Financials the Toughest Challenge for Social Standout

An iconic social Services Not for Profit operating several cafes in Melbourne’s inner suburbs is producing stunning social outcomes despite its ongoing quest to achieve financial sustainability, writes Nadia Boyce in this week’s Spotlight on Social Enterprise.

Jesuit Social Services operates multiple social enterprise cafes in inner Melbourne, providing its clients with the opportunity for economic inclusion through targeted employment programs in the hospitality field.

Despite the overwhelming success of the enterprises in meeting the education and training needs of the long-term unemployed, financial sustainability remains a struggle.

Pro Bono Australia News met up with CEO Julie Edwards at the organisation’s offices in Melbourne’s inner suburbs. Dwarfed by the surrounding spires of St Ignatius Church, Jesuit Social Services has made a cosy home for itself in a draughty old school building on the grounds of Richmond's Catholic Parish.

The organisation was established nearly 40 years ago, with a focus on young people exiting the criminal justice system. It was founded on tenets of providing social support and friendship to those in difficult times, driven by the philosophies of a former Pentridge Prison Chaplain, Edwards explains.  

That vision remains. Indeed, Edwards’ relaxed manner belies the fact that she is – at this moment – a woman in demand: It is the eve of the executions of Bali 9 drug smugglers Andrew Chan and Myuran Sukumaran, and preparations are underway outside for a candlelight vigil.

She is reflective as she speaks at length about the organisation’s journey with social enterprise to date – what she has learned, her hopes for a rethink around funding models, and how the organisation plans to address – and overcome – the financial challenges its social enterprises are facing.

New Models for Changing Times

Jesuit Social Services first began to experiment with social enterprise as part of a string of attempts to boost education and training opportunities for its long-term unemployed clientele.

A changing society and job landscape, Edwards says, has demanded a more structured approach from the organisation and the broadening of its client base to include not just former prisoners but also asylum seekers, those with drug and alcohol addiction and those from communities where there is entrenched disadvantage.  

“I think what we’ve been really good at Jesuit Social Services is providing the friendship…and we believe that is the starting point of everything. But the world around us has changed in those 40 years. Homelessness is an increasing problem, and the other thing that’s difficult is getting a job,” she says.   

“With the changes in the workforce in terms of the increasing skill level required – the skilling up of the workforce – plus the casualisation of the workforce, what it means is that many of the people we’d typically work with have fallen out of the odd job work…and end up underneath a pile of long-term unemployed people.

“We started realising it was really important to help people get unstuck. We started feeling that if they were really going to participate in the community and take up role like everyone can…that we needed to do something to create a pathway to education, training, employment – some way they could more included socially and economically.”

Jesuit Social Services first tried to work with TAFEs and employment services but had very little success, Edwards says, realising that if the organisation wanted to make a difference it would need to step into that space itself. The Jesuit Community College helping with training in foundational skills was set up, along with a small biscuit baking social enterprise that proved to not be viable for the long-term.

Today, the social enterprise Ignite Café program consists of several cafes in Melbourne’s inner suburbs. The flagship Melbourne venue is The Green at St Columbs in Hawthorn (pictured), which opened late last year.

“The social enterprises we run are more around trying to create a real life work experience, like a living classroom, where people learn and then can hopefully transition to a job,” Edwards says.

“We take them into the college first, do a bit of training in the basics, like food handling. Then they have a workplace experience.  

“We get people who have absolutely no confidence, they might have applied for dozens and dozens of jobs, they might have anxiety issues.

“One of the things we really like about hospitality – and it’s challenging for those reasons – but what it brings with it is people contact. It brings those customer-related skills, which are really valuable. You can go somewhere else and you’ve really honed your people skills.

“What we’re very proud of is that the job services we work with say that we have well over double the [usual] success rate in terms of the people who go through our enterprises going on to ongoing training or work, so that’s a really great outcome.

“We’ve had about a 67 per cent success rate of people who go through our enterprises moving on into further training and employment.”

Meeting Hidden Costs

Honest but cautiously optimistic, Edwards is candid when asked about the financial toll of running such a resource-intensive program.

“[The social enterprises] are really financially challenging for us,” she says. “To do anything in the food and beverage industry is challenging for anyone, when you add to that that you’re taking long-term unemployed people, it’s really challenging.”

Edwards says the are many concealed costs that affect the ability of the model to be financially stable. She recounts a recent incident where emotional upset on the part of a staff member required two hours of one-on-one support from a manager, after promised help from external support organisations was not available.

”We wouldn’t dream of not providing support that someone needs at the time. Our model is set up to run like a business, but someone needs to step in at a time like that,” she says. “The business kept operating, we kept serving people, but we had to bring in someone from somewhere else at that time. It was totally appropriate, and we didn’t mind doing it, but these are the hidden costs of running something like this.”

Edwards says that currently sales account for about 60 per cent of income, money from the JSAs is roughly 15 per cent, and that the shortfall, met by donations and fundraising, is about 25 per cent.

“That can really change, and it can vary from cafe to cafe,” she adds.

“I think the reality is that organisations like Jesuit Social Services or others are often happy to underwrite or to support an initiative like that for a period of time, or to a level that’s sustainable. But I think what often happens is that the policy environment changes.

“We’ll receive, in the [new Government funding] deal post June 30, less funding from the employment services for the placement of someone. The environment changes all the time, so you might build a [business] case on one set of assumptions, interrogate them quite closely, and then find you’re operating in quite a different environment than the one you have believed you were doing to be operating in.”

Edwards would like to see subsidies and a rethink of funding approaches to ensure her organisation’s social enterprises can stand the test of time.   

“Our view would be, if we are looking at it as an intermediate labour market approach, trying to break the cycle of unemployment, then I believe it needs to be subsidised properly. That’s the only way, I can see, that we could make that kind of social enterprise sustainable in the long-term,” she says.   

“The reality is, we’ve done a lot of work over a period of time – a year or so – to do everything we can in those settings to bring our costs down, like looking at whether we can any more labour, and also to increase the revenue as much as we can.”

Finding the Experts

An important part of the continuing quest to improve the business is the securing of the appropriate expertise, Edwards says.

“Often, people like us – who are social workers, youth workers, community development workers – embark upon some of these exercises or enterprises without necessarily having the business acumen to succeed. We’ve learned an enormous amount,” she says.  

“I think that’s a note of caution, I suppose. I think that because we are so driven by the social cause, because we are so keen to make a difference in people’s lives, we bend of backwards to try and do that.

“We’d had some staff who’d had some industry expertise, but they had all done things like run their own cafe. When you move into an organisation that has its own policies and procedures, it’s quite a different beast, [especially] when you’re doing more than one cafe.”

An external consultant from the food and beverage industry was one example of budgeted funds well spent, Edwards says.  

“That’s been fantastic..she’s really helped us make sense of what we could do,” Edwards adds. “She said we were starring in things like the participant pathway, the quality of the food and the customer experience. Where we were lacking was in some of our industry skills around processes, managing the cost of goods – all those sorts of things. It’s been incredibly useful.

“Our business is basically social work…it’s not in our DNA. She just goes in, has a sniff, and knows what’s right and what’s wrong! So that’s a really critical feature, to have that kind of expertise.

“I think one of the other challenges that we’ve had is that our business support services aren’t set up for enterprises. They’re set up for managing funding and service agreements where you bid for a tender, you get a contract, you invoice, and the money comes, and so our financial systems are – they’re not clunky – but they’re just geared for that.

“You need the industry expertise, you need the financial/HR/business support services that support that kind of enterprise, and I think generally, at a high level in the organisation, you need that business development and commercial acumen.”

Evaluating the Future

Despite the very steep learning curve for Edwards and Jesuit Social Services, there can be no doubt that the organisation has deep commitment to what they are trying to achieve.

“We’re pretty clear we want to stay in the business of helping put people on a pathway to education, training and employment, by whatever means. The commitment of the organisation is to stay in the place of trying to create that pathway for people because we just don’t think it exists.  

“We remain flexible about how that's best achieved. Some people might say – and these are the sorts of conversations we might have – ‘Would we be better having relationships with employers who have cafes who might take one or two people rather than our organisation doing it?’ These are the things we continue to explore.

“Where that’s going to lead us, I don’t know. We’d like to continue to work with the Government to recognise the true cost – for them to recognise the true cost to them – of someone being on the dole for a long period of time, or being unemployed for a long period of time.

“We believe we provide a much cheaper option…we’d like to continue in an advocacy role, a policy role with government to do that, to trial new models.”

Edwards remains adamant that something must be done about funding to ensure continuing sustainability.

“Talking to the program participants who go through, we can see the difference that it makes. We’re very pleased with that, and that’s why I think we need to have a different discussion about a subsidised model. Because these people aren’t really getting to break that cycle unless we do something different. And not all social enterprises have to be like this, there’s different models, but I think there is a place for thinking differently around how we move people off the unemployment queue,” Edwards says.

“Without some form of subsidy, whether it be from Government, whether it be philanthropic – if you are taking long-term, seriously disadvantaged people, and maybe it depends what industry you’re in – but I’m not sure that you’d break even. I haven’t heard anyone talk about breaking even.

“I’ve heard that there are some kinds enterprises like waste management, something that perhaps doesn’t have the people-facing skills, where you actually get a contract so you’re assured of that revenue, those sorts of enterprises might work.

“But I think we want to give people a range of options. So I think there’s a future for it but I think we really need to see how we can sustain that for the long term and it remains a concern for us.

“I feel very confident. If we’re talking about 67 per cent of people going on to training and employment, I think that’s a very good outcome.”