How to Navigate Your Impact Business through Uncertain Times

Written By: Joana Breidenbach for the BMW Foundation Twenty Thirty blog
Published on Twenty Thirty on: June 19, 2020

The world as we have known it has suddenly come to a standstill. In this eerie pause we can see the gap between the habitual world we have inherited, including its many dysfunctions, and a possible better future: a society and an economy that are more equitable, healthy, and respectful of planetary boundaries. But for this transition to happen, we need a new type of leadership. We need people who have the right mindset and skills to navigate the complex transformation from the national-industrial to the global-digital age.

Based on my own experience with new self-organized forms of leadership and collaboration in a social business, I will outline a few lessons learned over the past five years. These are, I believe, highly applicable to the volatile and uncertain post-COVID-19 era and can provide some guidance for organizations as they navigate the current transformation.


1. The coronavirus stress test has hurt impact businesses

But before diving into leadership, let’s look at the current situation of many social entrepreneurs and impact businesses in Europe. Many of our organizations and companies are struggling under the coronavirus stress test.

We are confronting a paradox: For the last decade, an increasing number of social entrepreneurs have developed agile and innovative answers to ecological and social challenges. Their market-based business models promised to make organizations not only more sustainable but also more responsive to the actual needs of clients and customers.

But in the current crisis these very qualities are backfiring. With the economy in semi-lockdown, many goods and services provided by these organizations have broken down and with them all of their revenue. One prominent example is Dialog im Dunkeln (Dialogue in the Dark). This well-established social business based in Hamburg, Germany, which enabled sighted people to experience the world of the blind, had to close its doors after losing 90% of its revenue.

Like most social businesses aiming to break even, the organization does not have the financial buffer to survive such a revenue loss. It also does not fit the criteria of the rescue packages provided by the German government, as non-profit social businesses are not eligible for commercial loans.

Thus the crisis seems to be benefiting more traditional NGOs which rely on long-term grants from foundations or public institutions, few of which have withdrawn their support. Yet the more dynamic and agile initiatives, which rely on short-term funding to respond quickly to acute needs (such as the 2015/16 European refugee crisis or COVID-19 itself) are finding themselves in a much more difficult situation, as most funders are hesitant to invest new money.

The current situation is dangerous, as many new digital-savvy, agile, and dynamic social businesses, well suited to tackle the “wicked problems” we are facing, are in danger of falling through the grid of both the market and the rescue measures. If we want to create a dynamic impact eco-system, we urgently need to provide tailored support to these new kinds of NGOs, social and impact businesses.


2. Navigating complex, messy environments requires new leadership competencies

Not all impact businesses are suffering. Those with a strong digital component and/or a for-profit business model are very well positioned to thrive in the new environment. These include innovative and often local solutions in essential industries like energy, food, and mobility. They are based on antifragile systems (Taleb), which means they are decentralized, open source, environmentally friendly, and capable of repair and change.

For these promising approaches to succeed in an increasingly messy and unstable world, we need new types of leadership. The hierarchical command–and-control style of running a business may have been suitable for the more predictable, standardized industrial world. But it’s proving too rigid, slow, and wasteful of talent for the current era, which is not only much more complex, but operates under the looming threat of climate collapse and societal and political fragmentation.

In order to manage this fast-changing and uncertain world, companies and organizations have for some years tried to become more agile and responsive. They have flattened hierarchies, abolished fixed role descriptions, and introduced remote work. COVID-19 has accelerated this trend, as #homeoffice has suddenly become a mainstream experience. With this shift towards greater autonomy and self-management, founders and leaders are confronting new questions: How can I manage a decentralized team? How can I communicate effectively in a network? How can I motivate my employees and control the quality of their work?

Decentralized and self-managed teams require very different leadership skills. Leadership functions such as strategy development, recruiting, or quality control are suddenly no longer concentrated at the top but distributed throughout the team. This requires a very different flow of information as well as different decision-making processes and control mechanisms.

But, as I learned in my own company, if these reorganizations only touch on external structures and processes, they are doomed to fail. When I stepped down as CEO and introduced self-management instead, we learned that transformation, in order to be sustainable, has to be much more holistic, demanding new inner competencies of every team member.

Why do we need to include our inner beings – our feelings, needs, values, and mindsets – in the change process? Well, in the wake of dissolving traditional structures, we are losing our habitual external markers for security and orientation (the boss, the rules, etc.). But as security and stability are basic human needs, we have to find them elsewhere: in a volatile and uncertain external world this can only be in our selves and in our relationships.

Leaders (as well as team members) need to grow psychologically; they need to know their values, what makes them productive, and how to organize themselves. Lacking formal processes for many situations, they need to communicate much more transparently with their colleagues. And they have to be able to manage the fears and anxieties which will undoubtedly accompany their work.


​3. Overcoming burn-out and establishing a wellbeing culture

This new focus on inner competencies is all the more important, as many social entrepreneurs and impact executives are already struggling psychologically. Research findings among social entrepreneurship networks and co-working spaces are alarming: Well over 50% of founders and employees report burn-out and depression, up to 75% regularly consume drugs or alcohol to cope with stress. And many pioneers find themselves in precarious economic situations.

There are many reasons for this wellbeing crisis: Most founders and executives are tackling grave social and environmental problems. They are highly self-motivated and have a tendency for self-sacrifice, while at the same time operating with limited and mostly inadequate resources. Funders for their part have for a long time focused on reducing overheads, leading to a chronic underinvestment in capacity building in the social impact sector. On top of that, the COVID-19 crisis has increased the stress level in many organizations enormously.

All of this leads to a lot of individual suffering and reduced social effectiveness, as organizations built on scarcity and stress are unable to provide healthy services for others.

Yet there is hope on the horizon: global initiatives such as the Wellbeing Project are advocating for a new culture of self-care and inner work in the social and impact sector. Wellbeing refers to deep personal development work which leads to wholeness and connection. Practices supporting wellbeing may include meditation, spending more time with family, reflecting on one’s life, or seeing a therapist. These practices lead to better mental health, more life satisfaction, a sense of meaning, and the ability to better manage stress. An ongoing series of articles in the Stanford Social Innovation Review explores this connection between inner wellbeing and social change in detail.

I’m personally deeply committed to this agenda. With the support of a diverse range of funders, the betterplace lab is currently designing a program for German social change actors that focuses on individual wellbeing competencies, such as self-inquiry, as well as organizational skills for better collaboration.

A new leadership paradigm appears on the horizon: creating thriving businesses whose ultimate aim is not shareholder value but a more equitable society and a healthy planet. For this we need to build human-centric organizations and enable more team members to realize their potential. Psychologically balanced and resilient individuals are well equipped to unlock their creativity in service of the larger mission of our organizations.
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As leaders, we can inspire our teams to embark on this new path, role model the new values, and support our employees to explore and acquire the new competencies needed.



ABOUT THE AUTHOR:

Joana Breidenbach
Joana Breidenbach (@joanabp) is founder of betterplace.org, betterplace lab, and The Future of Work needs Inner Work. She is deeply interested in digital-social innovations and inner work and also invests in meaningful startups.