Sunday, January 10, 2010

Will businesslike charities become charitable businesses? Part 1

One of the more interesting debates in our sector at the moment is the discussion (panic/hue and cry/gnashing of teeth) about the merging of the nonprofit and for profit models of business. Critics and analysts have noted correctly that many nonprofits are acting in a more businesslike manner than 10 or 15 years ago. Then, these observers marry that "fact" with the growing desire of businesses to have a social outcome and become one definition of a social entrepreneur. These two trends are seen as inevitably ending the distinction between charitable groups, often accompanied by much verbal angst and pulling of hair.

My suggestion? Chill out. We are not approaching the nonprofit apocalypse by any means, so let's dissect this discussion a bit to see why in this post and my next one.

Are nonprofits in general more businesslike than 15 years ago? Absolutely. Are all nonprofits this way? No chance. There are hundreds of thousands of sloppily run nonprofits today, and there always will be, just as there are sloppily run for-profits, poorly managed government agencies, and badly managed personal finances.

What has happened is that the expectations of the quality of nonprofit management have climbed dramatically. Take outcome measurements for example, a term that was just gaining traction 15 years ago (with, I might add, much angst-filled commentary about how such measurement would be the "end of the sector" since it took valuable time away from mission). Or, look at the spread of best practice models, standards of excellence (such as the terrific ones from Maryland Nonprofits) and accreditation. And, of course, the online oversight of watchdogs like Guidestar and Charity Navigator. All of these forces have slowly raised the bar on nonprofit management, outcome and accountability.

To which I say, good, good, and good.

And, certainly we talk more about mission-based businesses (a term I've been pushing for 25 years) and using business skills such as marketing and finance. But have most nonprofits moved from being charities to becoming mission-based businesses to going all the way to being businesses with a mission on the side?

No, and it won't happen any time soon. Why? Because nonprofit staff and board have seen the light regarding the key rationale for managing their mission better: They get to do more and better mission as a result. All the business "stuff" that critics worry about is not based on becoming a business--it's about doing better mission. That's what people on the ground tell me and show me all the time. There are just too many people who are too committed to service and mission to let this morph out of control. Will some organizations go too far? Yep, and they already have. But the vast middle of the bell curve on this issue is just doing more and better mission, not turning into some sort of nonprofit Wal-Mart.

Now, how about the for-profit world and their social aspirations? That's also a real trend, and we'll look at that in my next post.

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