Determining Best Use of Resources for Sustainable Social Impact

There is a very useful and widely used matrix in the business world called the “BCG Matrix” that helps a company analyze their product lines to determine which to further invest in, which to liquidate, which to expand, etc.  This is where the term “cash cow,” a product whose positive cash flows pay for the other products of a company, comes from.  Each product line is placed in the matrix, which measures the relative position of the product line in the market (low to high market share) against the rate of growth of the business (low to high).  Depending on where the product line falls along those two matrices, you can determine what strategy to take with the product (invest further, liquidate, etc.).

Back in the early 1980s Robert Gruber and Mary Mohr (“Strategic Management for Multiprogram Nonprofit Organizations”) adapted this matrix for nonprofits to enable them to plot their programs according to social and financial returns.  This allowed a nonprofit organization to take a hard look at their programs to determine a strategy for each.

I would argue that the tool could be used by social entrepreneurs (both for profit and nonprofit) to analyze their programs/activities/products/services to see which are worth investing and growing, which are worth sustaining, which should be divested from, etc.  The matrix looks like this:

A social entrepreneur could plot their activities in the matrix according to each activity’s social impact (low to high) and financial return (low to high).  So, let’s take a fictitious K-12 education nonprofit that has four main activities:

1. An after-school program during the school year for low-income kids
2. A summer camp for a broad cross section of kids on a sliding scale fee
3. A book store for the general public
4. A backpack program where donations from local stores are gathered, assembled and given to children in the program.

The after-school program for at-risk kids has a high social impact (their results are great) but it is very expensive to the organization.  This would be a “Worthwhile” program in the matrix.  The summer school is “Beneficial” because they make some money off of it, and it has social impact.  The book store would be a “Sustaining” program because it provides them a high financial return, but little social impact.  Finally, the backpack program, which provides each child a couple of notebooks and some pens and pencils, has little social impact and no financial return, is a “Detrimental” program.

Once each program is plotted on the matrix, the organization can make some difficult decisions.  The strategy, according to the matrix, would be to “carefully nurture” the after-school program, “cautiously expand” the summer school program, “sustain” the book store, and “cut” the backpack program.

However, there are always shades of gray, and any good tool needs to allow for that. Perhaps the summer school program provides some social impact, but not enough because it is a 50-50 mix of at-risk and low-risk kids.  So an expansion of that model might detract from the overall social impact of the organization.  The organization might want to grow the social impact side of the program (enroll more at-risk kids) while growing the book store revenues or increasing the price for low-risk kids to subsidize that growth.  The point is that by analyzing each program/activity/product/service of a social enterprise the organization can make strategic decisions about growth, maintenance, pruning and ultimately where best to funnel limited resources in order to create sustainable social impact.

Tags: BCG Matrix, Mary Mohr, Nonprofits, Robert Gruber, social entrepreneurs