Nonprofit Periscope

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Is the road to good paved with cash?

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One of the most fascinating love-hate relationships in the nonprofit sector involves the taboo subject of money—or whatever euphemism you want to use. As a nonprofit fundraiser I did the dance myself. Nonprofits don’t need big checks in the bank; they need “funding.” They don’t need overhead funding; they need “mission support.” They don’t even need fundraisers anymore; they need “supporter developers.” Money is the longest four-letter word in the nonprofit vocabulary.

Let’s call a spade a spade here. Nonprofits need money. They may not distribute profits to shareholders á la private sector, but in a way, they distribute the benefits of their social investment to those who may not own shares, but still have a stake in the nonprofit’s work. So nonprofits don’t need money just qua money. They need it to help others. And that’s a staggering responsibility they willingly accept. The struggle is constant, the learning curve is steep, and the stakes are high. This is clear.

Enter the private sector. For-profit businesses have money, and many lack a philanthropic outlet, so there’s a promising fit between the two sectors when one is willing to fund the other for the greater good.

It’s a haughty courtship when businesses intervene and insist nonprofits are financially naïve and should be less “soft.” But is this warranted? Do nonprofits have an obligation to be more like businesses to ensure their work continues?

An article from Monday’s Telegraph (UK) puts this tension in a specific context: venture philanthropy. The featured executive describes how Impetus puts nonprofits through a rigorous assessment and planning process before funding them. The results so far are impressive: the income of the nonprofits Impetus works with has increased by 29 percent a year, and the number of people they help has increased by an average of 53 percent “every year over a five-year period.”

An undercurrent of condescension belies the tension here. The sub-headline for the article reads: “The slash and burn culture of private equity seems ill-suited to the warm and well-meaning charity sector. But perhaps that is just what the latter needs.” That is, nonprofits—soft, gentle, and brimming with good intentions—need a firm hand to steer them toward the best results. With Impetus’ steering, nonprofits have helped more people. At least in this case, the private-sector model improved upon the nonprofit-sector purpose. Maybe money is the answer.

An older article from Third Sector (again, UK) goes even further. The headline pulls no punches: “You have a duty to make money.” This time the featured executive is the winner of the BBC’s version of The Apprentice. And he isn’t shy about telling nonprofits what to do: according to the interview, nonprofits “that fail to maximize their money-making potential are failing in their duty to their beneficiaries.”

So not only do nonprofits need money (as long as we’re going to talk dirty here), they have a responsibility to their clients and communities to aggressively seek money. And both interviews depict the most accountable, efficient, effective model for money-seeking as found in private enterprise.

1) Both featured executives come from the private sector and stake their careers on venture philanthropy.
2) Money doesn’t solve everything (see: crippling nonprofit regulations, bad PR, etc.).
3) The executives work in Britain, which regulates its nonprofit sector far more than the US government does, making the operation of nonprofits a more public affair.

But that said, is it going too far to drive nonprofits to make more money? Is it underhanded to hold up needy clients as justification? And does the private-sector model overlook the creativity and resourcefulness that nonprofits have used for centuries to do their work with less money?

Leave your thoughts in the comments section. Don’t worry, it’s free.


Written by eclawson

September 1, 2009 at 6:24 PM