Guest Articles

June 5

Paul Breloff / Daniel Waldron / Coco Lim

A Hidden Reason for Business Failure in Social Enterprise: Exploring Innovative Talent Solutions in Frontier Markets

Social enterprises are going where no one has gone before, developing cutting edge technologies and business models to reach customers who have long been overlooked by other companies. These innovative enterprises can’t rely on the well-worn business models of the past or futuristic technologies like AI to guide them. Extraordinary problems call for extraordinary people to drive solutions. Yet those people are in short supply and often come at a steep cost. 

The shared experience of Acumen (an early-stage investor) and Shortlist (an Africa-based executive search and workforce development firm) has taught us that failure to recruit and retain the right talent is a leading factor in company and investment failure. 

As one example, in 60% of Acumen’s failed investments, poor financial management was a key factor. This is an endemic issue when it comes to investing in companies that serve low-income households — especially in Africa, where 65% of CEOs say that a lack of talent is hampering innovation. Since social enterprises have a particular need for more innovation as they work to address some of society’s most pressing problems, it’s essential that they bring top-tier talent on board. 


An Acute Demand for Experienced Business Leadership

Companies that serve customers living in poverty face an acute demand for experienced, executive-level talent who can operate complex businesses in challenging and remote markets. Many times these businesses must design “full stack,” vertically integrated business models to innovate new offerings and fix broken value chains: Think PAYGO solar or integrated services for smallholder farmers. These new models create complicated financial and operational challenges: from multiple working capital cycles and complex unit economics, to lower-income customers with high price sensitivity, and persistent issues around liquidity and cash management. 

These contexts call for creative, sophisticated talent: executives with the ingenuity and agility to tailor established approaches to these unique demands. If they lack this talent from the start, companies risk scaling their problems alongside their operations. Acumen’s recent report highlights the anonymized example of GrainCo — a vertically integrated grain company that failed in large part because: (a) it did not build up a cadre of local technicians to service its equipment, leading to low uptime and missed revenue targets, and (b) it lacked a strong in-market CFO with the right understanding of key operational drivers of financial success. 


Talented Executives are often in Short Supply 

Unfortunately, executives who can cut through this complexity and guide enterprises are the hardest to recruit and compensate in thin-margin, remote markets. Most experienced executives can make more money elsewhere, far beyond what social enterprises can afford to pay them. Further complicating matters, the business context for these enterprises adds even more challenges than for most traditional companies: Operations are in far-flung areas, data reliability is low, politics and regulations can be unstable, and frontline staff may not have the training that experienced managers expect. All this makes it challenging for companies to find and retain candidates who have both the right local knowledge and the right skills and education. Even when bringing talent from outside is possible, this limits opportunities for women in particular, who face even higher barriers to relocation and tend to be more risk averse than their male counterparts when it comes to taking on roles at early-stage companies, due to their family and caregiving responsibilities. 

In more developed capital markets, startups solve this problem with stock-based compensation. But that solution is less feasible in Africa, where share sales and exits remain rare (though a handful of success stories are emerging). As a result, most companies find whatever full-time talent they can at the price point they can afford, leaving them with less experienced staff who are more prone to errors. One failed company in Acumen’s portfolio saw most of its well-trained credit staff leave for higher-paying bank positions once they acquired a sufficient level of experience. 

Like it or not, we must accept that the warm glow of social impact only goes so far in attracting talent. We need more options to plug this talent gap for social enterprises.


A New Approach to Talent in the Changing Future of Work 

In the broader business sector, companies are increasingly thinking about talent differently as the future of work continues to evolve. When the office was central to employees’ day-to-day experience, full-time employment had a clear advantage over part-time and other arrangements. But this is changing, and more companies are looking for experienced talent outside of traditional full-time structures. This shift is driven by several factors:

  • First, the rise of remote work means that companies are no longer dependent on people being physically present 9-to-5, five days a week. 
  • Second, companies are looking at various ways to control costs and get the work they need done in more creative ways: just in time and just in the right amounts. 
  • Third, part-time work from a more experienced professional is more valuable than full-time work from someone without the right skill level. 

This is all happening alongside changes in the tastes and aspirations of executives. For many years, executives aspired to the income, stability and identity of full-time employment at a reputable company. Now, a growing number of executives aspire to “portfolio” careers, in which they simultaneously work with a number of organizations and/or engage on more intense, shorter-term projects, enabling variety, autonomy, flexibility and, in some cases, higher pay.

At Acumen and Shortlist, we often see startups and social ventures that need creative, sophisticated talent but can’t afford that talent full-time. Currently, they’re forced to hire full-time talent at the lowest budget they can afford, knowing those individuals will require significant guidance, support and scaffolding. However, alternative approaches to talent management are making more right-size approaches possible, allowing companies to recruit experienced talent whose part-time work offers more value than that of full-time talent with a lower skill level.


New Models and Approaches for Hiring Talent in Africa 

It’s worth briefly recapping what the current toolbox of options looks like when it comes to hiring talent in Africa, before we move into innovative solutions to this challenge. Hiring full-time staff and relying on part-time advisors both have limitations. For instance, hiring (and retaining) full-time staff is not financially feasible for all companies. Meanwhile, advisors and consultants often lack integration into a company’s day-to-day operations, and can fall short in providing the long-term commitment and problem ownership needed.

To meet this need, Shortlist launched a pilot “fractional” executive platform aimed at helping entrepreneurs across Africa access the right local expert talent “just in time” and in the best format. This included experts and executives across areas like finance, operations and HR for part-time (long-term or interim) or project-based (short-term) work. 

Early results from this model are promising. In 2021, Shortlist ran a pilot program to match local experts with women-led SMEs across Kenya (in partnership with UK-Kenya Tech Hub and Women Work). Within days, we had over 900 experts and over 150 companies apply, nearly 10 times the number of companies we could support. Shortlist paid modest, below-market monthly retainers to the experts for the term of the program. The findings from this pilot were encouraging:

  • 73% of companies saw increased revenue growth as a result of the program, growing by more than 27% on average. 
  • Even after concluding the program, over 20% of participating companies continued engaging with their matched experts on a periodic basis (with no fees).
  • 91% of participating companies would recommend the program to others.

This approach is different, and in many cases better, than the traditional consulting model. As one company shared, “The expert support was critical to the company growth in terms of strategies, units/department, procedures, workflows, internal communication, leadership, etc. The expert literally took our management team to [the] next stage.”

The challenges faced by social enterprises in sourcing and retaining top-tier talent are not just a minor hiccup. Getting the right talent is a fundamental issue that can undermine or supercharge social change. Innovative approaches like better access to just-in-time executive talent are needed to bridge the talent gap and support the success of social enterprises in addressing some of the world’s most pressing challenges. 

Enterprises that succeed in Africa do so by adapting old models to fit their context. Now it’s time for them to take the same approach to sourcing talent.


Paul Breloff  is the co-founder and CEO of Shortlist; Daniel Waldron is Head of Insights at Acumen; Coco Lim is a Senior Associate at Acumen.

Photo courtesy of UN Women/Ryan Brown.




Social Enterprise
business development, employment, failure