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, Board of Directors, charity, governance, nonprofit, nonprofits, not for profit, philanthrocapitalism, philanthropy, Poverty, social entrepreneurship, volunteer
Posted in 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 | 9 Comments »
January 19, 2011
Take a look at this piece from the Chronicle of Higher Education documenting the important role of legacy preferences—admissions boosts to the children of alumni—in college acceptance rates. It raises the question, as our colleague Rick Cohen puts it at the Nonprofit Quarterly, “why tax preferred institutions of higher education in many cases get to use their tax-exempt status to serve children of immense wealth and privilege.”
This is the real issue embedded in another question frequently asked: “Why do well-endowed universities get tax breaks?” The answer to that can easily be “because education is a public good,” but if that good is available disproportionately to a tiny subset of the public then the entire edifice of tax protection for elite institutions starts to crumble.
Legacy preferences are regularly justified on the grounds that they’re necessary to assure alumni loyalty and therefore alumni financial support. As the Chronicle article documents, the evidence for this is ambiguous at best. But even if it were true, it’s not clear why the convenience of fundraising officers should trump society’s legitimate questions about how it’s allocating scarce benefits among competing groups of beneficiaries. And as long as universities receive tax breaks, it is the broader society that’s doing the allocating and has the right to ask the question.
And here’s another question we have a right to ask: why is affirmative action a problem when it benefits poor people and minorities but not when it benefits wealthy white people? “Legacy preferences” is, after all, a euphemism for making sure that thems that has, gits—and gits more.
Most colleges and universities these days would regard it as an ethical violation to accept tobacco money, or porn money. Why should their ethical standards tolerate accepting privilege money—which means, essentially, accepting a bribe? It makes little sense for the source of money to be evaluated for purity while its purpose goes unquestioned.
As an ex-admissions officer, the Nonprofiteer is more familiar with legacy preferences than she ever wanted to be, and she can assure her readers that merely being the child of an alumnus is not a bona fide occupational qualification. Plenty of successful alumni have no-’count kids—hence the old saw about “shirtsleeves to shirtsleeves in three generations.” Nor does it matter that the practice is long-established. Ivy League colleges had a long-established practice of coordinating their scholarship packages (to keep students from choosing among them on the basis of cost), until someone read and implemented the antitrust laws. The sky didn’t fall as a result of that change, and it won’t as a result of this one.
Of all the ways in which universities violate the spirit if not the letter of the laws granting them tax advantages (from running semi-professional sports teams to serving as research arms of the military), legacy preferences are perhaps the most damaging. Every legacy preference helps perpetuate a system of inequality. Every legacy preference deprives someone better-qualified of an opportunity s/he’s earned. What’s more, the howls of protest that go up when that accusation is leveled at some other system of preference are nowhere to be heard.
If institutions of higher learning want to maintain their tax-favored status, they should abolish legacy preferences. If they don’t—if they go on practicing white people’s affirmative action—they deserve to be knocked off the comfortable perch on which they now sit.
Tags:501c3, charity, donors, Fundraising, IRS, nonprofit, nonprofits, not for profit, philanthropy, Poverty, Relations with funders
Posted in Coverage of nonprofits, Current Affairs, Education, Fundraising, Higher education, Mission, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Poverty, Private Philanthropy, Racism | 7 Comments »
November 19, 2010
More about the troubles of the do-well-by-doing-good gang, this time in the financial services sector.
Which raises the question: when does “profiting” turn into “profiteering”?
Tags:charity, corporate giving, Fundraising, International, nonprofit, nonprofits, not for profit, philanthrocapitalism, Poverty, social entrepreneurship
Posted in Charity scandals, Conflict of Interest, Coverage of nonprofits, Current Affairs, Earned income, Finances, Fundraising, International, Investment, Mission, Nonprofit management, Nonprofits--General, Poverty, Relations with funders, Social enterprise | Leave a Comment »
November 17, 2010
A new study—poignantly titled “Social Enterprise: Innovation or Mission Distraction?”—reports that nonprofit agencies which choose to support themselves with for-profit businesses end up serving their clients less and worse. Moreover, when the businesses thrive the profits go back into the business, while when the businesses falter the losses are taken out of the hide of the agencies. (So glad to see nonprofits acting like businesses! This “heads I win, tails you lose” approach is just what the investment bankers did—en route to destroying the economy.)
Gloating is unattractive, and unwarranted. After all, any friend of the nonprofit sector would be delighted to learn there was a way to strengthen it without having to stretch every penny into a copper wire, or grovel to wealthy people who understand the situation less well than the people they may or may not deign to help. But a bit of schadenfreude directed at the prophets of social enterprise really can’t be avoided.
It’s always seemed obvious to the Nonprofiteer that if there were money to be made in ending poverty, poverty would long since have been ended. The challenge is to provide services and alleviate suffering when it isn’t profitable. It seems equally obvious that any system which must allow for a private person to make money before the clients get served is one that reduces the resources available for those clients.
Now, lots of things that are obvious also happen to be false. And certainly there’s a reasonable discussion to be had about whether, once you factor in all the costs of raising donations, it would be cheaper or more efficient—even with a profit margin—to organize charities as business enterprises. But a decade’s worth of experimentation suggests that the answer is “No.”
Are services provided by social entrepreneurs better than no services at all? Sure, but it demonstrates the poverty of our current mindless anti-tax political discourse that those seem like the only two choices. The real alternative to entrusting the provision of public services to for-profit groups is having them supplied by the public. Anyone familiar with the history of the private subway franchises and private lending libraries and private schools of the 19th Century will be grateful that our predecessors decided to eliminate the middleman markup and run subways and libraries and schools as the public goods they are.
Have social enterprises ever succeeded? Certainly, and more power to them. But anyone who claims they will supplant philanthropy, charity or social change movements is selling snake-oil.
The most thoroughgoing enthusiasts of the market seem to forget that Adam Smith himself recognized areas in which it would, and did, fail. Those of us caring for people who can’t make profits for other people are dealing with the consequences of those failures. So let’s face it: we’re outside the market economy. Let’s stop contorting ourselves to fit into it, and concentrate on figuring out how to make our own systems function more fairly, transparently and effectively.
Tags:501c3, Fundraising, nonprofit, nonprofits, not for profit, philanthrocapitalism, philanthropy, Poverty, recession, social capital, social enterprise, social entrepreneurs, social entrepreneurship, social services
Posted in Coverage of nonprofits, Current Affairs, Earned income, Fundraising, Investment, Mission, Nonprofit management, Nonprofits--General, Poverty, Private Philanthropy, Social enterprise | 10 Comments »
October 26, 2010
England’s Financial Times reports concern that cuts in government grants to charities will impair the charities’ ability to provide services, and particularly to pick up the slack produced by cuts in direct government services. The Nonprofiteer wonders what this is doing in the newspaper, as it falls into the category of Dog Bites Man.
Defenders of the cuts argue that they’ll provide incentive for government-dependent charities to raise money from the private sector and individuals. While the Nonprofiteer yields to no one in her insistence that charities become less dependent on grants of any kind and spend more time asking for money from individuals, she also knows that this defense is crap—at best irresponsible, at worst deliberately false.
No one can realistically suggest that charities which have essentially been created by the government to provide services it funds (probably for the purpose of evading unions) can somehow instantly replace 95% of their operating budgets with contributions of a pound or ten, or even a hundred. It takes time to develop individual donors, and surely no one would seriously suggest that charities have neglected this task for lack of “incentive,” because government grants keep them in the lap of luxury. There’s never enough money, as a result of which there’s also never enough time to raise money if you’re also going to serve your clients.
So which is it, Mr. Cameron? Do you want charities spending their time providing services that your government now won’t, or do you want them spending their time raising money to provide those services? “Both” is not a realistic answer.
Conservative governments should really have the courage of their convictions. If you’re going to cut public services, then say to the public, “We’re not going to provide these services.” It’s just dishonest to say, “We’re not going to provide them, but don’t worry, someone else is,” when no one else has anything like the resources necessary.
Apply as appropriate to the American situation.
Tags:Advocacy, charity, donors, Fundraising, government, government funding, government grants, grantmaking, grants, International, nonprofit, nonprofits, not for profit, philanthropy, politics, recession, social services
Posted in Advocacy, Campaign finance, Charity scandals, Coverage of nonprofits, Finances, Fundraising, Government grants, Nonprofit management, Nonprofits--General, Poverty, Private Philanthropy, Public private partnerships, Social Service Agencies | Leave a Comment »
October 26, 2010
The Women’s Philanthropy Institute at Indiana University’s Center on Philanthropy has just released a study showing that at all income levels women give more than men—both more frequently and more generously when controlled for income.
This study’s headline is that across nearly all income levels women 1) are more likely to give and 2) on average give more than men.
Specifically, women who make $23,509 or less (Q1) are 28% more likely to give than men; women who make $23,509 – $43,500 (Q2) are 32% more likely to give; women who make $43,5000 – $67,532 (Q3) are 49% more likely to give than men; women who make $67,532 – $103,000 (Q4) are 43% more likely to give than men; and women who make +$103,000 (Q5) are 26% more likely to give than men.
In every income group except for Q2, women give more than men. In Q1, women give 92% more (or almost twice as much) than men; in Q3, women give 95% more (or almost twice as much) than men; in Q4, women give almost 45% more (or almost one and a half times more) than men; and in Q5, women give 94% more (or almost twice as much) than men.
The study’s authors resist the temptation to make bold claims about why this is the case, though they note that generosity tends to increase with education and that women now earn more than half of all bachelor’s degrees. Generosity also increases with income, and more women are employed now, and therefore earning their own income, than ever before. But even controlling for income, education and wealth, in what principal investigator Debra Mesch calls “pure terms,” women are the more generous half of the population.
[Digression: Women now make 80 cents for each male dollar. This represents an increase from 62 cents in 1979, at which rate we'll achieve wage parity in 2043. Only the most ridiculously strident feminists regard this as a problem.]
What’s the source of women’s greater generosity? When prompted, Mesch is willing to indulge in a bit of speculation:
Women are socialized to take care of their families and their communities, and because of that socialization process we see the motives of empathy and caring. We’ve done another study that looks at difference in motives for giving, and women score much higher on empathy and principle of care.
Her new study’s results comport with the trend to focus international aid on women because they’re more likely than men to spend surplus income on their families instead of themselves. Mesch is unsurprised: “I think that’s an international phenomenon, that women are the caregivers and nurturers; they have more of those prosocial behaviors.”
So what difference does any of this make, except the sheer giggle value of demonstrating female superiority to the male of the species? Mesch is the Queen of Tact on the subject:
I think what we need to understand is that one is not better than the other, just different. Women give for different reasons, give differently, are much more egalitarian in their approach. As girls, we’re taught to be nice and share. Men have been taught to be much more competitive, and to communicate status. Men are strategic and women want to be equalizers.
[Oh, right, of course: no one's better, we're just different. But the Nonprofiteer defies anyone to offer an example of how "less generous" can be better than, or even equal to, "more generous."]
If we’re lucky, the study will help eliminate the prejudice afflicting most professional fundraisers: that women are timid askers and chintzy givers who never donate without asking someone’s permission. Not only will cultivating a female donor be more likely to yield a “yes” than comparable effort spent on a man, but women’s giving will increase faster than men’s relative to their economic power. You’re betting on a stock that’s going up.
But you can’t treat your female donors like men in drag. As Mesch notes,
If you’re a fundraiser, you have to communicate with women in a different way than with men. You need to involve and engage them, because if you feel involved as a woman, you contribute not only your money but your time.
Thus the study suggests a lot more than it claims: that today’s efforts to find meaningful work for female volunteers will produce tomorrow’s major gifts. That achieving equal pay is essential not just to women but to the charities we support (so, a little help here, guys?). That female-headed households can be a resource to be tapped and not just a problem to be solved. That the future of philanthropy rests in women’s hands.
What makes this more than a parlor game is the extent to which it reveals the role of empathy in giving. Just as poor people give a greater proportion of their income to charity than rich people—presumably because they know how it feels to be on the needing side of the give-and-need equation—so women may give more generously because we know what it’s like to be dependent. Women are less likely to imagine that having been born on third base means we hit a triple; and the feminist mantra that every woman is one divorce away from welfare makes most of us acutely aware that there but for the grace of God go I.
Part II of the study, scheduled to be released in December or January, will address gender differences in the kind of charities supported: secular or religious? Large or small? Do women’s gifts go to operating expenses, while men’s go to bricks and mortar on which they can carve their names? Says Mesch,
What I can tell you is from the previous research, men and women do give to different causes. We find women seem to give more to the social service areas, to helping the needy. Plus women seem to spread their giving out [among multiple charities] and men are much more strategic.
The results of her research leave Mesch hopeful.
My ideal wish is that at some point, we won’t have a need to study women’s philanthropy. It would be wonderful if philanthropy is just philanthropy, and we understand that women have caught up in terms of their income and education and wealth.
We can really change the world––women are at the tipping point. It’s going to be a huge movement where women can really see themselves as making an impact and being philanthropists.
Tags:501c3, charity, donors, Fundraising, generosity, International, nonprofit, nonprofits, not for profit, philanthropy, Poverty, Relations with funders, volunteers, women, Women's Issues
Posted in Coverage of nonprofits, Current Affairs, Finances, Fundraising, International, Nonprofit management, Nonprofits--General, Personnel Issues, Philanthropy and Taxation, Poverty, Private Philanthropy, Relations with funders, Social Service Agencies, Volunteers/Volunteerism, Women's Issues | 3 Comments »
January 11, 2010
The Nonprofiteer comes roaring out of seclusion to point out that big-bank donations to charity, and/or big banks’ making donations to charity mandatory among their employees, are NOT substitutes for big banks’ and bankers’ payment of a fair share of their earnings in taxes that support the operation of the United States government. (You’re welcome to translate “fair share” as “the 90-plus percent banker-bonus tax recently enacted in the United Kingdom.”)
While the Nonprofiteer is as enthusiastic as anyone about the work of the nonprofit sector–all of its work, whether advocacy or arts or higher education or social services–she hardly thinks that donations to the Metropolitan Opera and Harvard should be considered an appropriate alternative to making tax funds available for health care or schools or housing or child care–or even the military.
Taxation is the expenditure of our common funds on common purposes. Expenditure of private funds on private purposes–however worthy–is something else entirely, and the latter can’t be offered in trade for the former.
If the big banks want to dampen public outrage over the enormous bonuses they’re paying, they should take the simple step of not paying them. And, as they seem unlikely to do anything that sensible or decent, public criticism should be made law in the form of taxes and regulations to recapture the windfall profits the banks made with public money.
Charities are real entities with real work to do. We shouldn’t be treated as fig leaves for the worst excesses of capitalism.
And the Nonprofiteer certainly hopes we don’t hear from self-appointed sector spokespeople hastening to tug their forelocks and say “What a swell idea! Thank you, thank you, Goldman Sachs!” It’s not just the public at large: even nonprofits are better off with a government suitably supported by taxes than with a temporary infusion of tax-free guilt money.
Tags:bank bonuses, bankers, banks, charity, donations, nonprofit, not for profit, philanthropy, taxation, windfall profits
Posted in Advocacy, Charity scandals, corporate giving, Coverage of nonprofits, Current Affairs, Finances, Fundraising, Health care, Higher education, Mission, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Poverty, Private Philanthropy, Relations with funders, Social Service Agencies | 2 Comments »
October 1, 2009
Dear Nonprofiteer,
I am wondering if you can help. I recently made a film about the efforts of a group of villagers in the developing world to find a means of support after their livelihoods were taken away by misguided government actions.
I am getting requests from people who want to donate money to the village after seeing the film, but there are currently no charities that specifically cater to the village and I know it takes a long time to start one. Are there any charities where you can specifically earmark donations for a purpose and manage how that money is used? Kind of as a sub charity?
I just don’t want the money going to some big non-profit organization where by the time it gets to the village it has been depleted by other things. There is a very big church in the village which might want donations to go to them, but I don’t believe that’s what’s best for the village, either. What do you advise?
Signed,
Avenue for Aid
Dear Avenue:
Though you’ve described a very particular set of circumstances, you’re asking a question of general interest: how to make sure that donated money gets to its intended beneficiaries. Often the correct answer to that question is, you can’t–and that’s a good thing. People gave oodles of money to relieve the suffering of the victims of September 11, but once that suffering was relieved and there was still a ton of money left over, the Nonprofiteer approves of its being used by the Red Cross to relieve other kinds of suffering, rather than its being used to enrich the intended beneficiaries. In any event, the price we pay for having experienced professional suffering-relievers on the ground when we need them is to pay their salaries and the light bills and rent of the people who send them there–and to pay all those overhead expenses year-round, not just when disaster strikes.
But you’ve described a case where very tightly targeted aid is available and makes sense, yet there’s no recognized pipeline from donors to recipients. Each country has its own unique way of handling charity, and even if you set up a recognized US charity it might not meet the necessary requirements for transmission and distribution of funds in Africa or Asia.
So your first step should be to get the lay of the land from the aid groups that know it best. Start with UNICEF or CARE: they’re certainly the least corrupt and most able people on the ground. UNICEF has a presence in virtually every country on the globe, working closely with local groups, and its office staff should be able to get to the in-country people and find out what systems would work for targeting your aid. Yes, of course, they’re likely to say, “Give to UNICEF [or CARE] and we’ll guarantee the aid will go to your country of choice,” and they actually will–but that won’t increase the total money allocated to that country by the agency. It will just substitute your money for some other money that hasn’t been so designated, with no net increase in welfare for the country. Nor would an increase in country funding help you support this particular group of villagers.
So you probably need to suck it up and tell people you’re happy to accept their contributions, but that they’re NOT tax deductible. They can send the money to you (or to a bank fund you set up, if that makes them more comfortable: establish the Village Rescue Fund at First National Bank, and the bank has a fiduciary obligation to keep the money separate and to remit it in accordance with the purpose you describe when you set up the account), and then you can send it to your contact(s) in the village for distribution as they see fit.
You won’t get to oversee it once it’s in the hands of people in the village, but you wouldn’t really want to: the point is to assist them in restoring their economic self-sufficiency, right? So concede them their autonomy. The last decision you get to make is to send it to your friend John instead of to the head of the local church; it’s hands-off from there.
If people are very moved by the film, the lack of a tax deduction (which is all that you lose by giving money to someone or -thing that isn’t a nonprofit) shouldn’t deter them from giving. Best of luck, and let us know if you find a better mechanism than the ones described here.
Tags:CARE, charity, international aid, nonprofit, not for profit, remittances, UNICEF
Posted in Finances, Fundraising, International, Management Advice Day tip, Mission, Nonprofits--General, Poverty | 3 Comments »
May 4, 2009
This piece about the lack of reserves at nonprofits appeared in the same issue of the New York Times as a story about a growing number of cities playing host to shantytowns–Hoovervilles, they used to be called. Coincidence? The Nonprofiteer thinks not.
In case anybody wonders whether we’ll notice when 100,000 nonprofits go belly-up.
Tags:charity, Depression, financial reserves, Hooverville, nonprofits, not for profit
Posted in Coverage of nonprofits, Current Affairs, Finances, Fundraising, Nonprofit management, Nonprofits--General, Poverty, Social Service Agencies | Leave a Comment »
