Our nonprofit has a new Board member who’s energetic and smart but seems obsessed with the notion of making us operate like a business. The only question he wants to ask about any program is, "What revenue does it generate?" As an old charity hand, I think most of what we do can’t generate revenue–that’s why it’s being done by nonprofits. Poor people are not profitable; that doesn’t mean they shouldn’t be served. How can I stop talking at cross-purposes with this new director?
Signed, What I Do For Love
There’s a terrific Boardroom brawl going on over at Tactical Philanthropy about this very subject. (Actually, a pair of them, one under the heading "Business vs. Nonprofit Models" and the other under the more provocative "Some Nonprofits Just Suck.") The Nonprofiteer is particularly impressed with the contributions of Dave Chakrabarti from Grassroots.org, who stands strongly for the notion that business concepts must be applied sparingly to nonprofits because they are fundamentally different beasts.
What’s great about the brawl is that it reveals the different languages people are speaking–even within the nonprofit sector. When some people say, "Nonprofits should operate like businesses, and the ones that don’t should be starved of resources," they mean, "Poverty is annoying. If we deny it, it will go away." But when other people say the exact same thing they mean, "Poverty is a serious problem, and if we’re serious about solving it we need to know whether Intervention X works better than Intervention Y. And once we know that, we need to give resources to the intervention that works, and stop funding the one that doesn’t."
Needless to say, these are not the same. If, as one of the Tactical Philanthropy debaters says, you’re interested in serving people who don’t have $100, you don’t charge $100 for your service–even if there’s a market for your service at that price. On the other hand, if you’re interested in serving people who do have $100–and still can’t afford whatever it is–then you can charge $100.
So you have to ask yourself–and your energetic new Board member–what are we about? Are we providing something free to the poorest of the poor, or are we subsidizing purchases made by people who only need a little boost to participate in the free market? Either of those is a worthy activity–but again, they’re not the same.
Likewise, the word "sustainable" gets used a lot, but it means different things to different people. Some use it to mean "paid for by its users without requiring charitable subsidy," in which case whatever it is can be done by the for-profit sector; but others use it to mean, "paid for over time by a combination of inputs, some of which come from former users whose problems have now been solved." This latter is the micro-credit phenomenon–lend money to people, let them profit, and then turn them into lenders.
But not every activity is sustainable, even in this sense: if your agency is running food pantries, you want people to stop needing your help, but emergency food supplies won’t in and of themselves enable those people to overcome all the problems which produced the need for emergency aid in the first place. That doesn’t mean there’s no need for emergency food supplies, or not role for institutions that provide them.
So find out whether your Board member thinks you’re doing the wrong things (this is often expressed as "addressing only the symptoms instead of the causes," though any doctor will tell you symptoms need to be treated if the patient’s going to stay alive long enough to be cured)–or whether he’s satisfied with your services but doesn’t understand how you measure their effectiveness. If it’s the former, thank him for his time and shove him off the Board (or reformulate your mission); but if it’s the latter, set him to figuring out how business principles can be applied to determine if you’re serving as many people as you can as efficiently as you can.