Saturday, January 22, 2011

The Rajan Memorial Lecture by Prof.Sriram

The Rajan Memorial Lecture is an annual event at IRMA instituted in the memory of T S Rajan, an alumnus of the institute who died in an accident.
This year we had Prof. Sriram as the speaker. An alumnus of IRMA Prof.Sriram is ex-faculty member of IRMA and IIMA. For those who track the microfinance sector, Prof. Sriram is regarded as one of the top researchers in this field. But he himself would agree that his interests are much wider than just microfinance.
The topic was an interesting one and was provocatively titled "Profit or Purpose:The dilemma of Social Enterprises ." The lecture was scheduled a day before Milaap which is the annual alumni meet of IRMA. One of the events during Milaap was a panel discussion on Social Entrepreneurship. Hence this lecture was perfect in its timing.
Prof. Sriram began by dividing social enterprises into three schools of thought. The first were pure not for profit enterprises (read NGOs) where purpose was the overriding concern. The promoters of such enterprises primarily played on the motivational aspects of employees who were largely payed below market determined wages. The problem, as Sriram saw it was that these institutions had issues of scalability.The other issue was that the since employees were payed below market determined wages, they would seek higher goals and achievements ( to make up for the low wages) and may force the organisation into a mission drift. The related concern was that the employees, when not allowed to grow, might end up in some sense "commercialising"the operations (though Sriram did not use the same language). Hence profits might trump the purpose.
The second form of social enterprise is community managed institutions-cooperatives. One cannot but appreciate co operatives when one studies at IRMA. Sriram argued that these are beautifully designed organisations which aligns profit and purpose to meet member interests. However, we do not look at such organisations as "social" because they are embedded deeply in the market system. Amul is a case in point. I wonder if a large section of the consumer base of Amul are aware that it is a producer owned organisation.In co operatives, the focus is on patronage and not on capital. However, Sriram did point out the "horizon problem" that arises because members force the co operative to increase current cash flows at the expense of future earning. Also there is denial of patronage when co operatives put aside a part of earnings as reserves.
The third form of social organisation is what Sriram calls the BOP school of thought. These are market based firms which seek to integrate the poor into the mainstream economy. They adhere to the double bottomline principle-doing well and doing good. But as instances in the microfinance sector (Sriram did not touch on this sector) reveal that one attracts great scrutiny when one seeks to achieve this double bottomline. So no one will question Arvind Mills selling organic cotton jeans in its stores but Fabindia will invite scrutiny if its sells garments or products not in tune with its "purpose". So as Sriram cogently put it, where you come from and where you are headed is very important for such organisations. Governance, then is the most important issue facing "social enterprises". But, as he conceded, it was easier said than done.
His talk was peppered with several examples for each type of enterprise. Some of the examples included Christian Medical College, Sankara Eyecare, Jaipur Foot, GCMMF, etc.
It was evident and as Sriram put it-he was hard selling co operatives. Not surprising for someone who was called the "co operative purist" of IRMA by Tushaar Shah in his book " Making Farmer Co operatives Successful"
Overall, it was a pleasure to hear Sriram for the first time. Not to mention the proud feeling of seeing one's senior hold forth so beautifully on a very fuzzy topic!

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