bit of a theme through the conversation here, of one of the dynamics that's different in a social enterprise from running your own business, is you've got a board to report to, and usually you've got funders to report to. What are people's thoughts, experiences on how you talk to boards or how you talk to funders about failure? So that they understand the bigger picture of the impact that the organisation is working on. What's your experience and what are the tricky parts about that?

Ifrin Fittock: I think for me it's actually just framing it. People will find out anyway if something that you try is working or not working. But the way I usually approach it, whenever we start talking to the funders, is that we've learned from this. It’s framing it that we've learned after trying for five years that this is not working. But we also know that if we change this way or we pivot this way, this will work. Because eventually, the reason why you're saying it in front of the funders is because you want to get their buy-in, right? Eventually wanting to get their funding. 

For the sake of the discussion, whether or not we should be telling our failures to the funders or not, I think transparency is always a good thing. My two cents on this, and I don't know whether this is right or wrong, is don't package it just as a failure because nobody wants to hear the failure story. What they want to hear is the lesson learned story from the failure that you experienced, and then, if you have a new way of doing things. That's the one you present. Because then you say, well, we know that's not working, now we learn from that, and this is how we're going to be doing it. Can you give us the money? That's how I usually approach it. 

Pablo Alfredo Gimenez: Before you even talk to your board about failure. One of the things I've seen, especially in the larger charities where I've worked, where the social enterprise is 5-10% of their business, is that you really need to bring the board along for the ride. You need to show them your business plans, your thinking, your theory of change, everything you do. They need to understand social enterprise because when they look at it they see something. For example, it's losing money, and yes, it's delivering on our social impact. Then you can say, well, if we didn't do this, you probably wouldn't find a funder to deliver that impact. 

My personal failure is that I haven't brought the board along. I think you mentioned it too, a bit, Ifrin, bring them along to your kind of thinking or the work that's being done.I think that's really essential that you make sure that you've got a board that understands social enterprise. You might have an amazing business plan, but things don't always go to plan in an enterprise. You'll need to pivot; pandemics come along, you lose that social procurement contract, so I think that the board needs to understand that and how enterprises function from the start. 

Sofiah Mackay: We've got some really interesting thoughts coming through on the chat. What lessons are there for philanthropists and funders is one of the questions coming through.

Jaison Hoernel: I'll call the elephant out of the room. Certainly, right at the moment, there's a very strong reckoning going on between philanthropy and funders and social enterprise in Australia. It's happening, and there are a lot of reasons for it, not going into those. This reckoning of what the expectations are, and one of the questions is, how do you talk to funders about failure? How do you do that in a way that's not going to jeopardise the only thing you have? Brand matters. Where brand and your relationship with funders are all you have. Most organisations are as strong as their best latest infographic.

We still haven't quantified what evaluation means. We go around and around with it. So it ended up being, well, who do they have faith? Going back to a funder and saying, hey, we screwed this up. I'm saying it needs to happen, but the question always is, how are you going to frame that up in a way that still shows that you've got brand, that what you're doing still has a future. It's a real juggling match there. I don't think any funder has an issue with telling someone that it fails. It's a grant. I've talked to boards about this in the past where they'll go, what's the risks of the funder asking for the money back? That's the last thing that they want to do. That's more paperwork. They don't want to have to do that. It looks bad when they ask for it. So they'll never do that. Now, that's a terrible thing to say in the realities of it, but, we're in competition for funding. It's a competitive landscape out there. Social enterprise and the social sector hate talking about competition because we all just want to collaborate. But that's what it is. I think it's getting better at understanding what is the go/no-go about failure with philanthropy, and what are those expectations? 

The sectors developed that on its own. The promise of social enterprise when I came in to this 10 years ago was, make money, create impact, and make profit. Now, I met with a young social entrepreneur recently, and they were like we want to run this program, we want to run the social enterprise, make some money so we can fund our project. Myself and Mark, who's been in this for years, looked at him and said if you can make break-even, you're doing well but you're not going to have money left over. It's still there, and I wonder, do funders still latch onto that?

Sofiah Mackay: I'm interested. What are people's thoughts on that relationship with funders. What are people's tips? 

I'll share one that came from the founder of the School for Social Entrepreneurs in the UK. He used to talk about whenever he went into a meeting with funders, or for one of his back pocket questions was, tell me all the reasons why you think this may not work or tell me what the barriers might be to achieving this. Rather than pitching all that he wanted to do, he was regularly inquiring about the barriers or the reason something may not work with people. Almost so that he could then go away and address all those challenges.

What are other people's tips in terms of that relationship with funders?

Mick Cronin: I think it's relationship-based. I think it's being able to have honest conversations. Over time, you'll work with different funders who will have different expectations of what you are trying to do with your social enterprise and the outcomes you're trying to seek. Some can be quite rigid, and some can be quite restrictive on what you're doing, which then obviously is a red flag in a sense as well. The biggest thing for most social enterprises, for majority, is if you feel that it's not right or you, feel that the funder that you're with is not right, are you going to walk away from that money? You're not going to walk away from that money most of the time because that money is keeping your social enterprise alive. Keeping you and everyone else around you, and keeping the main thing that you're after, which is the impact you want to make. So there's that side of it as well.

I think everyone here might have shared stories on this one as well. You might be in a funding agreement with a funder who you know doesn't really see exactly what you're trying to do, and there's some other agenda at play, which means that you can't have an honest conversation. You can't be honest about your failures. You can't tell them that it might be going a little bit one way. On the flip side of that, we've had the great experience of working with funders who have had that and you are able to go to, and go hey, what we proposed to do was this and this. This isn't working because what's got in the way is this and this. And it could be the environment, it could be the decisions made, it could be whatever. That's the open conversation about can we now turn this funding into something else? I've had some amazing experiences. Funders have said look, we see it, we've got you, we understand it, and we're going to help you come through this. That's the really positive side of it.

I will say one thing as well with funders. I think we are hidden failures in this, is the leaders of your social enterprise because you become the connector between your organisation and funding. If you or anyone walks away or anything else like that happens, then that funding goes. I think that is something that I learned very quickly about the important role that I play and the relationships that I have. How that could actually be a detrimental thing, not always a positive thing, because it's so heavy reliant on my relationship. That's something that I learned that was probably not a great thing, and I had to shift the balance of that over time. 

Jaison Hoernel: That's that age-old thing, people don't invest in businesses, they invest in people. You know that adage flows through. It is a challenge when you're trying to represent understanding of where the organisation is. 

I always wonder why growth matters so much to funders. Is it growth? As long as it's not growth for growth's sake. And certainly the use of that word, why would you not just give an organisation money over there that's going to do such a really strong piece? They're just going to do what they do there. But the funder looks at a bigger organisation, goes, " You've got aspirations to grow”. Why is that so much more important? 

Pablo Alfredo Gimenez: Someone mentioned in the chat that they're picky about their funders. I think it is a reality that the philanthropists are people who have made lots of money through growth. They've made lots of money doing probably really unethical things that many of us in our enterprises would not support. That's the reality: if you're willing to go for philanthropy, it's money that's tainted, it's money that's caused damage to life on earth. And you've just got to work out are you willing to go there? 

But I think one of the things going back is, in the business world, they do share their failures. Any proper entrepreneur will say I failed this 10 times before I set up Google. I think one of the things is just continue to share the failures and what you've learned from them and where you're going to go with those learnings. 

Sofiah Mackay: On that point, I’ll bring in a couple of things from the chat. Matt was reflecting about the failure rate of social enterprises versus businesses and he was wondering whether social enterprises perhaps take longer to fail because it's not just about business, it's also about the social side of it. There was commentary on that, that the Westpac Foundation have shown a strong survivability for social enterprises. That comes at a cost, often to a founder. Pablo, did you want to add?

Pablo Alfredo Gimenez: Yeah, we need to share more of these conversations. An example, STREAT. I can't speak on behalf of STREAT, but STREAT came to us when I was in the Community Enterprise Development Initiative and they said, we've got this amazing idea.

We're going to have these food carts, and we're going to have them all over the city. We're going to employ people with disabilities, we're going to pay them to go and do training. We said, you've got no chance of doing this unless you get a million dollars from somewhere. Lo and behold, there's a global financial crisis. Kevin Rudd's handing out million-dollar checks. They give one to our friends at STREAT. STREAT run their model. Completely unsustainable, didn't work. They regrouped, they pivoted and they moved on and have grown to where they are now. They probably have their own challenges at the moment that they don't talk about. I think we need to hear that. We need to hear more of that. 

Kevin Robbie: Well, it leads into my next question. What advice would you give to people who are in the middle of something failing or holding back because of the fear of failure?

Mick, you alluded earlier to a bigger failure that you might want to talk about. You want to start there?

Mick Cronin: I'm happy to share. It's a very relevant question. I can't speak to the end of this because it'd be very unfair of me. I can only speak to my experiences at the time, when I was working with YMCA Rebuild because it ran for a bit afterwards before it sadly closed its doors. But I suppose with that one, one of the things that was evident when you look at it, and sometimes you have to step yourself out of it, because we're all determined people to try and make things happen. It is a clear pattern, and that pattern is continuing month after month regarding your financials and so forth. Your social impacts will probably stay the same. Meaning that you're probably going to be doing the same work or what you're built to do. In our case, it was employing people from the justice system. That was all fine. 

The bottom line was that the actual model and the business model wasn't fine in the sense that it was losing money every month. I had a team around me, and honestly, I couldn't speak highly enough of the board that were at the time and everyone around that organisation, because they all loved it and they did buy into it, did want to do it. What I would take from that if I went back, if I could, was that it was clear. It was clear for a certain amount of months and then you put something in place. 

I think this is the advice I would give. You've got to have a really short time frame. When it's giving that pattern, you can't say, well, let's give it six months more and it will work. That would be my advice. It shouldn't have been that. It should have been, no, we got one to two months and it has to show this percentage, that has to happen. I think it waited too long.

If I had my time again, it would have been way earlier in the piece when I actually felt that there was something there. All the numbers were right, your contracts were there. You got to remember you're operating contracts that on paper are X million, looks amazing. But to run them with your social enterprise a percentage, 1%, 2% on that, that doesn't work and you're in real trouble. 

I think that's the learning that I had from that. If I had my time again, I would have had that time frame shorter and I would have had the action way shorter. If I'd have done that, here's the other key, I think if we had done some changes to it. I think the impact would have been exactly the same. 

You mentioned growth. We grew. We went for growth and expansion and we went for more opportunities. I think we could have done exactly the same as we were doing in that time with the older model and probably had the same impact. But everything told us it was okay to do this, the finances, money and all, it all looked like it. But in reality when you delivered it, there was too many hidden costs, too many hidden things of a social enterprise in that space that we could see and we needed to call it out. 

Kevin Robbie: Anyone else want to chip in with the advice they'd give to people who are in the middle of something failing or are holding back because of the fear of failure?

Ifrin Fittock: I'll add to what Mick said. It's like addiction, right? When you're trying to get something to work and you just keep going on and on, it's like gambling. One day this is going to work. One day this is going to work. This is easier said than done, putting in that measure and a matrix or indicators understanding and agreeing, potentially with somebody else, that when we hit this, if this ever happened, this is the time where we roll back. This is the time where we pull out or we don't do it or we move into, this is not working. This is a sign that we're not working. 

Often the challenge with growth or having the expansion plan or whatever you might call it is that you always give it time, give it time, give it time. You don't know when you need to stop. I think that is usually that pitfall of founders, or the leader of a social enterprise or a business. That's the key thing. That's the hard part, right? How do we know what are those numbers that mean this is red. This is red. That's the alarm bell going. It's not necessarily numbers, but environment or situation where that needs to give you that alarm bell. I'm saying it because it's easy to say, but actually to be able to do it, it's not easy because sometimes it's like, I will give it time. This is like an addiction. This is my mission. This has got to work. 

Pride also sometimes plays with it, right? I guess the best advice I can give here, the best advice that I also try to adopt myself, is actually agreeing with the board and agreeing with the leadership team that I'm in, if this ever happened, just yell at me and remind me that this is the time that we're going to go back. Agree with the board that this is it. It's like letting people know that give you that warning, but you agree on that warning. Hopefully, that gives you that extra wisdom that can whisper to your ears when things are not right.

Jaison Hoernel: Yeah. I'd say one thing which is, opportunity cost. Loss is hard. The idea of change is easy. When you boil it down and you go, we need to change something, it comes down to what is it that you're going to have to lose?  I've always felt that it's the best thing you can do, and the hardest thing you can do is go: if I were to give this up and stop doing this, or if the organisation were to, what opportunity might that open up? How could I use that capital? How could I use that energy? How could I use my brain? How could the organisation and the people that are there do something different? And the challenge with that is that it's very difficult to do that while you're still thinking about that thing. 

If you can get yourself into a place where you can learn how to do that a little bit, where you can see a light, then it becomes easier to let go. Once you actually let go of something or you decide, it's amazing because suddenly you don't have that, the people around you, the organisation suddenly isn't burdened with that. You'll have people come to you and go, oh, fantastic. And all these unknown things that you go, hey, I can now look at doing something else. 

If it's catastrophic and existential and it means the end of the organisation, that's a very different conversation. If we were talking about those failures in organisations, should we be doing this piece of work? Should we not? A lot of time it comes down to challenging what you think the opportunity cost is. As Ifrin said, not letting that drag out, but recognising that you've got to get onto that very quickly. 

Sofiah Mackay: It's interesting, the questions that I'd often find myself posing as a coach when I was working with a lot of social entrepreneurs were things like, what's the worst that can happen? But also what's the best that could happen? So helping people when there is that fear of failure. Helping people rather than avoiding that fear or that thing that's sitting there, really just going into it. Asking what's the worst that can happen in this scenario? But also what's the best that can happen? 

Another thing that I'm reflecting on as you've been talking is, one of the things that social entrepreneurs really benefit from are the peers. One of you mentioned that. You're working in the enterprise and what you need is opportunities to get on the balcony or get off that busyness of the dance floor, to use a dance floor metaphor, and get up on the balcony. Get a bit more of that separation from yourself as the social entrepreneur and the enterprise. To ask those questions and Jaison, to do that reflection that you were thinking about or that you were describing.

Ifrin, I like your piece around red flags or having the indicators that are the red flags, as well as boundaries. At what point might a red flag be triggered? Whether it's in terms of your personal commitment to the enterprise or functional aspects of the business. 

Kevin Robbie: Thanks. There was one other question that came in. I'm not expecting everyone to answer this, but maybe someone wants to take it up that's got a bit of background in this space. When social procurement fails, it can be existential for the social enterprise supplier. What's your thoughts on social procurement? How do we build a more resilient sector? 

Jaison Hoernel: I could give an answer. It may not be one that is appealing in the sense that, this whole existential social enterprise thing. Social enterprise hasn't changed the way, and fundamentally, what we've been asked to do. The number of times that we have challenges because of the fact that we are playing an imbalance of power with the corporate world, who all they know how to do is make money and remove as much as possible the risk upon themselves and place it upon whoever else is going to deliver the service for us, which in this case is social enterprise. Or if they've got a service which they just have no way of solving, they'll go to social enterprise because they think it could be the solution. Probably the biggest piece of resilience to that is there's going to be a lot more patience. There's got to be patient capital in there. There's got to be patience to do that. From a sector point of view, being realistic about that.

A corporate isn't going to change who they are. I recently got involved in the settlements provider sector after being in the youth sector. A room full of people all sitting there going, the government needs to do more, the corporates need to do more. Yep, that's right, absolutely they do, but at the end of the day, let's have a hard look at how we're viewing them and how we're managing that risk. Yes, philanthropies needs to make sure that we're realistic about that.

There's a lack of capital there, which makes it really challenging, and it's industry specific. So look really closely at the industry that you're going into, and if the incumbents in that industry are all sitting there going, none of us have ongoing contracts. That's not how it operates. We just have to sit on $15, $20, $30 million worth of capital. I've got a wage bill every month of $4 million whether I'm doing work or not. It's probably not a good place to go. 

That's my response to that question. I mean I've been guilty, I spent years before I went into social enterprise creating ironclad pre-bid agreements with all sorts of stuff in them that would protect me. Then I come into social enterprise and I go, oh, it'll be fine, you guys won't screw me over. And they do, they just do. It's because it's in their nature. You didn't write it into a contract and there's some lawyer who's sitting there who's gone, oh, look at this, we can screw them over. Sorry, I've ranted enough now. 

Mick Cronin: I think you're right. I was gonna say, other than that, sometimes you go into it, you gotta know you're dealing with businesses, and you're dealing with corporate. You're a social enterprise, and you're not a charity. So at any stage you'd be going in there thinking you're falling in love with an outcome you're gonna get quickly, that's going to change on you as well. 

I think sometimes we enter into things saying, you should do this. Why wouldn't you do this? You gotta look at from the other side. I was working with loans, in my new social enterprise, just trying to come into the construction space. I don't know why I keep coming back to the construction space, but I do. Sorry anyone who's in the construction space. People who look at social procurement would rather pay money than use a service. So if they can pay to tick off the social procurement, they'd rather pay, you know, $300,000 than use you for $150,000 services. There's such more work that needs to be done in that space as well. 

I think sometimes we're guilty. We walk in and we go, oh, you should use us. It's business. And they are business people and have budgets and have whatever and they're gonna screw you over at times. That's just what it is. Unfortunately, you learn the hard way sometimes. 

Pablo Alfredo Gimenez: If you're really solving a problem for them, like you said, Mick. I've worked in a cleaning enterprise. They charged $50k more than the others. It wasn't based on price. It was a billion dollar contract that required them to socially procure, so they were happy to pay 50 grand extra for the cleaning of their offices. So you're going to find those sweet spots. 

I think also with the social procurement, you’ve got to work out what are the implications if it doesn't pan out. If you put all your eggs in that basket? Diversifying your contract so that if you lose one, you can potentially pick up somewhere else. It isn't the panacea. There's no silver bullet. Social procurement necessarily isn't. You've got to do lots of deals that might not work with your enterprise model. So you've got to be mindful of that. It could be your employment costs are 50% more than the private sector and how you're going to recoup those costs.

Kevin Robbie: We're in the last couple of minutes. One final question to you each. If you could go back to your younger self and say something about failure, what would it be? 

Mick Cronin: I don't know, I think I'd say to myself, it's all right. I think at the time you feel, as we said, all the words around it, what it does to your person and so forth. It's going to happen. I think if I could say to myself, it'd be, hey, you're gonna fail probably a lot more times than you probably succeed. The learnings that you take from your failures should make the successions much bigger than them. It takes one big success that can erade 8, 10, 11 failures or more. Keep understanding that and be kind to yourself in them moments. You're going to find some real gold in them failures .Don't dismiss it and run away from it. Make sure you come back and break it down and be really honest with yourself around it. 

Pablo Alfredo Gimenez: Plan for failure. That it's going to happen and be prepared for it. It's going to happen, and as Mick said, you're going to learn from it. Know what the consequences of that failure will be for the enterprise, for you personally, for the people in your life, for a funder, most importantly, for the people you're trying to create change for. 

Ifrin Fittock: Well, I'll tell myself, you're an idiot but move on from it because you can't dwell in it. You gotta try something else. 

Jaison Hoernel: I don't know what I'd say because I don't even think my younger self would listen to me. He'd just tell me to shut up, and is just going to do what he did, I think. I don't know.

I think, just listen,  listen more. 

Kevin Robbie: Sofiah, what's come in, in terms of couple of comments.

Sofiah Mackay: Sally's saying, yep agree on the warning signs with stakeholders and be prepared to act. Failure is part of the innovation learning process. The innovation is that positive end of the failure spectrum. 

Claire Harris says to her younger self, don't wait around for the hierarchical power structures to jump on board. Just start small and keep going. Trust it will grow as it's aligned and don't worry so much. Founder energy and fun is critical. 

I like that idea of fun, the lightness. There has to be a bit of a lightness. Just know that you're going to make mistakes.

Steve Clifford says, don't hesitate to share your challenges and seek advice and says thanks to our speakers. 

That's all the comments we've had so far. 

I like that thing about critical friends. I think there's got to be something about if I were to tell my earlier self advice, it would be not to take myself too seriously. In some ways it's not about you. It is both, you do need to reflect on yourself and your own practice but it's also not about you.

So don't take it too seriously and surround yourself with some really good critical friends who can ask great questions that help you with perspective-taking. Help you get out of the soup, which is the complexity of the social enterprise and help you elevate up.

Kevin Robbie: Great, thank you. We're on the last two minutes so I just want to say thank you to Jaison, Pablo, Ifrin, and Mick, for your honesty in terms of the conversation, and for your perspectives. We'll hand back to Liz now to wrap up the session.

Liz Armitage: Thank you. Thank you everybody on the panel. I echo that. Important conversation and you all spoke so openly and honestly. 

Thank you everyone in the audience for joining us.

Huge thank you to the Department of Social Services for supporting these learning communities as part of the Social Enterprise Development Initiative

And lastly, thank you to the Social Enterprise Australia crew behind the scenes that make these communities happen today that's Sherryl Reddy and Caragh Porter. 

Check out Understorey for upcoming sessions and we look forward to seeing you all very soon. Thank you.