[ossig] something may be of interest for those involved in community projs

[nplee <nplee@xxxxxxxxx>]

Making Social Investments Accountable
by Manda Salls
Posted: December 16, 2004

For many companies, sales are the benchmark of a product's success. But 
when you are a philanthropic venture, success is measured in social as 
well as economic terms.

Take toothbrushes, says Acumen Fund CFO Brian Trelstad. If a social 
venture was in the toothbrush business, the real measures of success 
would be the number of children brushing, and whether the incidence of 
cavities is falling. Effective measurement of the right impacts is 
critical to understanding success or failure of a project, but it is 
difficult work, he told Harvard Business School's Social Enterprise Club 
last month.

As nonprofits struggle to create greater accountability, new models of 
giving have emerged. Acumen Fund is an example: It's a venture 
philanthropy, where donors invest in deeply vetted start-up ventures and 
the return is a well-managed social enterprise.

Founded in 2001, Acumen Fund backs entrepreneurs who deliver essential 
services such as water, housing, and health care to the billions of 
people worldwide who live on less than four dollars a day. Investment 
prospects are screened based on their ability to generate sustainable 
and scalable social change.

As Acumen Fund has grown, the company has learned lessons that may prove 
valuable to other social enterprise organizations.

One lesson learned has been the importance of management support. 
Originally a grant-making venture, Acumen Fund leaders quickly realized 
that business plans they funded weren't always well executed, and that 
entrepreneurs in far-flung regions needed more support to be effective. 
So the company shifted its primary focus from grant making to providing 
loans and equity for entrepreneurial ventures. The company now operates 
like a venture capital firm, claims Trelstad, investing philanthropic 
resources in innovative, socially responsible entrepreneurs, while 
providing them with management support and advice.

A detailed approach
Much of the management support is hands-on, Trelstad said. Acumen Fund 
helps companies develop business plans, offers interns and other 
resources to refine MIS and financial reporting systems, and provides 
troubleshooting advice. With Saiban, a housing investment in Pakistan, 
Acumen Fund had an intern-analyst help conduct a programmatic evaluation 
and then design, build, and implement a system to track customer 
payments, measure default rates, and improve the collections process.

"Moving Saiban toward a more data-intensive system will help us measure 
and improve the social and financial return of the project," said Trelstad.

Similar support was offered to Nadim, a furniture manufacturer in Egypt 
that Acumen Fund backs to develop a women's employment initiative. 
Acumen Fund conducted a study on how Egyptian furniture manufacturers 
could enter the U.S. market, and arranged meetings with two of the 
largest purchasers of furniture in the U.S., a hotel chain and a retail 
furniture chain.

In the quest to ensure that money is being used to its greatest effect, 
Acumen Fund does extensive work in terms of financials and accountability.

"It costs money to give money away," says Trelstad. "So we focus on how 
to keep those numbers down."

Trelstad and his team use time-tested best practices including 
variations on the Balanced Scorecard and monthly risk assessments to 
track the Acumen Fund's investments and the Fund's financial health.

Once a year Acumen CEO Jacqueline Novogratz or COO David Kyle makes site 
visits to assess the work being done and ensure that the money invested 
is making a tangible difference in people's lives. Acumen Fund also 
deploys summer interns from MBA programs at Harvard Business School and 
other educational institutions and management companies.

According to Trelstad, Acumen Fund seeks to connect serious 
philanthropists with some of the world's best social innovators in the 
areas of health, water, and housing. The current emphasis is to learn 
and apply knowledge across these three areas and to understand the 
common challenges of pricing, distribution, financing, and marketing of 
critical goods and services to the poor.

Manda Salls is the Web editor for Baker Library .

HBS Working Knowledge is a free, weekly Web publication by Harvard 
Business School. Visit http://hbswk.hbs.edu to subscribe to the free 
weekly newsletter.

Copyright © 2004 President and Fellows of Harvard College.
-- 

best wishes.
/nan phin

Simplicity is the ultimate sophistication.


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