I joined Hagar a few weeks after the onset of the global financial recession in late-2008. I was tasked with completing the formation of Hagar Social Enterprise Group (HSEG), a company that would provide strategic and operational support to Hagar’s social enterprises to help them grow and better accomplish their social mission. Furthermore, it would play a pivotal role is separating the risks between Hagar’s nonprofit and for-profit social business activities.
The importance of this new structure was apparent the day I started at Hagar. The combination of long-term operational issues and the sudden collapse of the financial markets quickly drove two of Hagar’s social enterprises (Hagar Soya and Hagar On-Time!) toward insolvency. Without a clear role or mission for the social enterprises, the Hagar community was not aligned on how to best deal with the situation. Internal stakeholders asked themselves, “Do we use our scarce funds to subsidize the businesses and keep them afloat? Do we close both of the underperforming companies?”
Hagar leadership began to ask some tough questions about the role and mission of social enterprise in our model. As we went through this painful process of reflection, we refocused our efforts around a single question: how do Hagar’s social enterprises best serve Hagar clients?
We realized that our social enterprises had been slow to adapt to the changes in the local economy and among Hagar’s clients. The typical Hagar client was now younger than before, better educated and had wider career aspirations beyond the three enterprises we owned. As well, we recognized that we needed investors and partners with deep business expertise, allowing Hagar to focus on supporting the integration between the non-profit social programs and for-profit businesses. We would not be able to do everything well – we decided that we needed to focus on where we could drive the most value for our clients.
As HSEG managed the transition to a new social enterprise strategy in 2009-2010, the results of John’s focus groups with clients directly influenced our decisions on how to better align our business and social impact objectives. We found partners to that would buy Hagar Soya and Hagar On-Time, and continue to run each as a social enterprise. We completed a joint venture with two extremely experienced industrial catering professionals that have added tremendous value to the business. Finally, we completed an investment in Joma Bakery Café to fund the expansion of the founders’ highly successful bakery café concept throughout Southeast Asia, training and employing many clients from Hagar and other nonprofits.
With the newfound ability to focus on social integration, Hagar concentrated on strengthening the social and operational performance of our investments: training, organizational development, human resources management, employee development, and social impact measurement and reporting. All of this takes an integrator, like HSEG, that can empathize with both the nonprofit and business, and stand alongside the business as it strives to support Hagar’s mission.
After three years of restructuring and support, Hagar’s social businesses have outperformed our best expectations, both on a financial and social impact basis. There is still much work to be done, but the trajectory is positive.
There is no set formula or social enterprise model to solve complex issues; change is the norm. What got you here, likely won’t get you there. At Hagar, we take the time to reflect on our mission and core values, as these will help us to continue to innovate effectively.
Tim has been working with Hagar’s social enterprise investments since 2008. He is currently the Acting Social Enterprise Director and a board member of Hagar Social Enterprise Group. Tim is based in Washington, D.C. and provides consultancy and business development services to start-up social enterprises and impact investment funds.