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Social enterprise as an early years business model

Social enterprise as an early years business model

March 27, 2017 | By Ron Spreeuwenberg
This is a transcript of the Preschool Podcast, episode #37"Social enterprise as an early years business model”

Ron SPREEUWENBERG: Hi, I’m Ron Spreeuwenberg, co-founder and CEO of HiMama. Welcome to our podcast about all things “early childhood education.“

INTRO: This week we're in Episode 37 of the Preschool Podcast. We discuss the implementation of social enterprise as an early-years business model with June O’Sullivan, CEO of the London Early Years Foundation, also known as LEYF. As June says, a social enterprise is a way of doing business by doing good, and doing good by doing business. LEYF has won many awards for its innovative approach as it reinvests its profits into supporting its educators and the disadvantage families it provides opportunities for. LEYF’s mandate as a company is to change the world one child at a time.

If you are a director looking for inspiration on how to build and run your childcare business in a way that has social impact, then stay tuned for this episode of the Preschool Podcast.

Ron SPREEUWENBERG: June, welcome to the Preschool Podcast. Great to have you on the show.

Rae O’SULLIVAN: Thank you.

SPREEUWENBERG: So June, you're the CEO of the London Early Years Foundation, or LEYF as it’s referred to. I was reading a little bit on the web site about the background of LEYF. And I thought it was super interesting, so I think would be really great if you could just tell our audience in a couple of minutes a little bit more about how LEYF started.

O’SULLIVAN: LEYF originally was a small charity called WCS – Westminster Children's Society. And it was set up to support local families to be able to access childcare. And it was very much funded by the local authority. So it was very traditional, and some fundraising to get money to improve the nurseries - they were little nurseries. And it was also at a time when there wasn't a kind of a state approach to nurseries - it was very random.

And so I became their first external employee as an operations manager. And it struck me that we could do much more if we could do it differently. So eventually when I became the CEO I changed it to LEYF, the London Early Years Foundation, because A: I wanted to work outside the bar and work across London, and B: it struck me also that it wasn't right that only a so-small number of children could access what we wanted to do, which was to build a social enterprise model where we could balance out fees so that we could subsidize quite a lot of children who wouldn't otherwise access good-quality childcare.

So it became my kind of duty – my raison d'être – to create a business model that would allow us to provide really good-quality childcare and nurseries for children, employ lots of local people, build apprentice model and stuff, and in doing that create the model that would allow us to subsidise as many as – up to and including – 40% of our children.

SPREEUWENBERG: Wonderful. And quick side tangent for us over in the New World. Because the early days of LEYF, the Westminster Children's Society started in 1903, which is crazy. And so a really long history of this organization. And so you have formed a new business model with this organisation and you refer to it as a social enterprise. Can you tell us what that means?

O’SULLIVAN: Effectively a social enterprise is a way of doing business by doing good. The notion of a social enterprise is that you shape your business in such a way as, just by doing the business itself you are actually adding value and improving certain things. So it might be the way you employ. So it might be that you're running a business and you have decided that that business will be run by people who've had a homeless experience, or are deaf, or that have learning disabilities. And that the very model itself – the very structure of it – has that built into it. So for us our model is such that we want to run nurseries. We are a business so therefore we charge fees. But the way we set it up and the way we've organized the fees enables us to encourage and enable – at least for the last year I think it was 43% of our children – to have access to a free or subsidized place.

So it's not like a traditional charity where you're doing something good, and then if you have money leftover or you generate a bit extra you do something with that particular fund. I didn't want that. I wanted to so that the exact core of the business, even if you made no money at the end of the year, you simply washed your face. By its very structure it was doing good. So you were doing business by doing good, and doing good by doing business.

SPREEUWENBERG: Now why would you choose the social enterprise model versus, for example, a not-for-profit model?

O’SULLIVAN: Because I want to be independent. And what I found, having worked with WCF before we became LEYF, is that you’re in the hands of charitable donations of funding and other peoples’ agendas. And so therefore you can’t plan and structure your business on that basis. Sometimes its hand-to-mouth, sometimes is year-on-year. Whereas I thought, if we could choose the business model, which then means you can look out to the future for at least five years if not beyond, where you could take control of your own destiny and where you could be independent so therefore you didn't have to be in the hands, of say, policy decisions or handouts or government kinds of initiatives, that your central core business was quite independent, then I felt that that was a better, more sustainable model in the long term, and that if we really want to deliver high-quality childcare we couldn’t be dependent on random policy and statutory intervention when they had money and no strategy intervention when they did. Actually children deserve the high-quality childcare from the outset that is sustainable independent and is driven by the ethos of what's good for children.

SPREEUWENBERG: Now personally I'm a huge, huge proponent of social enterprise. I actually think it's the future of doing business in the world, and I hope we can all move in that direction. However, do you find that there [are] specific challenges with this model in the early-years space?

O’SULLIVAN: Oh, gosh, yes. I could make my life much easier by just simply running a straightforward childcare business. It would be so much easier: you recruit parents who can afford to pay, you take money, you provide them with a lovely service, you look after and you educate their children, and you go home at the end of the day you don't worry anymore. However, childcare and its enterprises goes A: one into the areas of needs, poverty and deprivation. So you choose to set up a nursery in a place where you know people have got issues. And secondly you want to recruit people who may not have the best starts. So you have to then build a whole training academy for trainees that's going to, in a sense, encourage them and give them an opportunity and train them and bring them on. And then you're choosing to also make sure that for every two children you have that have a flat fee pay you might try and subsidize a third child. And you're doing this in a marketplace where you're competing with all the private sector and with the statutory sector. So you're competing with the schools who have state funding and can take the three and four year olds – in this country now can take some two year olds, would you believe? – and the private sector where they have often the venture capitalist funded. Some of them are listed on the stock market. Some of them are great big, large driven businesses with a large amount of central funding. And then a lot of them are very small mamas-and-papas sort of environments struggling to do good by having a small, local nursery. So yes, you're absolutely right and enterprise has to find a means of competing on the open market, but also making sure that it's social values are embedded into a really strong business methodology.

SPREEUWENBERG: So there must be a constant challenge for you, then, in that you're really trying to do is compete against some of these for-profit models, for example, where they have funding from other sources. And you're trying to do that so that you can increase the scope and the scale of this social enterprise model that's benefiting the children and the folks that you're employing in the organization as well. Is that right?

O’SULLIVAN: Yes, absolutely.

SPREEUWENBERG: And let me just touch on the point about recruitment that you made. So in reading a little bit about LEYF and your recruiting policies and the type of employees that you're looking for, you have this apprenticeship program. Can you tell us a little bit more about what that is?

O’SULLIVAN: Yes. So, currently I have six hundred and fifty staff, and 60 of them are apprentices. And there's an expression in the UK which is called NEET, which means: Not in Employment, Education or Training. And it actually can be seen as quite a negative kind of label, where it implies that the young person that has got too many barriers and it’s all too much and really they're almost given up by the time they're 17 or 18. And so I start with trying to provide them with an apprentice program and wrapping a kind of a nurture program around it to prepare people into work. And shock of work for some people is a little bit overwhelming, and also working in early-years is not an easy job. You are busy and lively and you have to think on your feet and you have to be positive and you have to be well educated to understand how children develop. It’s no easy task.

But it struck me as, again, fundamentally unfair that young people were already being cast into the failure box and they haven't even reached their 20’s. So we started looking at how we might do that. And in the days before apprentices I used to have a trainee program. So what we did is we kind of amended that to then expand and take more and more apprentices. And of course what we found was if you did it right with them they became your H.R. pipeline. And so, many of mine – 80% percent of them, in fact – are now getting fulltime employment with us and are interviewed and actually get a job. And I have to say they're substantially better than some of the people we see coming from the outside.

So apprentice to me is a core to the organization. It's about reaching out and thinking beyond the kind of usual employment methodology. It's about doing it properly and fairly, I hope. And we have won a couple of awards for this. But I hope that what we do for our apprentices in providing the nurturing, support, coaching – a tutor in the classroom, a tutor in the nursery, all of those things, equitable treatment as a member staff – all those kind of things actually make them feel a sort of positive motivation and therefore they are likely to pass their qualifications, and that then they're on a trajectory forward about how they can think about a plan for their future and their careers. And some of my apprentices are now managers with me, and some of my apprentices are doing their degrees with me. And they came, many of them, with very dysfunctional backgrounds and very isolated and kind of abandoned, actually, by society in general. So for me apprentices are absolutely central to the way we look at who we employ and how we support our employees.

SPREEUWENBERG: I think that's such a wonderful example of this whole concept of doing business by doing good, because I know – at least in North America, and I suspect it's probably the same in the UK – that recruiting and retaining good talent in early-years education is a big challenge. And so you are able to help support the growth of the London Early Years Foundation while also providing this amazing opportunity to people who may not have otherwise had that opportunity, in providing them with some social mobility and providing them with a great opportunity to work at LEYF. And I think it's such a perfect example of how you can bring those two things together.

You also mentioned that you're able to provide services to children who may not otherwise be able to access your services. [Are] there any other examples of things that LEYF is doing to stand as a social enterprise?

O’SULLIVAN: I think one of the things… people often think about childcare as simply a service that delivers childcare and then it sort of locks it just into that space. But actually, children and what's happening to children is like the litmus test of our society. And you find yourself touching on all other things that matter that you wouldn't expect to be touching on. So for example, social enterprise is a collaborative organization. It's an organization that recognizes its place in a in the broader society. Currently we have a problem in London of recruiting young staff. I mean, early-years isn't highly paid. We pay within the market rate but it isn't a highly paid job. London is an extraordinarily expensive city. So we have nurseries right in the center of London. None of our staff can afford to live now in the city that many of them were born and brought up in. So I've been looking at lost housing, and looking at how we might build a kind of key work housing, how we look at supporting housing, how we can partner with other organisations that are housing organizations where we can look at interim housing opportunities, whether we can influence government policy on housing for key workers. And we're particularly interested in working with our new Mayor [of London] Mr. Sadiq Khan on those kind of things.

Now it's interesting: you come into work in the morning and there's 4,500 children in your gift to be looked after and to be educated and to be supported and all of those things. And you don't think that you then might find yourself addressing issues of, say, housing for your staff. Apprenticeship: we have a big issue going on here at the moment about apprentice levies and how apprenticeship should be more central. And they're looking at changing the model at the moment. You find yourself looking at that. Perception parents have about how to raise their children and what that looks like in terms of TV, social media, language development… you go around all of those things and you suddenly find that the notion of simply the simplicity of the idea that you run nursery education, it suddenly becomes much more complex, and more like a spider web of other elements that need to be addressed. And I think social enterprises, by their nature, tend to be collaborative and tend to look at other ways of connecting.

So for example our aprons are made by a wonderful social enterprise in north London called Fashion Enter where she has a factory and provides clothes for Marks & Spencer’s and ASOS and the likes, and then uses her margin to develop an academy where she trains women to become independent seamstresses so that they can run their own businesses or indeed work in factories or whatever.

And so clearly I would want to recruit, to procure, my nursery aprons or shoe covers from there. So there's a kind of a strength of relationships about how you do that. And of course we talked to her then, and she says one of the barriers to work for so many – of especially women, because becomes quite a gender issue at times – is childcare. “Is there a way we can develop some link? Can we do stuff together?” And you find yourself in those very interesting conversations that have started with a very simple request, or a very simple perspective, which is an apron, or a member of staff wanting to get to work, or whatever. So I think the journey around social enterprise, like any business journey, is enriched by the understanding that you're not simply a standalone in a corner. You’re a part of a community, you’re a part of a wider socio-economic sort of structure. And, for example, I like where I can employ staff who live in the local neighborhood. Now a lot of the neighborhoods that we try and operate in are poor. So therefore you're building a local economy in your own way by both buying and procuring your, say, nursery foods and stuff from, as well as employing some of the people who live there because you know that they will spend more of their money in that neighborhood. And so you build this kind of cycle of economic benefit, no matter how small that cycle is.

SPREEUWENBERG: Now the idea of a social enterprise in early-years education is quite a progressive movement, I would say. I haven't seen too many other organizations that have taken it on to the extent that you have with LEYF. Now most of them are sort of what we described before: they're either for-profit or they're not-for-profit. And in both cases there's challenges with those two structures. And I think, again, social enterprise I'm a big advocate of. But in the context of early-years education, where I think a lot of folks who are on the not-for-profit side, they're not business-minded. And they may see this model as where they think of words like business and profit as sort of like dirty words, for lack of a better explanation. Do you see a future for social enterprise in early-years education where the people that are sort of on the not-for-profit side can see the benefits and maybe make that transition?

O’SULLIVAN: I totally recognize your description here, I have to say. And you make me smile when you say how people feel that the word “profit” is a dirty word. And I totally don't get that, because, for me, profit is the important thing here. Call it surplus if you wish. But actually you have to grow and you have to develop and you have to make a profit if you're going to succeed as a successful business. Because it's what you do with the profit that makes the difference. And if you don't drive any profit off you either become a handout organization or you die. So this notion that profit is this kind of idea that means that you're going off to spend money buying a house overseas and two Jaguar cars is kind of old fashioned and unhelpful and needs to be really moved on. Because actually profit is what drives the success of our business. Because if the more money I make the more children I can support. And some years I don't make any money, but just hang in there. Or I put a lot of money into investing in, say, growth, or I might want to upgrade our systems or I might want to take on a nurseries that are failing, because if I don't take them no one else will. But there are children in them. And if I didn't make a profit I couldn't do that, and I couldn't make that decision.

And so therefore I would end up just either maintaining the status quo or dying. And so for me the status quo is not acceptable. The status quo – and as the world is going at the moment – is creating bigger divisions between the rich and the poor. The current status quo is creating a kind of complacency, sometimes, about: “We're good because we're in charge and you're bad because you're a business.” That is a crazy ill-considered, unintelligent thinking in my book. The fact is, businesses are good because they drive employment for people. But some businesses are bad. Some charities are good, and they develop research and they do amazing stuff and they figure out a way of solving problems – which is their point, is it not? And some aren't big, lumpy, unnecessary proliferation of repetition, really, and are stale and stunted. So in all of that sector you're going to get good and bad.

And some social enterprises are not going to survive. They're overambitious; they're slightly naïve, or their business model is not sound in the first instance. But the point is that social enterprise, if you think of the market place as a cheese, there is a wedge of social enterprise cheese that isn't going to actually inhibit a good, solid charity that has a purpose and wants to end whatever it wants to end – cancer, or looks after animal welfare or whatever – and business, which drives the economy.

There is a place in-between, which is the hybrid business, that a social enterprise is, which takes a bit of both and shapes that. And I think that in a world where we're seeing division rather than connection, where we're seeing lack of collaboration, where we're seeing the dissatisfaction, demotivation and quite a lot of cruelty, then to find a route that uses the best of both those words, that can drive some of the services that are necessary to keep the communities together and to deliver services, can only be a good thing.

SPREEUWENBERG: A hundred percent some phenomenal stuff you're doing at London Early Years Foundation, June. Really appreciate you coming on the show. If I'm listening to this podcast and I want to learn more about social enterprise and the model that LEYF is following, where can I go to learn more information?

O’SULLIVAN: Three things, please: Number one, follow me on Twitter at @JuneOSullivan. Number two, then you get to have access to my blog which is probably fairly hardhitting. And three, you can go on our website – www.LEYF.org – where you can have access to anything else. And of course we're always open for a conversation, an e-mail, a visit. People want to come and see us, we're a very open organization, we're very proud of what we do. And we always learn something from visitors. We always learn something new. We always learn something about ourselves and we always find something from the people who visit us. So all of those things would be great.

SPREEUWENBERG: June, thanks again for coming on the show. I love what you guys are doing. Keep up the great work and keep advocating for this social enterprise model. I think it's really the way of the future. And I look forward to seeing where LEYF goes with it next.

O’SULLIVAN: I look forward to seeing you tweeting it all out in a minute now.

SPREEUWENBERG: We will do. Thanks, June.

O’SULLIVAN: Bye-bye now.

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