For vs not-for-profits. What is the difference?

The line between for-profits and not-for-profits is becoming increasingly blurred. Two quick examples of this are:

• For-profit companies launching public health campaigns in India around soap. The campaigns not only increase soap sales, but also help improve human health
• Google just registered its $90 million philanthropic arm, google.org, as a for-profit

The economist Susan Raymond recently argued in the journal On Philanthropy in September that, “We are beginning to understand that old categories” — commerce, capitalism and philanthropy — “do not serve the new generation of either social problems or market opportunities.”

An organization should not be judged by its tax status, but rather by the value and results that it creates (similarly traditional for-profit companies should not be judged solely by how much money they make). People should ask questions like:

• How many jobs has your organization created?
• What is your organization’s impact on the environment?
• Has your organized delivered on its mission?
• How many resources have you invested in raising the capital that you need to run your enterprise (whether it is for or non-for-profit)?

Caveat Emptor

Not all companies use the same standards for fair trade. For example, one business Grassroots Creations, labels their products as fair trade and as helping African workers. While the designs from their products do come from designers in Zimbabwe, their products are acutally manufactured in China.

Labels from certification organizations like TransFair and the Fair Trade Federation can be good guides to help you determine whether products are actually Fair Trade or not.

Its All in a Word

Sometimes the words we choose to describe something have a big effect on how people perceive different issues. We in the social sector need to stop using the words "nonprofit," "charity, " and "donation."

All the term non-profit denotes is the lack of profit generated in the sector. It doesn't begin to touch on all the positive things that the sector does create. Additionally the term "non-profit" no longer accurately describes a number of organizations that are providing social good in our society. Increasingly social sector organizations are creating for-profit income streams or even registering as for-profit entities to support their missions. Charity is also a dirty word in my opinion and is suggestive of an organization that requires a handout. Social sector organizations are not down on your luck organizations that require the largesse of donors. Social sector organizations are providing value. Rather than referring to donations, we should refer to investments. We are helping the people who choose to invest in our organizations create the type of world we all want to live in. Our work may not always return a profit in terms of money, but it certainly does create value in terms of our collective quality of life.

What Makes a Social Sector Organization Great?

I just finished reading "Good to Great and the Social Sector" written by Jim Collins, the author of the classic managment book, "Good to Great." In this monograph, Jim Collins points out the societal need to stop judging social sector organizations by their inputs and starting judging them by their outputs. In other words, we should just stop measuring whether a nonprofit is succesful by how little they spend on their staff costs and start measuring a nonprofit's success by how well the organization delivers on its mission.

Nonprofits should be able to invest in the infrastructure of their organization by purchasing items like new computers or professional development experiences for their staff without invoking the ire of their donors. Only when we measure a nonprofit's success by its results will we will truly start getting the results from a nonprofit that we as donors expect.

MOTG's Top Ten List

These ten organizations are all approaching the social sector in unique and innovative ways and particularly excel in bringing fresh capital into the social sector.

1. World Resources Institute: Check out the project sponsored by WRI called nextbillion.net that is seeking sustainable business solution to help the world's poor.

2. Robert’s Enterprise Development Fund: This nonprofit is helping other nonprofits create for-profit enterprises to help fund their social missions. Very cool.

3. Echoing Green: Identifies and funds emerging leaders in the social sector in the US with revolutionary ideas.

4. Ashoka: Innovators for the Public: An international version of Echoing Green. Ashoka identifies and funds social entrepreneurs whose projects are changing systems around the world. (I must admit my bias with this organization - I have worked for them before).

5. Self-Help: Another organization I have worked for. Self-Help is the largest non-profit community development finance institute in the U.S. (in other words – a nonprofit bank). Self-Help has been making loans to people who would not have access to capital otherwise for 25 years. Self-Help makes the list for being the best run nonprofit I have encountered yet.

6. Acumen Fund: The Acumen Fund is a non-profit venture fund that invests in enterprises that provide critical goods and services for the world’s poor.

7. Endeavor: Endeavor is helping create jobs around the world by supporting entrepreneurs in six developing countries.

8. Global Giving: Have you ever wanted to donate to an organization in another country, but not known if an organization was quality or not? Global Giving screens high impact, grassroots social and environmental projects from around the world so you know where to invest.

9. Grameen Bank: The Grameen Bank is the pioneer microfinance organization. Grameen has now expanded to new innovative projects like making cellphones affordable to the world’s poor.

10. Kiva: This organization actually makes it possible for you to lend to micro-entrepreneurs in Uganda and get paid back through paypal.

Welcome to the Management of the Good

The Management of the Good is a forum for discussion of the trend in both the social sector and the business sector toward convergence.

Please feel free to comment on any posting made.

Beth Richardson and Sarah Chasnovitz