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Do Economic Incentives Matter? A Nosey Economist on BAM Financing

AND THE AWARD GOES TO...

Our goal is to provide the BAM Community with the best content and resources available. We are currently highlighting various articles and resources which have stood out above the rest. Below is the “Editor’s Pick” for the spring of 2015.

Please enjoy and thanks for following!

Interview with Dr. Steve Rundle

Steve, I know you have been doing some interesting research on BAM in the last few years, can you briefly describe what you have been looking at?

As an economist, I’ve always been interested in the relationship between the structure and governance of a company and its performance. Since the 1990s, when I first started meeting people who were combining business and missions, I naturally asked lots of nosey questions about the company’s financing, revenues, profits, and so on. I was especially intrigued by the role venture capital might play in funding businesses that were not only extremely risky, but were being managed by people who, in many cases, admitted that they weren’t too concerned about profits and that in fact they would be satisfied with just breaking even. I was not surprised to discover that no venture capital firms existed in this space, at that time. Most of these businesses were either donor funded, or in some cases funded with the help of one or two “Angel Investors.”

But this raised lots of new questions about the performance of these businesses. What are the expected outcomes, and how are practitioners incentivized to achieve those outcomes? Practitioners who are affiliated with a missionary sending organization may be discouraged from being too serious about business for fear that it will distract them from their ministry goals. One way to remove that distraction is to require the practitioner to raise donor support, in which case they will not be dependent on the business for income. This might sound logical at first, until you start meeting other BAM practitioners who are entirely dependent on their businesses for their salaries who are having an incredible impact. So I wanted to look at this more carefully by comparing the outcomes of people who drew 100% of their income from donors with those who are 100% business supported. Read more

Two Books to Help you Break Down the Sacred-Secular Divide

The sacred-secular divide is one of the most serious barriers to business as mission engagement. It is the reason, given again and again, that business people do not feel affirmed in their call to business and do not realise the good their business could do.

Here are two books to help you, and the business people in your life, break down the sacred-secular divide.

Every Good Endeavour by Tim Keller

A Review by Dr. Steve Rundle

Book - Every Good EndeavourI’ve been doing lots of reading lately on the Theology of Work, and I’m discovering that most of the books cover pretty much the same ground. (That’s a polite way of saying they’re often boring.) So I was pleasantly surprised at how much I enjoyed Tim Keller’s new book Every Good Endeavor. Yes, he covers some of the same territory as others – the intrinsic goodness of work, the Creation Mandate, the Doctrine of Vocation, etc. – especially in the first few chapters. But what made this book refreshingly original for me were his discussions about the impact of the Fall on our work, and about Common Grace. Obviously these aren’t new topics either, but he has a way of encouraging the reader even as he reminds them that (1) there is a certain inescapable futility and self-centeredness to our work, and (2) we should rejoice in the fact that God uses both Christians and non-Christians to fulfill his purposes. (Translation: Christians don’t have a monopoly on making contributions to the common good.) For those who want to read only one book about the Theology of Work, this one would be an excellent choice. It’s an easy read with lots of substance.

 

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Do Economic Incentives Matter? A Nosey Economist on BAM Financing

Interview with Dr. Steve Rundle

Steve, I know you have been doing some interesting research on BAM in the last few years, can you briefly describe what you have been looking at?

As an economist, I’ve always been interested in the relationship between the structure and governance of a company and its performance. Since the 1990s, when I first started meeting people who were combining business and missions, I naturally asked lots of nosey questions about the company’s financing, revenues, profits, and so on. I was especially intrigued by the role venture capital might play in funding businesses that were not only extremely risky, but were being managed by people who, in many cases, admitted that they weren’t too concerned about profits and that in fact they would be satisfied with just breaking even. I was not surprised to discover that no venture capital firms existed in this space, at that time. Most of these businesses were either donor funded, or in some cases funded with the help of one or two “Angel Investors.”

But this raised lots of new questions about the performance of these businesses. What are the expected outcomes, and how are practitioners incentivized to achieve those outcomes? Practitioners who are affiliated with a missionary sending organization may be discouraged from being too serious about business for fear that it will distract them from their ministry goals. One way to remove that distraction is to require the practitioner to raise donor support, in which case they will not be dependent on the business for income. This might sound logical at first, until you start meeting other BAM practitioners who are entirely dependent on their businesses for their salaries who are having an incredible impact. So I wanted to look at this more carefully by comparing the outcomes of people who drew 100% of their income from donors with those who are 100% business supported. Read more

Assessing the Viability of a Great Commission Company

by Steve Rundle and Tom Steffen

The following are just a few of the questions that should be asked when assessing the viability of a Great Commission Company (GCC).

Economic Viability
  1. Is there a clear statement of the purpose and goals for the company?
  2. Does the management team have the appropriate experience and training?
  3. Can the business create and maintain a competitive advantage?
  4. From a financial perspective, is the business an attractive investment?
  5. Is there a clear path from start-up to financial sustainability?
  6. Are there investors and other advisers committed to helping the company reach financial sustainability?
  7. Is this a business concept that has worked in other contexts?
  8. What are the risks?
  9. Is the business model flexible enough to allow for expansion, changes in direction or alliances with other companies?
  10. How will the net earnings be distributed?
  11. How and when can the investors expect to be repaid?

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The Emergence of the BAM Movement

by Steve Rundle

Not long ago the Wall Street Journal noted a significant change in the attitudes of university business students1. Compared to other incoming classes in recent memory, today’s young people are more interested in using their business skills to make a positive difference in society. Undoubtedly, many have been inspired by social enterprises like Tom’s Shoes, Kiva, and Chipotle’s Mexican Grill, as well as turned off by stories of corporate excess on Wall Street.

In Christian circles we are seeing something very similar. “Business as Mission,” as the name suggests, involves businesses that have a missionary impulse.  Neither motivated by money, nor embarrassed about making it, these enterprises and the entrepreneurs who start them defy easy classification. Like Social Enterprises they are hybrids in their purpose, and in many cases, their organizational structures. The main distinctive is that “Business as Mission” extends beyond addressing the physical needs of the poor (or the ethical treatment of pigs and chickens, as in Chipotle’s case), and includes a desire to make Christ known and see people freed from spiritual bondage.  While social entrepreneurs want to do good for their fellow man, so-called “BAMers” in addition, are motivated by a desire to serve God and draw people’s attention to Him. The Christ-centered nature of BAM is a significant difference that gives rise to different questions and requires a more interdisciplinary approach to the subject.

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