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The Role of Human Capital in Scaling Social Entrepreneurship The Role of Human Capital in Scaling Social Entrepreneurship
Dawn Harris
Loyola University Chicago
Yasemin Kor
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The Role of Human Capital in Scaling Social Entrepreneurship
163
Journal of Management for Global Sustainability 2 (2013): 163–172
© 2013 International Association of Jesuit Business Schools
THE ROLE OF HUMAN
CAPITAL IN SCALING
SOCIAL ENTREPRENEURSHIP
DAWN HARRIS
Loyola University Chicago
Chicago, Illinois, U.S.A.
dharri1@luc.edu
YASEMIN KOR
University of South Carolina
Columbia, South Carolina, U.S.A.
ykor@moore.sc.edu
Abstract . In this article, we discuss the importance of human assets in
growing and scaling a social venture in order to achieve its objectives and
attain financial sustainability. We focus on the three key dimensions of how
a social enterprise’s human assets contribute to the effectiveness of the
company’s operations and its missions: 1) human capital acquisition, 2)
human capital development, and 3) human capital retention. In discussing
and unpacking these three dimensions, we draw from rich insights and real-
life examples from two social ventures we studied: Solar Sister of Uganda
and E-Health Point of India. These inductively-generated research insights
underscore the importance of productive engagement of human assets for
the long-term viability of social ventures and in achieving their objectives on
a broader social scale.
Acknowledgements. We are grateful to Katherine Lucey of Solar Sister and
Amit Jain of E-Health Point for sharing their experiences and providing us
Dawn Harris & Yasemin Kor
164
with rich insights and examples for our study. We also thank Thane Kreiner,
the Executive Director of the Center for Science, Technology, and Society
at Santa Clara University, for providing us with access to the social ventures
affiliated with the Center.
INTRODUCTION
A recent review of the literature suggests that social entrepreneurship
research is receiving increased interest and momentum (Short, Moss, &
Lumpkin, 2009). Although a unied denition of social entrepreneurship
has not yet emerged (Christie & Honig, 2006; Weerawardena and Mort,
2006), we use the broad denition of social entrepreneurship that has
been developed by Mair and Marti (2006: 37) who view “social entrepre-
neurship as a process of creating value by combining resources in new
ways … [where] these resource combinations are intended primarily to
explore and exploit opportunities to create social value by stimulating
social change or meeting social needs.” In particular, we focus on the
knowledge, skills, and experiences of human resources that are considered
among the key contributors to a rm’s bundle of resources and capabili-
ties (Hitt, Bierman, Shimizu, & Kochhar, 2001; Lado & Wilson, 1994).
In this article, we discuss the importance of human assets in grow-
ing and scaling a social venture in order to achieve its objectives and
attain nancial sustainability. We focus on the three key dimensions of
how a social enterprise’s human assets contribute to the effectiveness of
the company’s operations and its missions through (1) human capital
acquisition, (2) human capital development, and (3) human capital reten-
tion. In the next section of the article, we rst explain why human assets
matter to social entrepreneurship. We then discuss how a rm’s policies
and actions in these three key dimensions can promote (or hinder) the
growth of the rm which is vitally linked to the delivery of social, en-
vironmental, and economic benets to the impacted communities and
stakeholders. In discussing and unpacking these three dimensions, we
draw from rich insights and real-life examples from two social ventures
we studied, Solar Sister of Uganda and E-Health Point of India. These
inductively-generated research insights underscore the importance of
productive engagement of human assets for the long-term viability and
successful scaling (growth) of social enterprises.
WHY DO HUMAN ASSETS MATTER IN
SOCIAL ENTREPRENEURSHIP?
The Role of Human Capital in Scaling Social Entrepreneurship
165
Systems, activities, and routines for acquiring, organizing, develop-
ing, and rewarding human resources directly inuence the processes in
which rm competencies are developed and renewed (Huselid, 1995;
Lado & Wilson, 1994; Prescott & Visscher, 1980). These rm-level capa-
bilities which are built on specic human capital development systems
can be difcult to imitate because these systems involve routines that
are rm-specic, socially complex, and path-dependent (Kor & Leblebici,
2005; Reed & DeFillippi, 1990).
With regard, therefore, to the utmost importance of human assets
in terms of skills, experience, and good work ethic, social enterprises re-
semble for-prot corporations. In social ventures, however, the versatility
of human resources both at managerial and operational levels often goes
beyond the norms we observe in for-prot organizations. Because social
ventures usually operate under resource scarcities and in environments
with weak institutions (e.g., physical, technological, legal, economic, and
educational infrastructures), their human resources often demonstrate
increased exibility, rapid knowledge and skill acquisition, creativity,
entrepreneurial drive and energy, and strong intrinsic motivation (Miller,
Grimes, McMullen, & Vogus, 2012). The availability and continuity of
managers and operational staff with such qualities matter immensely,
therefore, to the development and sustainable growth of a viable social
enterprise. Healthy growth brings economies of scale and efciency in
operations, helps build reputation and rapport with targeted communi-
ties, and can be a precursor to nancial sustainability. However, social
ventures often experience heightened challenges in building and growing
their human asset stocks and competencies on a par with their expand-
ing operations; thus, overcoming these challenges will be vital to their
survival and mission. We turn to such challenges in the next section.
1. Human Capital Acquisition Challenges and Strategies
Human capital acquisition involves recruitment of managerial, eld/
operational, and support staff with essential knowledge, skills, and
mindsets (Adner & Helfat, 2003). Regarding human capital, Becker’s
(1975) research distinguishes between generic and specialized human
capital. Generic human capital reects education, skills, and experience
that have applicability in multiple rm and industry settings. Special-
ized human capital tends to be context-specic, such as the knowledge,
skills, and connections one can build while working in a specic rm
or industry context (e.g., health care industry). Firm-specic human
capital, which entails a deep understanding of a particular rm’s unique
culture, strengths, vulnerabilities and tacit knowledge, is associated with
the rm’s social context (Castanias & Helfat, 1991). Firm-specic human
Dawn Harris & Yasemin Kor
166
capital may accumulate through years of experiential learning in com-
pany operations where highly specialized skills are developed.
Acquisition of essential human capital could be a major challenge
for social ventures due to internal resource shortages and external labor
market conditions. In the social ventures we studied (Solar Sister and E-
Health Point), we expected to see heightened difculty in nding and re-
cruiting talent considering the developing nature of the countries where
they operated. Surprisingly, however, both rms were satised with the
pool of talent in these countries (Uganda and India, respectively) and
they were able to hire bright, well-educated managers and employees.
The key difculty they experienced had more to do with specialized
human capital—many of the hires, while well-educated, lacked context-
specic (specialized) skills.
Specically, E-Health Point
1
provides clean water and health care
services to low-income rural communities in India. The rm uses in-
formation technology to connect local patients with doctors who are at
off-site locations. E-Health Point was able to locally recruit well-educated
nurses, paramedics, and pharmacists, but as company CEO Amit Jain
realized, these employees still needed specialized training in customer
management, English speaking prociency, and the ability to work with
computers, all of which are essential to the rm’s business model.
As a company objective, Solar Sister
2
aims to empower women with
economic opportunities in Sub-Saharan Africa (mostly Uganda) by
recruiting and training them to sell micro solar products in their com-
munities. Through founder Katherine Lucey’s social networks and via
formal recruitment, Solar Sister was able to hire highly talented manag-
ers and regional coordinators. Lucey, however, found out that additional
formal training and high touch mentoring/coaching were needed for the
employees to become skillful salespeople in the local cultural context,
one where entrepreneurship is not always naturally embraced. Thus, for
both Solar Sister and E-Health Point, good recruitment was crucial, but
it was only the starting point to be supplemented by signicant internal
development efforts. As such, we now turn to the challenges and strate-
gies of internal human capital development.
2. Human Capital Development Challenges and Strategies
1
http://ehealthpoint.com/
2
http://www.solarsister.org/
The Role of Human Capital in Scaling Social Entrepreneurship
167
Human capital development involves training as well as motivat-
ing and rewarding employees. Human capital pertains to innate and
learned abilities, as well as expertise and knowledge gained through
education, training, and on-the-job experience (Becker, 1975). Human
capital researchers have studied productivity-enhancing investments
such as education, health care, training, and rm-specic knowledge
acquisitions, as well as the payoff from such investments (Harris & Hel-
fat, 1997; Gimeno, Folta, Cooper, & Woo, 1997). This line of research
shows that individuals with higher quality human capital deliver better
performance, and thus can be key sources of competitive advantage for
the rm (Hitt et al., 2001).
In social ventures, managers face the challenge of developing spe-
cialized training materials that t unique service needs, distributing
and effectively utilizing these materials in geographical locations that
can be dispersed and diverse, and recruiting the appropriate individuals
who can do effective training, as well as those who can enhance their
skill sets from this training. We anticipated that formal training would
be a major component of the systematic training process; however, we
did not foresee how important informal training and coaching in social
entrepreneurship is. Partly due to the specialized nature of training (i.e.,
guidance and advice tailored to situations, locations, and individuals)
and due to the intimate, personal nature of social interactions, formal
training does not sufce. Entrepreneurs (and their managerial/training
staff) often need to put in substantial time mentoring and coaching as
situations and challenges arise. Formal and informal training thus play
complementary yet distinct roles in human capital development.
We also noted that due to differences in interests, values, and a base
level of knowledge and skills, not all individuals benet sufciently from
training. The social venture can end up wasting precious time and re-
sources if training is not properly targeted. Pilot training thus became
essential in order to determine the characteristics or competency-value
proles of individual actors (e.g., trainers, sales people, and even managers)
who should be targeted for additional formal and informal training.
Solar Sister, for one, continues to try to be more systematic in its
training efforts, which are important as the company continues to grow
within Uganda and into other countries. The women entrepreneurs
whom the company relies on have deep social networks but they do not
always realize how to reach those networks. Social entrepreneurs at the
company thus undergo formal training and a certication process on
how to be successful salespeople. During the training process, they are
taught to visualize their social network by drawing a map. Each social en-
trepreneur can then expand her market and achieve higher sales goals.
Dawn Harris & Yasemin Kor
168
However, while formal training is crucial, a good portion of the criti-
cal training is verbal and informal. High touch mentoring and coaching
remain essential because experiential learning matters in this context.
Katherine Lucey, the founder of Solar Sister, is dedicated to the mentoring
of the rm’s sales managers (regional coordinators), so she communicates
regularly with them to hear their concerns and challenges, offer guid-
ance, and engage in problem solving with them. Sales managers also
interact with one another, discussing the challenges encountered and
solutions found, and they gain considerably from such lateral learning.
In addition, Solar Sister invests in the most promising social entrepre-
neurs with additional nancing and training. These promising social
entrepreneurs, called “anchors,” have the potential to sell a broader
portfolio of products (e.g., solar cell phone chargers) in addition to the
primary product, a solar lamp.
Furthermore, the participants in social entrepreneurship (e.g., man-
agers, employees, and community participants) can be motivated and
rewarded to increase their engagement and the overall productivity of
the organization. However, similar to what we learned about training,
we found out that motivation and reward systems are not universal. The
specic cultures and social contexts determine how individuals preferred
to be motivated and rewarded for higher performance. For instance, So-
lar Sister encountered a cultural challenge when they tried to motivate
and reward high productivity. Unlike the success-oriented culture of the
United States, where employees expect to receive monetary rewards for
high performance (e.g., bonuses), the culture in Uganda is community-
minded, and employees are not accustomed to pay-for-performance
incentives. For example, when Solar Sister offered a team leader a bonus
system based on her team’s sales productivity, the team leader was con-
cerned that this system would create distrust in her team and network.
Solar Sister thus turned to an alternative reward mechanism, i.e., a xed
bonus amount that was not directly tied to her productivity. Another
example is when some of the Ugandan women entrepreneurs stopped
selling solar lamps after they reached the amount of money they needed
for health care or their children’s school fees.
We thus observe that human capital development policies, includ-
ing training, motivating and rewarding social entrepreneurs, require
culturally-sensitive and creative solutions designed for specic contexts.
Such policies benet from combining formal and informal training
efforts. They also benet from creating a t between the levels (and
types) of investments and the competency-value proles of individual
participants in the social enterprise system. Given all this, we now focus
The Role of Human Capital in Scaling Social Entrepreneurship
169
on the challenge of how to retain essential human resources after a so-
cial venture invests heavily in developing their general and specialized
knowledge and skills.
3. Human Capital Retention Challenges and Strategies
Unwanted turnover of human resources both at managerial and
operational levels can be a serious challenge (Shaw, Duffy, Johnson, &
Lockhart, 2005). In social ventures, turnover can be particularly devas-
tating when rms are in the process of becoming established and trying
to scale up. It can be disruptive to day-to-day operations, and is also
costly especially when it involves the departure of employees who have
received specialized training in the company. High turnover can also be a
serious threat to the ability of a rm to scale up in order not only to fulll
its mission (in a larger community) but also to achieve operational and
distribution efciencies that can be paramount to nancial viability.
In environments with a scarcity of highly-skilled workers, reten-
tion can be hard to achieve. In social enterprises that operate in such
environments, we observe that rms face a turnover paradox such that
the more they invest in training and developing the specialized human
capital of their employees, the more attractive their employees become
to their direct competitors or other rms. Put differently, effectiveness in
training and human capital development can ironically result in elevated
levels of unwanted turnover.
E-Health Point faces this challenge at various levels of employees
and management. In the clinics they operate, their technical personnel
(nurses and pharmacists) have been heavily recruited by competitor clin-
ics which value E-Health Point employees’ customer management and
computer skills. As a solution, the company began providing additional
incentives and promoting promising employees to supervisor positions.
The CEO of the company, Amit Jain, explains that about 30% of clinic
employees are women for whom employment opportunities are usually
limited. These employees are treated well at E-Health Point, and they
appreciate the supportive company culture and being able to work close
to where they live (in rural locations). Combined with incentives and
promotion opportunities, these intangibles may act as strong induce-
ments for women to stay with the rm.
Turnover at the middle-management level has also been a challenge
for E-Health Point. This level consists of management trainees with MBA
degrees who are expected to advance quickly and take on high-level re-
sponsibilities. Many of these trainees, however, leave the rm within a
Dawn Harris & Yasemin Kor
170
year because even after a short period of experience at E-Health Point, they
become more attractive in the labor market and can get jobs in urban ar-
eas. These employees seem to treat the rm as a training ground, and this
has been a concern to the company. As a remedy, E-Health Point decided
to rely less on generic MBAs and started recruiting sectoral health-care
MBAs with specialized skills and a strong interest in health care careers.
The company has also recently started experimenting with a two-year
contract that discourages employees from leaving early in their tenure.
The E-Health Point example highlights the importance of recruit-
ing the right people with the “right credentials and values.” The generic
MBAs may not have the best t for a social venture if their immediate
(and near future) goals are to seek high-paying, urban corporate jobs.
In social ventures, an important aspect of recruitment is to hire people
not only with the appropriate skill set but also with the relevant values,
interests, and life style preferences. Social venture jobs tend to have id-
iosyncratic challenges that many otherwise capable job candidates may
fail to cope with (e.g., working in rural and remote areas with resource
scarcities and lack of infrastructure). Thus, employee mindset, values, and
preferences are just as important as education and experience credentials.
In fact, values and mindset are hard to change whereas certain skills can
be developed or enhanced through experience and training (Mintzberg,
2009). We thus observe that success in employee retention is intertwined
with careful planning and due diligence in the recruitment stage.
It is also noteworthy that offering market-competitive salaries is not
always a solution to turnover challenges (as E-Health Point found out).
It is critical that employees (including management) in social ventures
are compassionate and psychologically invested in the company and
its cause (Miller et al., 2012). Employees are entitled to a good pay and
work environment, but they also need to be intrinsically motivated, and
derive energy and satisfaction from being part of a social enterprise.
Put differently, a combination of monetary and non-monetary incen-
tives is likely to be more effective than one form of incentives alone, yet
such combinations would only work to the extent they are valued by
the employees. Thus, a match is needed in terms of company goals and
employee (personal) objectives. This brings us to full circle in terms of
the importance of the diligent recruitment strategy as our starting point.
Here we emphasize that a successful recruitment strategy involves frank
and clear communication of the rm’s objectives, challenges, and avail-
able resources, as well as the opportunities for personal growth for the
employees. Social ventures are dynamic and evolve quickly; thus, these
The Role of Human Capital in Scaling Social Entrepreneurship
171
conversations need to be revisited regularly. Founders and managers,
moreover, play the most central role in this continuum of exchange,
education, and co-learning.
CONCLUSION
In this article, we have focused on how a social enterprise’s human
assets contribute to company effectiveness and growth through its poli-
cies on (1) human capital acquisition, (2) human capital development,
and (3) human capital retention. We emphasize that, in recruiting social
venture employees, it is important to consider not only generic skills and
education, but also the more crucial and harder to nd specialized skills
necessary for a specic social enterprise. It is also essential that informal
training be promoted (although formal training is still important) and
that top performers be identied/targeted for additional training. We also
note that effective motivation building and rewarding involves designing
(monetary and non-monetary) incentives based on specic contexts (e.g.,
business type, rm and country culture). We highlight that incentives
matter a lot in both motivating and retaining social venture employees,
but this alone is insufcient. Retention of trained human resources also
relies on diligence in the recruitment stage, with equal emphasis placed
on both the skill sets appropriate for, and the values relevant to, being
part of a social endeavor. In combination, these human capital strategies
(in acquisition, development, and retention of human resources) can play
a substantial role in the ability of social ventures to achieve viability,
prosper, and fulll their objectives on a broader social scale.
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