A few years ago I read a Wall Street Journal article which has stuck with me ever since, and which I wanted to post about here on the Broke Girls Guide to Giving site – because it addresses many of the issues Broke Girl donors, like myself, need to be thinking about as we look to lend our time, money and energy to nonprofits. The article, “Why Can’t We Sell Charity Like We Sell Perfume?” argues in favor of treating non-profit organizations with the same allowances, structure, and fundamental operating principals that we treat for-profit businesses with. The crux of the argument is that we, as a society, are generous in our support of non-profits, however we place restrictions on non-profits that we don’t on for-profit businesses. As I’ve mentioned in other Broke Girl posts, we’re basically asking non-profits to solve nearly impossible problems – homelessness, disease, poverty, hunger – and then limiting how they can do it.
The essay goes on to call out 5 key areas where we, society, set for-profit business up to succeed, yet that we deny non-profits access to – hindering their growth, and ultimately, their ability to achieve their goals of “doing good” (whatever that “good” may be):
1) “First, we allow the for-profit sector to pay people competitive wages based on the value they produce. But we have a visceral reaction to the idea of anyone making very much money helping other people.”
So true. I have caught myself doing this…. I am a great admirer of the work of the Acumen Fund, and consider Jacqueline Novogratz to be a pioneer in the field of social entrepreneurship – her organization has helped thousands of people increase their incomes, send their kids to school, afford medical care, and live with the security and dignity we all strive for….and yet when I came across her salary somewhere online, I remember thinking “OMG she takes THAT MUCH of her own organization’s funding for herself??” I thought her to be a bit of a fraud….but why?? She has dedicated her considerable talents and resources to helping the world’s poor when she could have used her ample skills in the corporate sector, helping the world’s wealthy….why should I frown on her for wanting to live a comfortable life herself when she has dedicated her career to ensure others know comfort?
2) “A second area of discrimination is advertising and marketing. We tell the for-profit sector to spend on advertising until the last dollar no longer produces a penny of value, but we don’t like to see charitable donations spent on ads.”
Yep – agree here too. As someone who once worked in the ad sales space, this one hit home. I remember just how much my for-profit clients at Google would spend daily on their advertising, all in an effort to build their reputation, gain more loyal followers, and increase their reach…. JetBlue can spend millions of ad dollars so we know when we can catch a cheap flight to Vegas, but we don't think its cool to let the American Red Cross spend money promote a local blood drive.... (Nice, America).
3) “A third disadvantage for charities is the expectation of a home run on every at-bat. If Paramount Pictures makes a $200 million movie that flops, no one calls the attorney general. But if a nonprofit produces a $5 million community fundraising event that doesn’t result in a 70% profit for the cause, its character is called into question.”
This point hits very close to home for me, having now worked for a number of organizations, some of which are really trying to break the mold and test new ideas when it comes to addressing poverty issues….and yet, these programs fight an even greater uphill battle when it comes to attracting donor dollars – “innovation” may sound cool but really donors want “proven”….But if we knew how to solve all the worlds’ problems, we’d have done it already. Innovation is essential – whether its in testing a new drug to fight disease or testing a new funding scheme to provide access to capital to low-income farmers – yet innovations are risky, and therefore not tolerated by most donors in the non-profit world.
4) “A fourth problem is the time frame during which nonprofits are supposed to produce results: immediately. Amazon.com went for six years without returning a dime to investors, who stood by the company because they understood its long-term goals.
Donors want results NOW. And while program monitoring and evaluating and making sure dollars are spent efficiently are obviously important to any non-profit program, the reality is change is HARD. And it takes TIME….yet rarely do we allow non-profits the time they need to show progress towards change. You couldn’t solve (insert “Highly Complex Social Problem”) in the 12 month time-frame of the pilot program? Well then we’re going to call you “inefficient” and we’re going elsewhere next funding cycle. See ya…..This prevailing attitude makes non-profits risk-averse – and yet risk is married to innovation, and innovative ideas are the only way to solve complex, deep-rooted, long-standing problems… (see #3).
5) “Finally, the for-profit sector is allowed to pay investors a financial return to attract their capital. The nonprofit sector, by definition, cannot. Why shouldn’t an investor be able to take a risk—and get a return—on an investment that allows a charity to double in size? And why wouldn’t we want to encourage it to do so?”
This one is interesting to me having done some work in the impact investing space– where return IS given to investors for their willingness to invest in enterprises that serve a social need – so here I have a bit of a biased view, but I really do think that impact investing is the next great frontier in social change, as long as its current momentum continues…..
While I don’t agree with every point in this piece (no, I don’t think capitalism can solve ALL of the world’s problems), in general I am very much in support of increasing efforts which model the operations of non-profits much like those of for-profits, and of allowing non-profits the kinds of freedoms to spend on talent, take risks, and promote their work which we allow for for-profits. Because the fact is that the Professional Me who worked in the corporate world had the same objectives as the Professional Me working in development world does now: to reach the maximum number of people, and have the largest impact possible, in the most cost-efficient way.