If You’re Out to Change the World, How Do You Know When to Move On?

July 3, 2013 Editor 0

A certain phrase has gained currency in my world lately: the notion that a social enterprise must have an “exit strategy.” Social enterprises, of course, are organizations designed primarily to yield social versus financial value. But here the community is borrowing a term from traditional venture capitalists, who know that a big part of maximizing returns is having a plan for when and how to end one’s involvement in a venture and invest resources elsewhere.

It’s much-needed advice. At least in my corner of the social enterprise world (the part that focuses on communities’ access to good water), I have yet to see a successful, strategic exit. To be sure, many international water agencies have left developing countries but those exits tend to reflect a loss of funding or end of a contract — or sometimes a convenient belief that a community water challenge has been solved by simply installing a water system and providing basic community management training.

Sadly, there are also the investors who don’t exit at all: the international NGOs who become a permanent feature in a country, seemingly doing little more than sustaining themselves for decades. You know them. These are the organizations that speak with conviction about how well they know a specific nation and its issues as they celebrate their 25th anniversary working there.

If we truly planned for return-maximizing exits — made that the explicit objective and kept our sights on it throughout — much about our programming and behavior would change. Because the road to exit is not already well trod in the water development sector, we at Water For People are attempting to map it for ourselves. Even more, we hope we can model it for others.

When your mission is social benefit, the “when” of the ideal exit is in a sense very simple. It isn’t when enough clean water has flowed that you think your efforts have paid off. It is when the problem that was preventing enough clean water from flowing has been solved. A venture capitalist can declare victory when he or she no longer needs a startup to produce more value. In our work, victory means that the districts where we work, comprising hundreds or even thousands of villages, no longer need our support to keep water systems operating.

The magnitude of that goal can make the right time to exit seem like “never.” That is particularly true in the water sector. Every international NGO (INGO) and aid agency involved in water supply has a mission statement along the lines of “we envision a world where no one dies of a water-related disease.” Ours is similarly ambitious: to ensure reliable water services for Everyone Forever in the districts we have targeted worldwide. Faced with a daunting goal like that, most agencies default to tracking their incremental efforts. A good year is one that sees more beneficiaries served, more wells built, more loans given and repaid. Metrics like these may reassure donors, or give one INGO more influence than another, but they shed little light on whether these interventions brought a district closer to a point where INGOs are no longer needed. These incremental efforts tend to establish endless cycles of INGO work and perpetuate their continued involvement in addressing water challenges.

The key, we think, to breaking these habits, is to shift the focus from immediate returns to lasting impact with a clear exit strategy. More specifically this means to work at reasonable scale; to measure not what you are putting in, but how effectively you are catalyzing others’ contributions and scaling back yours; and to monitor long afterward to determine whether solutions are proving sustainable. (For a full explanation of the principles of Everyone Forever, see here.)

Remember: the objective is to solve the problem not temporarily but forever. If Water For People supports a program that leads to full and ongoing water coverage in a geographic area like a district, it will only be deemed a success if these districts never need another INGO for their water challenges again. If water systems break down and another agency is needed, then we have failed to achieve our goal.

The smart venture capitalist thinking about exit strategy doesn’t assume that every investment will succeed. With a clear exit strategy, we’re able to see when our continued efforts are no longer effective. We either see the potential for full coverage at a district level in alliance with local governments, local communities, and the local private sector, or we leave because we cannot catalyze that activity. We either wind down as others step in or we recognize that we are part of the problem because we are making ourselves a permanent development fixture, and close.

In short, we either transform lives by working in a way that actually keeps water flowing, or we do not. Either way, we exit.

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Categories: Feature Articles

Tags: exit strategy, social enterprise, venture capitalist, Water