The idiocy continues. More media reports and public pronouncements on philanthropy that equate the push for effectiveness and impact with the adoption of business or “Wall Street” practices. The latest, from Reuters this week, is headlined “Charities Mimic Wall Street to Woo Wealthy Donors.” Which aspects of Wall Street, exactly, it doesn’t say, but the implication is that it is the positive ones – not the ones that contributed to the economic downturn that we are currently experiencing, prompting the new financial regulatory reform bill.
Like so many others that I have blogged about (and this recent, even more ludicrous article from the Financial Times that suggests that MBAs will save philanthropic foundations from themselves), the Reuters article insinuates that nonprofits just woke up to the idea that they should try to be effective and implies that an impact orientation is a business concept. But, of course, neither of these points is accurate. (I know three of the four people quoted in the article and have great respect for them: I suspect they would agree with my take and that the lack of context and understanding in this piece made them wince, too.)
Wait, there is more.
Also this week, Facebook Founder Mark Zuckerberg weighs in with yet another business-to-the-rescue argument. “I think building a company is the best way to change the world, because it’s the best way to align the interests of a lot of smart people and a lot of partners to build something that’s great and that serves people,” Mr. Zuckerberg said in an interview on the blog Inside Facebook. “You can’t do that if you’re an individual because it’s just you and there’s no one to align, and you can’t do it if you’re a nonprofit because you have no resources and you’re constantly out trying to raise money instead of generating it and being self-sufficient.”
Zuckerberg went to Harvard University, which, in case he forgot, is a nonprofit organization with an endowment of roughly $30 billion. (Does that qualify as “resources?”) I don’t know about Zuckerberg, but I am pretty grateful for the fact that the educational institutions I attended were nonprofits, because they were able to provide me the financial aid that allowed me to attend them. These institutions, thanks to their “nonprofitness,” delivered an education to me for less than it cost them, rather than focusing on how to turn me into a profit margin that could then be returned to shareholders. Might not have changed the world, but it sure changed my life.
Let me be clear. I love entrepreneurialism and capitalism. I have an MBA and have worked in both the corporate world and the nonprofit sector. But let’s get beyond the “sector wars.” Neither business, government, nor the nonprofit sector can succeed without the other sectors playing their distinctive roles. And none, today, is as effective as it needs to be.
Phil Buchanan is President of CEP.
| Posted in | Managing Operations |
| Tags | nonprofit sector, role of philanthropy |
It was almost a year ago when I wrote this in my open letter to the Independent Sector’s forum on the future of non-profits:
1. Non-profits have done a spectacularly lousy job of explaining themselves to the American public.
Modern societies need three components to function: government, businesses, and non-profits. Non-profits are the glue that holds society together, and while in the USA we have a market economy, our society is bigger than the economy. Non-profits are inherently different than businesses. Governments are inherently different than businesses. It is astounding how many non-profit leaders (and political leaders) don’t do a better job of communicating to the American public about the value of all three components of society, all of which are critical.
The commenting software does not allow the display of my diagram about the differences between the non-profit and for-profit sectors. The fundamental difference is that in the business example, the provider of the funds is also the direct recipient of the benefits of goods and/or services provided, e.g. customers. On its face, my diagram of the non-profit sector is more complex than my diagram of the for-profit sector, and this is what non-profit leaders have done a poor job of communicating to the American public.
Not much has changed. If anyone would like the diagram, please just send me an e-mail at billhuddleston1 at gmail dot com with “NP diagram” in the subject line and I’ll be glad to send it to you.
Thanks,
Bill Huddleston
The CFC Coach
www cfcfundraising dot com
I wholeheartedly disagree with Zuckerberg and agree with Mr. Buchanan. I also agree with Mr. Huddleston. Clearly, until he knows better Zuckerberg is unlikely to share his considerable (still on paper) wealth with any of the non-profits that helped him get to where now is, especially Harvard.
Non-profit does not mean non-stable or non-wealthy. I wonder if Zuckerberg will ever do what Bill and Melinda Gates are now doing (along with their friend, Warren Buffet, among others) in turning their wealth over to a not-for-profit foundation that is using its considerable wealth both hire the best people out there and to tty to tackle some of the world’s largest issues. I guess Zuckerberg is just thinking of non profits such as all of the the public schools that are now having to turn to public funds drives to keep their doors open and their most important programs intact and the programs still trying to help homeless people and inner city youth. So, in fact, I think that there exist such needs on both ends of the spectrum, “smaller” situations such as helping one school stay open, or the homeless people in one city, and the big issues such as finding a cure for malaria, or an effective malaria vaccine, are both indicators that the private (“for profit”) sector is failing to deal with such problems, that both the political system and the tax scheme are now so slanted toward the “for profits” that there have been inevitable market failures as a result and those failures, if we don’t address them in a way that makes it society’s business to cure or heal or prevent these problems, that there won’t be a need for the non-profits to come in and do what the private sector can’t seem to handle.
Do you remember when you saw your first homeless person in America? I think for me it was sometime in the early 1980s when we had begun to experience the inevitable result of the tax system that “supply side economics” brought us under President Reagan. That, I believe, is one economic experiment that we can say has definitely not worked, and despite all of the non-profits’ efforts to come in and help the increased levels of poor people and environmental problems we are now dealing with, we really do need to go back to the system of progressive taxation that we had before Reagan, including during the boom years of the 1950s and early 60s. That, I think, would be good for the non-profits also. There would be incentives for both wealthy individuals and coporations to keep their earnings out of the hgher tax brackets by giving more liberally to the not-for-profit sector.
Zuckerberg knows something that apparently all of you don’t – capitalism and business create prosperity. Ask yourself why Zuck is a billionaire. Is it because he stole money from a lot of people? No. It is because he created an enormous amount of value for a lot of people. Does his wealth exceed the aggregate value he created? No. Because of taxes and friction, no company, let alone the company’s richest owner, will ever realize more than a fraction of the value it creates.
Instead of bashing Zuck why don’t you try to create a tiny fraction of the value he has created. The way to measure your value creation is to add up how much revenue you realize from what you create. Money means something. It’s a measure of value. People part with it only under duress or to gain something they value more highly. Your pointless platitudes are exactly that – pointless.
Non profits and charity in general are a waste. Universities should not be considered non profits in any normal sense. They sell a very valuable product – legitimacy. Graduates take that legitimacy and use it to gain valuable careers. Universities charge a ton of money and gain a ton more in alumni donations – a measure of gratitude and desire for alumni progeny to follow in their footsteps.
Normal non profits don’t do much. They spend an enormous amount of time marketing and fund raising. They appeal to people’s better side, while in actuality operating in a very cynical fashion. If most people understood how the majority of money given to non profits goes to pay marketing and salary costs they likely would stop the cycle.
What Zuck is saying is exactly right. Non profits are a dead end. They don’t help those they target, mostly they delay the inevitable and thereby exacerbate and increase the pain. If you want to save the environment, start a company and find a cheap source of energy. If you want to save lives, start a company and find a cure for something and then sell it and use the money to find more cures. If you want to improve people’s lives, start a company and create a product they will pay to own. If you want to help those less fortunate, hire them and force them to work for something. We need to stop wasting valuable lives in dead end non profits.
“Modern societies need three components to function: government, businesses, and non-profits. Non-profits are the glue that holds society together, and while in the USA we have a market economy, our society is bigger than the economy.”
What a joke.