Everything old is new again; and nonprofits should stay that way

So a couple of weeks ago the Nonprofiteer received a press release announcing “Redefining [of] the Nonprofit Model.” Doubtless you’re all familiar with the genre: a group of business people get together and decide that the nonprofit sector hasn’t cured cancer or ended poverty because people in the nonprofit sector are stupid and lazy, and that an infusion of good old hard-headed American for-profit business practices will compensate for that. Voila: instant Great Society!

This particular redefinition was truly revolutionary:

One hundred advisors, including many of Silicon Valley’s elite, are coming together to disrupt the nonprofit space. . . . [They] have committed to one full year of serving on the board of a nonprofit. . . . [and] attending monthly salons where they will discuss the specific pain points of their assigned nonprofits and attempt to find solutions as a team. . . . [This] is part of a larger movement . . . to make the non-profit world more efficient. . . . “This is just the start of how [we] will disrupt the nonprofit sector and create new, innovative ways for business leaders to contribute . . . . Before [this], there was no easy path for nonprofits to find experienced leaders to help them at a board management level. A board role is not just about fundraising, but includes developing growth plans, operational efficiency, cause marketing, customer relationship management, event planning, and much more.”. . . . In order to maximize results, [the group] carefully matches advisors to nonprofits based on their skills, interests and a nonprofit’s needs.

So let’s review: a bunch of business people are going to sit on nonprofit Boards of Directors! And then periodically those business people will get together and talk about how to be better Board members! As Board members, they will not only fundraise but contribute their skills! They’ll join Boards based on their interest in the nonprofit’s mission! And they’ll seek ways to improve the whole sector!

The accumulation of these radical notions caused the Nonprofiteer to swoon; but the one idea that really had her down for the count was that the entire purpose of the endeavor was to “disrupt the nonprofit space.” Because really, what nonprofits trying to serve their clients need most of all is disruption of their management to supplement the disruption of funding they face constantly, disruption of their staff produced by those funding crises, and disruption of their ability to operate smoothly or secure resources when their message is being drowned out by a constant drumbeat of demands for “reinvention.”

The Nonprofiteer understands that in the tech world, “disrupt” is a positive word, suggesting the kind of change-the-world ethic that fueled Microsoft and Facebook. But she urges everyone to notice that when those disruptive entrepreneurs Bill Gates and Mark Zuckerberg moved into the nonprofit sector, what they did was to find nonprofits doing good work and give them lots of money to do more of it. If the disruptive “advisers” of the press release would just do the same thing, there would be less “news” but a healthier nonprofit sector.

As she fanned herself back to consciousness, the Nonprofiteer was struck once more. In this case, the weapon was yet another article about hybrid corporate forms designed to enable nonprofits to earn their own revenue and stop “begging.” Whether the discussion purports to be about L3Cs or public benefit corporations or Triple Bottom Lines, the argument is always the same: nonprofits should just get with the capitalist program, identify lucrative markets and earn their keep like every other good red-blooded American.

This approach ignores the fact that nonprofits’ markets usually consist of clients who are not profitable to serve—because if they were profitable to serve, the for-profit sector would be serving them. The better a nonprofit is at finding and serving its market, the poorer it will be, because though for-profit clients are a profit center, nonprofit clients are a cost center.

Fine, say the hybrid-benefit-earn-your-own-revenue people: so start a profitable business and funnel its profits into the charity. But this notion of a two-headed agency is, like most similar creatures, a monster. If nonprofits expend their limited energy on creating market-based revenue streams, they’ll be diverted from their mission-based activities. Either the marketing strategy succeeds, in which case the profit-generating people gain the power within the organization and mission falls to a sad second; or the marketing strategy fails, in which case it has consumed significant resources that should have gone to serving clients.

There are, of course, institutions for which running a business can be part and parcel of mission, for instance, job-training centers. But for mental health agencies, arts organizations, group homes, rape crisis hotlines and most of the other charities which do the important work in our society, running a business is a dangerous distraction.

What if, instead of spending time telling nonprofits how they should operate differently, business people re-examined their own operating principles? What if every business set aside 25% of its profits for investing not in the business itself but in the wider community?

In other words, instead of asking why a charity can’t be more like a business, let’s start asking why businesses don’t operate more like charities. Businesses receive all sorts of public services and protections, from the enforcement of contracts in the law courts to well-maintained roads along which to distribute their products. Why shouldn’t they be expected to contribute to the public good in return?

Most business people would say, “But our primary duty is to our shareholders, not to the public good” (and those over-influenced by Ayn Rand and the University of Chicago economics department would say “Our SOLE duty is to our shareholders, the public be damned”). Right: and the primary (or SOLE) duty of charities is to their/our clients. Anything that takes nonprofits away from that activity is perforce improper.

What’s the point of this thought experiment, in which charities chide businesses instead of the other way around? Simply to demonstrate how much business advice to charities is sheer nonsense. To presume that the voluntary sector doesn’t make a profit because it hasn’t thought about how to do so is to fundamentally misconceive its role in the wider economy.

Besides, what nonprofits need isn’t more advice: it’s more money. When business people are ready to provide that—when they’re ready to serve on Boards not as agents of disruption but as securers of resources; when they’re ready to advocate for a tax system which will underwrite the necessary work done by the voluntary sector—well, THAT will be the time for a press release.

Tags: 501c3, Advocacy, Board of Directors, Boards of Directors, charity, governance, Marketing, Mission, nonprofit, Nonprofit management, nonprofits, not for profit, philanthrocapitalism, philanthropy, Poverty, Private Philanthropy, social entrepreneurship, volunteer

This entry was posted on April 21, 2011 at 2:08 pm and is filed under Advocacy, Boards of Directors, Coverage of nonprofits, Current Affairs, Earned income, Finances, Marketing, Mission, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Poverty, Private Philanthropy, Social enterprise, Technology, Volunteers/Volunteerism. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

9 Responses to “Everything old is new again; and nonprofits should stay that way”

Rebekah Says:
April 22, 2011 at 3:01 pm | Reply
Well said, dear Nonprofiteer! The nonprofit world has experienced more than its share of disruptions over the past few years and the last thing the organizations with which I work need is board members who are there as disruptive observers. We need board members who come aren’t just sitting, but giving and advocating and listening and learning.
Thanks for your rant.
- Nonprofiteer Says:
  April 22, 2011 at 3:32 pm | Reply
  Happy to rant on behalf of us all. But your calm observation that Board members need to listen and learn–instead of scold and lecture–is the key to the whole thing. Maybe someday we can get across that, though this is a field on which anyone can play, there are nonetheless rules by which every player must abide.
Deborah Strauss Says:
April 24, 2011 at 4:08 pm | Reply
Not that I wouldn’t have agreed with this rant before, but I’m working on a project designed to assure that broadband is available to everyone, even those in remote or rural locations or low income households. If it WERE profitable to serve these ‘customers,’ vendors would be doing it! This is only one aspect of our mission; it includes fact finding about availability and finding ways to aggregate demand to attract vendors, but the profit-seeking method is not working today for several population groups.
- Nonprofiteer Says:
  April 24, 2011 at 7:12 pm | Reply
  Perfect example of the problem! Yes, of course, you may be able to develop ways to make the market profitable, in which case everybody’s happy; but as you say, even if you don’t, it’s still essential to make broadband access universal.
Jane Beckett Says:
April 25, 2011 at 10:42 am | Reply
Plus, these Silicon Valley disrupters are ignoring that when it makes sense to charge for services (universities, recreational organizations, arts organizations, health care providers, the list goes on) nonprofits do so. It’s pretty much their beloved market forces that decide whether earned income is feasible for most nonprofits.
- Nonprofiteer Says:
  April 25, 2011 at 11:24 am | Reply
  Absolutely–it’s just that what the market will bear is less than the cost of providing the service. Doesn’t it seem strange that we have to spend so much time teaching elementary economics to these so-called Masters of the Universe?
Nancy Worssam Says:
April 27, 2011 at 6:44 pm | Reply
Preserve us from the well-intentioned who are as ignorant of our issues as they are willing to save us.
Non Prophet Says:
May 18, 2011 at 1:57 pm | Reply
One full year to be on a board? Gee whiz! So they’ll just be starting to figure out how the organzation works when it’s time for them to leave.

Not everything moves at the speed of tech (or “reality” television). Far from it. It’s a bit arrogant to think that one can come in and turn around an organization in a year.

The org I work for has about a $10 million budget, and we run a pretty tight ship. Our projected deficit for next year? $250,000. The cost to the org of health insurance for employees? $350,000. We don’t need Silicon Valley help. We need health insurance premiums to stop rising 15% per year.
- Nonprofiteer Says:
  May 18, 2011 at 2:06 pm | Reply
  Amen, brother. That, at least, is a problem for-profit Board members can understand, if not cure.