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Nonprofit Management

Everything Old Is New Again, and Nonprofits Should Stay That Way

What nonprofits need isn’t more advice, it’s more money.

A couple of weeks ago, I received a press release about the new Palindrome Advisors group with the subject line, “Redefining the Nonprofit Model.” Doubtless, you’re all familiar with the genre: A group of business people get together and decide that the nonprofit sector hasn’t cured cancer or ended poverty because people in the nonprofit sector are inadequate, and that an infusion of good old hard-headed American for-profit business practices will compensate for that. Voilà: instant Great Society!

This particular redefinition is truly revolutionary:

One hundred advisers, including many of Silicon Valley’s elite, are coming together to disrupt the nonprofit space….[They] have committed to one full year of serving on the board of a nonprofit….[and] attending monthly salons where they will discuss the specific pain points of their assigned nonprofits and attempt to find solutions as a team….[This] is part of a larger movement . . . to make the nonprofit world more efficient….[Founder Zaw Thet states,] “This is just the start of how [we] will disrupt the nonprofit sector and create new, innovative ways for business leaders to contribute….Before [this], there was no easy path for nonprofits to find experienced leaders to help them at a board management level. A board role is not just about fundraising, but includes developing growth plans, operational efficiency, cause marketing, customer relationship management, event planning, and much more.”…In order to maximize results, [the group] carefully matches advisors to nonprofits based on their skills, interests and a nonprofit’s needs.

So let’s review: A bunch of business people are going to sit on nonprofit boards of directors! And then periodically those business people will get together and talk about how to be better board members!  As board members, they will not only fundraise, but also contribute their skills! They’ll join boards based on their interest in the nonprofit’s mission! And they’ll seek ways to improve the whole sector!

The accumulation of these radical notions caused me to swoon, but the one idea that really had me down for the count was that the entire purpose of the endeavor was to “disrupt the nonprofit space.” Do nonprofits that are trying to serve their clients really need disruption in their management to supplement the disruption of funding they constantly face, the disruption of their staff produced by those funding crises, and the disruption of their ability to operate smoothly or to secure resources when their message is being drowned out by a constant drumbeat of demands for “reinvention”?

As I fanned myself back to consciousness, I was struck once more. This time the weapon was yet another article about hybrid corporate forms designed to enable nonprofits to earn their own revenue and stop “begging.” Whether the discussion purports to be about Low Profit Limited Liability Corporations (L3Cs) or public benefit corporations or triple bottom lines, the argument is always the same: Nonprofits should just get with the capitalist program, identify lucrative markets, and earn their keep like every other good red-blooded American.

This approach ignores the fact that nonprofit markets usually consist of clients who are not profitable to serve—because if they were profitable to serve, the for-profit sector would be serving them. The better a nonprofit is at finding and serving its market, the poorer it will be, because though for-profit clients are a profit center, nonprofit clients are a cost center.

These two news items have one thing in common: They ignore the fact that what nonprofits need isn’t more advice, it’s more money. When business people are ready to provide that—when they’re ready to serve on boards, not as agents of disruption but as securers of resources, and when they’re ready to advocate for a tax system that will underwrite the necessary work done by the voluntary sector—well, that will be news.

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COMMENTS

  • Mary Fuller's avatar

    BY Mary Fuller

    ON May 4, 2011 03:49 PM

    Thank you!  Also, who agrees to be on a board for 1 year?  Talk about disruptive.

  • BY Al Huntoon

    ON May 4, 2011 04:20 PM

    Kelley,

    Don’t you get it - we need heroes, captains of industry, to show us how to reach that elusive goal, our true potential.  This will bring us one step closer to the day when we can stop stumbling around in the dark!

    I guess don’t get it either.  I do think its a good idea, engaging business folks, facilitating board service, and so forth.  But my goodness, the hype about disruption and reinvention!  It’s odd and more than a bit troubling that the Palindrome people view this approach -  overblown rhetoric overpromising radical transformation - as necessary or justified to attract good quality business people.  I suppose that coming onto a board with such a paternalistic perspective will pretty much guarantee some sort of disruption, so maybe they got one thing right.

    Reinventing the nonprofit sector does appear to be all the rage.  There seems to be a rising chorus of voices (including those from b-schools) repeating the refrain that if only nonprofits could be more, business-like, entrepreneurial, innovative, etc, we would be able to solve all these intractable problems.  Acknowledging the strengths, accomplishments and unique challenges of the nonprofit world is a much more productive starting point. 

    Thanks for speaking up so candidly.

  • BY Mark Richard-Fogg

    ON May 4, 2011 06:17 PM

    While I always applaud the use of sarcasm for humorous effect, and it is funny, take the long view that these will simply be Newbees. If they have gotten together to try to make a difference and want to start at the top they’ll either realize what the mission demands and get to know the clients personally, or turn out to be lampoonish, just as they are at the beginning of their journey outside themselves.

  • BY Rob Cipriano

    ON May 5, 2011 05:29 AM

    Kelly, Thank you for this piece.  Nice work.  My thoughts are swirling and many too many to include here, however, having said that, let me try.  I believe that your smack on with the disconnect between the “high end captains of industry” and the end recipients.  Directing from the penthouse can leave many a crisis undetected and unsolved.  Nonprofits, NGO’s, IGO’s, charities and foundations need to have the tools made available to them on a platform they have access to in a competitive marketplace (nonprofit sector).  This platform will assist each org with their social networking, logistics, donor management, technology, business management, CRM, transparency and accountability with their Boards, donors, management teams, volunteer bases and with the most important group, the recipients.  The “Titans” can certainly help in defining some of the logistical, accounting and business best practices as the platform expands to meet the needs of those in need. http://www.allhumanity.org

  • BY Terry Purnell

    ON May 5, 2011 05:30 AM

    I understand that Board Members of the corporate sector feel that they have the god given ability to reprocess the voluntry sector management by introducing their ethos in to the decision making management. .  On the positive side they should be able to bring new fresh ideas to the not for profit sector but it is hoped that their reasoning is not just to enhance their C.V. but to understand to needs and demands of this sector and by working with all levels influence the management thinking, the operation amd the sustainability of the organisation.

  • Serena Low's avatar

    BY Serena Low

    ON May 5, 2011 06:14 AM

    Right on!

    Well written - fun to read!

  • BY Tom Costello Jr

    ON May 5, 2011 07:12 AM

    Kelly -

    As a startup nonprofit we are having fun and almost working 24/7…well OK, maybe closer to 11/6.  I don’t have the experience you have, nor the ability to look at the industry from a 35,000 foot perspective, so perhaps I am be a little naive.

    We just run The Joy of Sox, we simple provide socks for the homeless, like (I suppose) any startup.  We are passionate about what we do, mission focused and scramble for every opportunity.  And we all enjoy the role of being social entrepreneurs (ambitious, mission driven, strategic, resourceful and results oriented).

    With that being said, I would like to add your phrase “securer of resources,” to the business cards of our board members.  Thanks for the article.

    Tom Costello Jr
    Chief Sock Person
    http://www.TheJoyOfSox.org

  • Kathryn Papp's avatar

    BY Kathryn Papp

    ON May 5, 2011 08:16 AM

    Having moved from the private sector,  a global very successful service corporation, to the nonprofit sector about eighteen years ago to the nonprofit community, I can attest to the fact that nonprofits are staffed by largely untrained managers who are cast into highly demanding positions requiring the true maximization of resources of any and every kind.  As a result they often fall behind and are advanced with few management skills.

    This lack of experience and often expertise leads to an entrenched defensiveness and chronic positions of underperforming.  It is all “justified” by mission, which I agree should NEVER include a profit measure such as return to shareholders, but should include a measure of return to those who are served, be they children in Ghana, animals in Tanzania, or plants in the Amazon.

    This simple service measure is missing from almost all nonprofit mission statements, and when present does not translate to actionable objectives.  Often “experts” are brought in to provide provisional justification.  So the business community when looking to determine “impact” has no way of really knowing; hence the recurrent criticism, which I believe is justified.  It is not difficult to articulate a level of service delivery, but in not achieving it,  it will “impact” funding streams.

    The first nonprofit I worked with was World Wildlife Fund.  It highly benefited and continues to do so from its close relationship with Ogilvy & Mather, a premier marketing and advertising firm.  The research I was fortunate to review was targeted, asked the right questions of members/nonmembers, reviewed the status of mission, other conservation organizations, determinants of giving, etc. 

    The new group you’ve referenced may make a difference by “disrupting” the nonprofit sector, but like all well-established institutional sectors the nonprofit favors inertia more than change.  Where I would expect to see positive outcomes (“impacts”) from this group is in how social media, mobile devices, and new servers can revolutionize the delivery and effectiveness of nonprofits’ work for those whom they serve.

  • BY Scott Bessenecker

    ON May 5, 2011 09:16 AM

    Thanks Kelley. Here’s another article questioning the value of the for-profit industry as primary architects   and guides for the non-profit world: http://www.icnl.org/knowledge/ijnl/vol6iss2/special_7.htm There. are cetainly benefits to involving leaders in the for-profit sector, including their funding help, but the weight we place upon the for-profit model to inform and instruct the non-profit world has become unhelpful.

    I have also written about the incongruity of the for-profit model being used in the area of Protestant Christian mission with a set of blogs titled “The End of Mission as Business” at http://www.thenewfriars.com .

    I am glad to see some challenge being laid upon those of us in the not-for-profit world in re-thinking our structures and our bed fellows. We lack imagination if the primary source of our stucturing, visioning and metrics come from the for-profit sector. Thank you for challenging us.

  • BY Kelly Kleiman

    ON May 5, 2011 11:06 AM

    I’m startled and pleased to hear so many confirming voices, having felt like a voice crying in the wilderness on this very current topic.  Naturally, though, I want to engage with the dissenter.  @Kathryn: of course you’re right that there are many managers in the nonprofit sector who know more about ballet or child abuse than they know about management, and that this poses a threat to the achievement of their mission.  My point is that resources to cure this weakness should be directed at identifying nonprofit best practices and teaching them to front-line managers, rather than at having nonprofit management attempt to pattern itself on the for-profit model which often is inapplicable.  In some fields, of course, the nonprofit/for profit distinction isn’t relevant—probably good marketing is good marketing, apt use of social media will be apt in any context, and the need to measure success/impact is not diminished by the absence of a profit motive.  But in many other ways—particularly the intersection of marketing and service capacity, meaning that serving more clients is actually a net deficit for nonprofits—any for-profit “disruption” will be just that, distracting service providers from the need to provide, evaluate and improve service.

    The role of for-profit business-people, as of all the other community members represented on nonprofit Boards of Directors, is to assure that the nonprofit is doing the work that justifies its nonprofit status, and doing it as effectively as possible with the resources available, and making those resources available.  Anything else is just showboating.

  • BY john willis

    ON May 5, 2011 11:55 AM

    Hi Kelly, I like your style and your content - well done on this post, it’s right on.  In Canada we have a whole new wave of ‘social innovation’ - some of which is genuine social change by another name but a lot of which is the kind of gee-whiz capitalist claptrap that comes along every few years.  Undoubtedly profit-making businesses can - and bloody well should - devote more of their creative energy to solving real human challenges rather than figuring out which breakfast cereal to induce us to buy, but there is exactly zero need to think the nonprofit sector has been holding that back. Talk about adding insult to injury.  But this leads me to my real contribution here: there is a sibling to the phenomenon you have identified, and the sibling is designers wanting to get past making pretty things and instead solve the world’s problems.  In books like Glimmer and the Massive Change exhibition a few years ago, some very creative but not very politically savvy entrepreneurs started a discourse that goes like this: ‘how come there are still kids starving in Africa?  I mean, c’mon, did we say we wanted to deal with that, like, in the eighties? What is going on here, can’t people fighting hunger see that in this new world we want results NOW, not tomorrow?  What they need is some design thinking, what they need is people who know how to design things to do some design on food systems (or schools, or healthcare systems, or whatever) and voila! what seemed intractable turns out to be a confluence of challenging design constraints that really good designers are dieing to respond to!’ 

    Key thing about this discourse is that it (silently) eschews social justice, equating politics with the old pre-design thinking way of seeing things.  The world suffers from a lack of technique, not a lack of justice.  What it needs is ingenuity, not struggle.

    There are problems of that kind that we need to solve but the universalizing tendency of every new wave of ‘I really care’ business people is really getting on my nerves.

    Thanks! Keep it up!

  • Few business professionals could build, grow and/or operate successful businesses with the inconsistent revenue streams non profits in many sectors have available to them.  I don’t think wishing for “more money” will make business become more strategic in providing more money, or a better distribution of money, volunteers, in-kind donations and leadership to more places where these resources are needed.

    I see a need for intermediaries to form who will innovate new ways to educate those in the for-profit world to be more effective in using time, talent and dollars to help those in the nonprofit sector.  Those intermediaries could also be non profits, or could be for profit, or governmental bodies.

    Non profits also need to take a role in this “volunteer/donor” education process. Changing the way dinosaurs act will not be easy, or quick. None of us can achieve this working alone.

    If we expect a business person to instantly understand the mission, strategies and challenges of the non profit he/she serves as a board member, and have a passion for the cause, we are naive and so is the prospective board member.  We need to think of systems of learning that start preparing board members— and volunteers who serve in other roles with non profits—many years prior to when they take that role.

    I have been building a library of links to articles that show challenges facing non profits.  http://tinyurl.com/TMC-ChallengesFacingNPOs . One step in changing what donors do is to point them to information like this and help them learn and understand it. This learning could start as early as middle school when young people are growing up.

  • BY Michael VanBruaene

    ON May 5, 2011 12:24 PM

    I have seen the same mentality - hubris - regarding private sector executives thinking that they can “solve” the problems they perceive in the government sector.  After working in all 3 sectors (private, govt. non-profit) I have seen a lot of very capable and smart people in the non-profit and govt. sectors who deliver great results with their limited resources.

  • Ashir's avatar

    BY Ashir

    ON May 5, 2011 12:45 PM

    I’m surprised at how my hostility there is to what I see as a potential opportunity. I don’t read polemic in Palindrome’s statement, but rather a willingness to help non-profits do what they don’t seem to have the time to do: think strategically about how to use emerging technology, management tools and ideas to advance their causes. I think Kathryn P and Dan did a much better job of detailing this than I can, but my greatest frustrations within the non profit experience has been that we don’t have the time to devote to finding new ways to drive fundraising, cause-related marketing because there are “more important” things we need to do. Further the level of inefficiency I’ve seen in some of the non-profits I’ve worked for is mind boggling and in many cases all we need to do was think smarter and apply new ideas/technology to the problem but we lacked the internal resources of capability to do so. I think that’s the primary reason organizations like Taproot succeed. There is a need for the for profit world’s skill set and their ideas and tools will prove fundamentally disruptive because they’ll ensure that we think strategically about every decision we make to maximize value to our constituents. I don’t think it means disruption in terms of “we’re just coming in here to move around your furniture and leave.” That’s far too cynical an interpretation for my liking. As Dan said, none if us can do this alone.

  • BY Dori Ives

    ON May 5, 2011 01:46 PM

    I love this article. In fact, I think that businesses could learn more from nonprofits. They know how to get more things done without resources. Why not have MBAs required to do two years of community service without pay just like teachers and social workers are required to do? Talking about disruption! I’d love to see my fellow MBAs do just that!

  • BY Lillian Murphy

    ON May 5, 2011 02:22 PM

    Thank you Kelly for your observations about the Palindrome Advisors Group. My whole professional career, almost 40 years, has been spent in non profit management, first in healthcare and then in affordable housing development and ownership.  I believe it is a mistake to make generalizations about non profit managers and capabilities.  We come in many sizes and shapes as do business leaders and organizations.  True, there are some basic business principles that are common to any well run organization, for profit or non profit, and both have an obligation to their investor, donors, stakeholders or stockholders to be accountable for the wise use of resources and the quality of the “products” they provide to the publics served.  Both have to make a profit if they are to survive as healthy, sustainable enterprises.  As I see it, there are three major differences, mission, who they serve and what happens to the profits.  All for profits are not evil and all non profits are not pure and pristine.  All for profits are not perfect and all non profits are not inept do gooders.  We all make mistakes and stumble in our pursuit of our avowed missions.  In the case of the affordable housing world, and I am defining affordable as housing that is affordable to people who make 80% or below of the area median income,  the non profits have to do all the for profit real estate developers/owners do with a lot less equity!  Generally, the non profits have to piece the financing together from mulitple sources who place restrictions on the operation of the property.  In the case of rental housing potential residents need to income qualify annually and rents are restricted.  This results in more on going administrative work and little ability to raise rents to cover unexpected spikes in the expense of running the property in a responsible manner.  In general, affordable housing non profits are undercapitalized and over levereged. We are taking on more long term risk but not being properly compensated for it so as to build up sufficient reserves to ride out the ups and downs of the markets.  One of the most impactful things the government and the business world can do to help nonprofits is make more unrestricted equity available and hold us accountable for how we use it to impact low income communities and people. We are about providing affordabel housing opportunities for people to stablize their lives and achieve their dreams.  We measure our success in lives that are changed for the better in fundamentally profound ways and welcome committed individuals from whatever sector to help us do more and do it better.

  • Is there no middle ground between being reliant on donations and pure, heartless capitalism?  I agree completely that the nonprofit sector cannot achieve new heights through efficiency gains or improved “business” practices.  The sector employs countless talented people and there are many innovative organizations (and effective traditional ones) who can create real, lasting social change.  But at the same time, the sector cannot hope to grow its revenue base by simply stomping its feet and telling the capitalists join the board, cut a check, and shut the heck up.  Rather, nonprofits should be looking for opportunities to address the market inefficiencies that led to their creation in the first place—to close the economic circle.

    If a nonprofit organization is truly making a difference in society, then their work will create economic ripples somewhere down the line.  The trick is finding where that new value is being created and getting buy in from those people downstream who benefit from that new value and are willing to pay for it.  Sure, it’s not as easy as simply selling a widget.  Nor is it as easy as making an emotional appeal.  But the money is out there to substantially grow the sector; there’s no need for the nonprofit organization to operate on leftovers.  You can join the economy without compromising your mission.  You just have to find the right place to plug in!

  • BY Lauren

    ON May 5, 2011 03:36 PM

    I’ve spent most of my career straddling the fence – trying to make investments that generate positive financial returns while also achieving some form of positive non-financial return. Recently, what I do got a new name “social impact investment”, which for me means using investment as a means of generating both financial returns and improving quality of life for the working poor. Why do I say “working poor”? Because I truly believe that while there are many ways that we can create viable commercial models in health, housing, education etc., I also recognize that there are communities and needs that cannot be served through commercial models.

    When I talk to my colleagues in microfinance and impact investment, the concept of straddling the fence always arises when we discuss hiring and human capital for impact investment (as opposed to human capital at the level of the social entrepreneur). On the one hand, we have lots of talented people coming out of the development and non-profit world, with deep sector knowledge and field experience, but often little investment expertise. And on the other hand, we have lots of talented investment bankers and VCs who have significant knowledge of financial instruments and structuring, but often lack “boots on the ground” sector experience. Neither group brings the complete skill set we are looking for, so finding ways to blend talent and create work environments that enhance learning and professional development is of critical importance. I suspect this is true for many specialized organizations, regardless of their profit orientation.

    Reading Kelly’s post (thank you, well written and the humor was much appreciated), I was struck again by this notion that the private sector can “fix” the non-profit sector and vice-versa. As Lillian commented, not all for-profits are evil and not all non-profits are good. Multiple bottom line management is, however, quite complex.

    What I find myself looking for is not disruption (the global financial crisis has provoked quite enough disruption) but convergence. In other words, many non-profits do need to adopt better business practices from the private sector, often because they have grown beyond the point at which informality encourages creativity and productivity. Most for-profits need to understand that social and environmental stewardship are important for their own long-term sustainability. Both groups have knowledge and practices that would benefit the other.

    For the most part, non-profit and non-traded (private) company Board members only know what management chooses to tell them. The most brilliant Board in the world won’t be able to produce brilliant results in the absence of a collaborative relationship with management. And I find it hard to imagine that any Board member who arrives believing that they have all the important answers is going to develop that collaborative relationship. I’d love to hear private sector business leaders saying “HOW can what we know be used to help you achieve your goals” as opposed to “You can achieve your goals if you follow our advice instead of what you’ve been doing”. I’d bet the answer would include things like multi-year financial commitments, grant funding that covers (rather than excludes) associated administrative costs, leadership coaching or management training opportunities, the ability to outsource some back office services to high quality providers at reasonable rates and so on, but I doubt that a desire for smarter Board members would make the list.

  • jacqui's avatar

    BY jacqui

    ON May 5, 2011 05:26 PM

    Hilarious piece - I work for a nonprofit and we just laughed out loud at this.  But seriously I can laugh because I have a board of directors who are all leaders of large for-profit organisations, who sign up for our board for a minimum of 3 years and who are personally involved with the programs we deliver.  Not so funny for some of those organisations who will be the recipients of the largesse you describe above.

  • BY Paul Shoemaker

    ON May 6, 2011 03:48 PM

    Well, this feels like 1997 all over again smile. So there are two parts to this story - 1) SOME nonprofits DO need the business skills and expertise that a private sector executive provides (AND vice versa, the private sector exec needs to learn from how a nonprofit ED runs their organization and goes after social problems). It is a two-way street and done with mutual respect and humility. When the kind of collaboration is done right, it’s powerful and beautiful. Hopefully we get it right along the way at our 26 SVP’s (http://www.svpi.org). It’s not easy. But 2) there is NO doubt that the tone and inference Palindrome conveys is pretty sickening. I wonder why someone ever writes something like that. Did anyone proofread it? I’ll guess that a lot of their advisors are good people and that 2-3 years from now if they areally take this work seriously, they will change their tone and tune. But as of today, someone needs to tell them they come across to the rest of the world as full of themselves and ignorant of reality. Stay tuned

    P.S. I will look these folks up and reach out to see if we can start a “conversation”

  • deGrene's avatar

    BY deGrene

    ON May 10, 2011 07:17 AM

    This tactic is not surprising to me.  With the Friedman-esque concept of capitalism practiced today, where corporations have no obligation other than making profit, however and wherever they can and the hording of those profits for distribution to the already obscenely rich, it’s natural that for profits would want to disrupt non-profits—the goody-two-shoes that want to use the money that could be better used to support those who neither need it nor can possibly spend it in their lifetimes.

    If I sound angry it’s because I am.  I am sick, tired and more than a little pissed off that we, as non-profits, bow and scrape and cower to the Great Capitalist Despot who dangles a few paltry dollar in front of us and torments us by trying to force us to become as heartless and self-serving as it is.

    It is time we cut those strings and set our own courses.  for years, the only reason most corporations or rich people have donated to non-profits is because they get a tax break, so let’s let them pay those taxes.

    Non-profits, if we work together, can find ways of countering this “come to the darkside” attitude of the for-profit world. 

    One of the things that has me most upset is the idea within non-profits that we need money to confront every problem.  Where is the creativity?  Where is the innovation?  Where are the partnerships between agencies that would allow a sharing of services or materials?  we have gotten ourselves into this trap by thinking we need to confront every obstacle with some sort of money-based solution, so we have debased ourselves by selling advertising to donors—putting their names on our events and publications in reaction to what amounts to extortion. 

    And what have we found as a result of taking a business attitude toward our non-profits?  Executive Directors and CEOs who rip off the organization and demand for-profit compensation packages, juggled books by slimy accountants and services cut because they don’t contribute to “the bottom line.”

    Most of us got into the Nonprofit world because we were believers that there are things more important than money—that some things are beyond a price tag.  And yet, what do we do?  we chase the dollar!  We create programs just so we can apply for grants; we bend over backwards for greedy corporate types who have all the answers to our problems—for a price; we betray, in my mind, every value we had in order to grab a buck here and there because we think we have to to survive.  I’ve spent over 30 years working in the non-profit world as a volunteer and professional, and none of the non-profits I have worked for have ever been on solid financial ground.  But we have always gotten things done because we have sought out ways of doing it on shoestrings and on nothing at all.

    We need to realize that our purpose is to serve those that Capitalism treads underfoot or sweeps aside.  If we, ourselves become Capitalists—in the Friedmanesque model—we will ourselves be walking on the backs of those we pretend to serve. 

    It’s time we went back to the more traditional model of what we do and if that means we don’t have a large bank account, so be it—we should, in my mind, take pride in that because that means that our efforts are coming more from the heart than from the wallet.

    There are ways of doing things with less IF we put in the effort and the time to find them.  It all depends on how dedicated you are to doing what you believe in.  I think it’s time we went back to the grassroots idea of serving those in need and forgot about corporations and their extortion.  The whole idea of non-profitism centers on people, not companies, and that’s where we need to focus our efforts, both in services and fundraising.  If we’re not the biggest cat in the jungle, who the hell cares?  It that individual person we serve, who needs help and who is thankful for the littel we can do that truly matters.

  • BY Doug Yeager

    ON May 10, 2011 07:56 AM

    Amen.  Count me in your corner.

    The trick is to figure out how to move beyond the honest anger:  what do we do about it?

    These are good people with talents and treasure (and yes, a conviction that they know what is best).  What will it take to engage with them in a way that yields energy rather than heat?

    I, for one, feel this to be how I want to spend my time.
    doug

  • Jeff Wallace's avatar

    BY Jeff Wallace

    ON May 13, 2011 07:08 AM

    Many interesting takes on this topic.  I am finishing up my 3rd year on a board for social needs in Central Ohio and will be reelected next week for another 3 year stint and am proud of this. 

    I came through an organization called “The Groundwork Group” that aligns IT leaders/experts with local non profit boards to take the next step in helping facilitate and design an IT strategy.  We are not all business leaders nor do we bring the fiscal resources in to help, but we are all passionate about taking the meager resources available and ensure they are spent wisely with a real plan.

    I cherish the time I spend with my peers on the board, both for their wisdom and their passion, it is easy to get excited about what can we do next when you are engaged.  I am not sure a blanket 1 year statement is enough for all boards, these are ships that need a slow, steady change of direction.

    What bothered me most from this article is the pompous attitude that the organizer’s feel they can fix everything in 12 months.  My guess is the organizations they are paid to serve now don’t move that quickly.

    Good thought provoking article.

  • Neal Myrick's avatar

    BY Neal Myrick

    ON May 16, 2011 12:48 PM

    There is so much I agree with in the article - thank you.  I disagree, however, with the premise that nonprofits must stay that way and that there is no middle ground.  I think any legal structure that allows an organization to successfully achieve its mission is good. 

    Hybrids exist because of controls and limitations in tax laws.  Those of us who have or who are considering hybrids are trying to find the most strategic and sustainable ways of successfully achieving our missions.  I also don’t think profits or profit motives are necessarily evil.  How the profits are earned, from whom, and how profits are used seem to be more important indicators of good versus evil.

    My organization, for example, is a nonprofit that works with environmental organizations.  There are many (too many actually) nonprofit organizations we could help.  There are also many for-profit organizations that can benefit from our technology innovation and programs.  One of the reasons we are considering a hybrid is that we think business and government have more power to address climate change at the necessary scale than most nonprofit organizations have right now.  Tax laws don’t allow us the freedom to continue to take philanthropic dollars while simultaneously earning revenue and profit from for-profit and government organizations.  A hybrid structure does.  And, profits we earn from working with for-profit organizations would be given to the nonprofit for reinvestment into our nonprofit work.

    I will say the Palindrome messaging is off-putting and certainly not a good way to build relationships with the nonprofit community.  Their messaging is more of a distraction, however, than anything else.  I would hope after becoming involved they realize how complicated it is to run a successful nonprofit when most of the nonprofit ‘market forces’ seem to work against success.  If they really want to be disruptive I challenge them to come up with a new model of philanthropy that gives nonprofits the strong financial footing they need to take good ideas to scale.

    Thank you again for a great article and for raising your ideas.  Very well done.

  • Kelly - I’m going to make you an offer - I’ll hire you for the rest of your life, as long as it means that you never give advice to another non-profit again.  We in the non-profit world need to move forward, and let folks like you in the old guard, with their close-mindedness, die off or go broke.

    While I’m not a fan of the initiative described in the article and I agree that “business” isn’t the answer to all things non-profits, you completely miss the point. 

    I hope that my response will be of value to you and to any non-profits who may be suffering as a result of your advice.

    “what nonprofits need isn’t more advice, it’s more money”

    Not having money isn’t a problem, it’s a symptome of a much bigger problem.  Money is an indiscriminate accelerant - it doesn’t make bad non-profits good, just like it doesn’t make bad companies good - it just accelerates the inevitable.  That’s why lottery winners with no money management skills go broke, and why poorly managed organizations that receive money fail faster.

    “Do nonprofits that are trying to serve their clients really need disruption in their management to supplement the disruption of funding they constantly face, the disruption of their staff produced by those funding crises, and the disruption of their ability to operate smoothly or to secure resources”

    Sounds to me like you’re so caught up in the day-to-day putting out of fires that you’re unable to see your non-profit holistically.  In the spectrum of “sustaining” vs “improving” your non-profit, it’s easy for Exec Directors to get caught up with sustaining, just as you are, and have a blind spot to the improving.  This is EXACTLY why getting advice from someone in a cross-disciplinary field is beneficial.

    “This approach ignores the fact that nonprofit markets usually consist of clients who are not profitable to serve—because if they were profitable to serve, the for-profit sector would be serving them.”

    Did you go to law school?  Don’t you understand the basic logical fallacy of this argument?  I’m not even going to get in to this here, but visit your local library and pick up a macroeconomics book. 

    There are plenty of ways of making what you’re doing sustainable without the need to earn excessive revenue.  There are plenty of funding and revenue opportunities from third parties whose self interest can be associated with the work that you’re doing.  The problem with your narrow minded point of view is that you think that the only people who are clients are the folks who are the primary recipients of your goods or services.  In reality, many of the problems that the non-profits you consult for are probably having are as a result of not considering your partners, your funders, and your donors as clients.  You’re solving a problem for each of these parties as well, and many will be in a position to value that.

    You sound like an alcoholic who tells their doctor they will do anything to get healthy - just don’t tell them to stop drinking.  STOP DRINKING KELLY!

    As for my offer, you know how to contact me: .(JavaScript must be enabled to view this email address)

  • BY Kelly Kleiman

    ON May 20, 2011 01:04 PM

    @Rich: It’s certainly your privilege to disagree with me, just as it’s the privilege of the ladies and gentlemen of Palindrome to decide that they’ve got the cure for what ails nonprofits.  But just like it’s not Palindrome’s privilege to be condescending in offering its members’ skills, it’s not really your privilege to be condescending in offering your critique. 

    Some social problems can be converted into profit opportunities and in those cases it makes sense to partner with for profits; others cannot and in those cases it doesn’t.  See how easy it is to be civil?

  • Kelly,

    As someone who allocates large amounts of capital into the non-profit space, and works with leadership to use the capital effectively, your post represents the mindset that I’ve spent my career fighting.  You have a megaphone and with that megaphone comes responsibility.  My response was meant to be an ad hominem criticism because you, personally, need to be accountable for what you write.  You either didn’t consider the damage that publishing this could cause, or you really don’t understand the issues you’re writing about.  I’m not sure which is the case, but regardless, the effect is that you’re perpetuating the same narrow mindedness that is crippling the non-profit sector. 

    So I’ll ask you this - is your intent to be provocative and generate page views, or is it to leave a lasting impact on the world by helping non-profits be more effective at serving the most vulnerable populations?  If it’s the latter, what if you found out you were giving them bad advice?  Would you stop writing? 

    I certainly agree with you that I could have been more civil in my response.  There are some circumstances in which civility has no place - especially to prevent the purveying of ignorance.  And while you could argue that the tone of my response was counterproductive, I know some of the folks who own your megaphones and am happy to share my thoughts with them as well.

  • “Disruption” as used in the context of that statement, is a business term, usually meant as a new process, product, or technology which radically changes an existing, or creates an entirely new operating model, commonly a positive connotation.  I understand why someone without a business background would interpret it in the way that you did. Unless of course, you did understand the context, but felt compelled to misrepresent it in your posting.

    I am also a for-profit business person, who sits on a non-profit board. I find that most or all of the non-profit folks are so passionate and consumed by serving their end recipients, that they often discard or prioritize down the need to make efficiency gains. Gains, that could help reduce the need for fundraising.

    Embrace diversity of thought, my dear!

  • Brenda's avatar

    BY Brenda

    ON May 24, 2011 12:24 AM

    I’m glad I read the whole thread here and agree with John and Rich’s perspectives. Being from the non-profit sector and having worked the past 4 years bringing for- and non-profits together at Arts & Business UK, I can add that the idea that the for-profit sector can fix the non-profit sector disappears as soon as a ‘newbie’ from the corporate world joins a board and begins to understand what makes the non-profit sector tick (in terms of it’s people and the people it serves). I’m sure there is some great talent in the Palindrome group and worth keeping a close eye on. Their 1 year commitment is inappropriate for board recruitment, but they would be well placed to support as advisers to resolve specific organizational issues.

    This article and comments do, however, highlight just how easily the two sectors can become polarized when a new enthusiastic group of business people uses business terms like ‘disruptive’ (comes from the ‘innovation space’ and is loved by the tech sector) when reaching out to the non-profit sector. An unfortunate choice of words perhaps, but then language has always been an issue when these sectors cross paths.

  • Maria's avatar

    BY Maria

    ON May 24, 2011 04:45 AM

    I’ve served in the non-profit world for a number of years and have regularly noticed that there are always too few resources chasing too many clients in need or vice versa. What non-profits do not lack are passionate, idealistic and, sometimes, altruistic employees….who need training in customer service, collaborative partnering with outsiders to build support and goodwill, cultural competence and an understanding of economies of scale, to name a few. These leadership qualities flow from managers who have been trained to critically think outside the box. Managers willing to call for a level of accountability which incorporates performance tied to evaluations, supervision between managers and staff about measurable goals and training plans for managers and staff.
    The Palindrome approach carries a leadership model in which seemingly fresh ideas disrupt, however, how does the change (disruption) come to be infused into the agency as a level of expectation? It flows from leadership, through management and into day to day operations via training and expectation.
    Two programs, the Center for Non-Profit and Public Leadership at UCBerkeley and the Institute for Non-Profit Management and Leadership at Boston University offer a unique leadership approach which gives non-profit leaders and managers the tools to integrate fresh thinking. The programs pulls emerging and talented leaders currently working in non-profits and place these talented individuals in settings where they exchange thinking, offer solutions, read case studies and non-profit related literature and develop support networks. This macro level perspective provides the non-profit leader and senior manager with the base level of knowledge and access to others faced with similar challenges via a program at BU that comes with scholarship and financial support for the individual from the non-profit.
    While the Palindrome approach is to be applauded it must also be woven through the fabric of the non-profit and this doesn’t happen at 30,000 feet.

  • BY Les MacDonald

    ON May 24, 2011 03:30 PM

    Kelly,

    We are experiencing the same phenomenon here is Australia. They often expect us to be grateful for the gift of their time and “expertise"that they deign to bestow upon us and many are blissfully unaware that serving on a not-for-profit board must be for them also a learning experience. Instead they often simply assume that the learning process is all one way and simply manage to piss-off the people they have come to work with. Many Also singularly misunderstand that the motivating force of each sector is fundamentally different and that shapes the behaviour of those in the sector and gives it it’s special flavour and character.

    The Private sector is always assumed to be motivated by competition, although many in the sector spend their entire lives seeking to organise their markets in such a way as to eliminate that competition entirely. But nonetheless theoretically it is competition that drives efficiency and innovation. The not for profit sector does not, and should not, have competition as it’s motivating force. It is motivated by co-operation. Communities and people working together to achieve shared goals and aspirations unaffected by the desire to become rich out of achieving those shared aspirations. That makes it fundamentally different from the for profit sector and thus creates a different dynamic. Sharing information and experiences and knowledge is the predominant way in which change and innovation occur in this sector. To ensure that sharing it is necessary to build and sustain relationships of trust and reciprocity.

    Many in the business community find this an almost impossible transition to make so instead of them changing their orientation to fit the needs of the sector, they seek to change the sector to fit their view of how the world does, and should, operate. That approach literally kills the organisations into which it is introduced stone-dead! They make in fact continue to exist as organisations, but the purpose that gave them life in the first place is no longer being met. They become clones of for profit corporations without any other purpose than making money from a vulnerable and needy group of citizens. This is happening more and more in Australia and is destroying the social capital that many of these organisations have built and sustained in communities for decades.  Our society and communities are the poorer for it.

  • Max Teo's avatar

    BY Max Teo

    ON May 24, 2011 04:25 PM

    Kelly,

    Have to disagree with what you’re saying. As a long-time provider of pro-bono consulting to the not-for-profit sector in Australia, the fundamental problems isnt’t always about money - yes if they have more money they can do more stuff - the fundamental problem is that not-for-profits are often poorly managed - they lack commercial discipline.

    Les McDonald from Australia, the corporate guys are seeking to change the not-for-profit mindset, not the overall goal of the sector which is to serve the underprivileged.

    Case 1 - I am doing a turnaround strategy for the board of not-for-profit a group that works in the women’s health space. They are on the verge of bankruptcy through financial mismanagement. Incidentally, the one skills lacking on the board is financial management - which an evil corporate person would have i.e. that discipline to ensure cash in = cash out.

    Case 2 - I’ve been working with a group that looks after asylum seekers - it absolutely competes, yes competes, for government and public money. As a consequence of this competition, it is forced to innovate in terms of utilizing it’s assets to generate profit (ghast, yes they’re trying to make their own money to be self sustainable rather than rely on handouts)

    A commercial mindset and approach to working is what I as an evil corporate advisor am trying bring into this sector. I’m not trying to stop helping people, I trying to help not-for-profits be more efficient (this means doing more for less) and effective (this means that we’re actually helping people rather than wasting money without cause) with the tools and experience I have from the corporate world.

    Regards,
    Max Teo

  • BY Bob Silvestri

    ON May 24, 2011 04:29 PM

    Well said!

  • BY Bob Silvestri

    ON May 24, 2011 04:33 PM

    ...and by that I mean what Kelly said in her original piece. Having run a number of nonprofits that employ hybrid funding models (environmentalmediafund.org ; doGoodrfund.org), I can say emphatically that the most needed services provided by nonprofits are the most costly (i.e. healthcare, homelessness, hunger) and will never be solved by anything else but altruism and heartfelt hard work.

  • Garth's avatar

    BY Garth

    ON May 24, 2011 07:15 PM

    I would really like someone from the non-profit world to ‘disrupt’ the business world - well most especially the finance industry.  Start by having a look at the movie “The Inside Job”.  Following the Global Financial Crisis, I am surprised at the gall of some of these people.  They really need some humility, not more hubris.

  • BY Les MacDonald

    ON May 25, 2011 12:11 AM

    Max Keo,

    I have run not for profits now for the last twenty years. they have all been highly successful financially and in terms of delivering on their goals. None have been in need of any special expertise provided by the private sector. There are plenty of people in our sector with financial skills that also have the right values orientation that ensures their skills are being put to a socially useful purpose and not simply turning the organisation into a money making machine. I have also run private for profit organisations in a number of industries and have come across quite a few people in that sector in senior management positions that I would not allow to run a chook raffle, let alone a not for profit organisation.

    The problem is the arrogant assumption that for profit managers are actually better than not for profit managers and the superior attitude adopted by many of them. Some have been fantastic, but they are the ones who have that rare combination of an ability to learn as well as to teach and an understanding of the importance of the values necessary for the sector. If we are talking about organisations going bankrupt through bad management I can think of several hundred of the worlds major banks that might need some help.

  • BY Kelly Cordovano

    ON May 25, 2011 09:08 AM

    B R A V O !!!

    It is a great idea to motivate people to join boards to help solve issues. After all, a new set of eyes on a problem may help. But, just as has been said, the idea that we are all inadequate is getting very annoying. The idea of “disruption” does not sound like a positve, uplifting, problem-solving word of help or encouragment.

  • BY Kelly Kleiman

    ON May 25, 2011 12:34 PM

    Ladies and Gentlemen: I’m familiar with the term “disruption” as used in the tech sector, and in fact the original draft of this piece made that fact explicit.  It was nonetheless appropriate to consider the extent to which tech-style disruption would produce actual disruption.  By the way, your assumption that I needed to be instructed on that basic business terminology—or on the need for nonprofits to keep accurate track of their finances, or to figure out ways to provide their services better at lower cost—is the gravamen of my complaint.  We in the nonprofit sector have a range of skills, as well as an acute understanding of the skills we don’t have and need to recruit to our Boards of Directors.  Many of us—I might even say “most”—are really quite sophisticated.  We prize our Boards of Directors and are happy to work with those members whose background is in the for-profit world—but on conditions of equality and not condescension.

  • Joy Hahn's avatar

    BY Joy Hahn

    ON June 8, 2011 09:15 PM

    Great and fair article.  Great responses too.  Thank you.  I wonder if we could all agree that *foundations* could benefit from Palindrome? insert laughter here; oh, this is an inside joke for people with nonprofit experience grin grin  Thank you to all again.

  • BY Daniel Ben-Horin

    ON July 14, 2011 11:24 AM

    I approach this debate as someone who founded and has directed (in the last 14 years, co-directed) a nonprofit, Techsoup Global (originally: CompuMentor), that works very very closely with the private sector, employs 200 people, works in 35 countries, is primarily funded by earned revenues from a social enterprise and has enjoyed, over 24 years, the profound benefit of private sector board members, advisors and consultants. I am fond of saying that the best thing that ever happened to TechSoup was the Dotcom bust, because it ‘liberated’ people with the private sector skills we needed to grow to our next stage.

    So I’ve been living in the ‘business-y’ part of the nonprofit world.

    And my sympathies here are about 95% with Kelly. Thank you for your courage and good writing and civility too. Keep using that megaphone!

    The missing 5% concerns the suggestion that the lack of money is pretty much all that ails us. It is indeed a big missing part, but I do agree with some of the comments that there is major opportunity cost to receiving infusions of cash absent the skills to build the systems whereby that cash can effectively be deployed. And those skills do tend to reside more in the private sector, since having fungible cash is much more a private sector area of experience!

    At TSG, we know that the problems we care about need partnered solutions. We convene philanthropy, corporates, nonprofits, techies, and concerned thinkers in collaborative venues to work toward these partnerships and solutions. http://techpresident.com/blog-entry/innovation-social-change-and-tech-techsoup-stirring-pot The first rule of collaboration, as far as I’m concerned, is a ‘human’ rule—respect and listen to the other people in the room. “Civility” isn’t a ‘nice to have’; it’s a ‘must have’ if we are to achieve impact. While I wouldn’t demand civility in opposing, say, genocide, I cannot disagree more strongly with this statement by Rich in the present context:

    “There are some circumstances in which civility has no place - especially to prevent the purveying of ignorance.  And while you could argue that the tone of my response was counterproductive, I know some of the folks who own your megaphones and am happy to share my thoughts with them as well.”

    Rich, most of us use our real names here. Who are you? And would you mind elaborating on that last sentence about your access to the people who ‘own’ Kelly’s megaphones?

  • David Geilhufe's avatar

    BY David Geilhufe

    ON July 14, 2011 11:54 AM

    As much as I feel I could have written Kelly’s post… I had the exact same reaction to the Palindrome thing, this entire discussion reminds me of the current political environment (Democrats/Republicans).

    The two sides (corporate & nonprofit) have almost religious views:
    (1) Do nonprofits need more money? From the corporate view, they need to do more with what they have. From the nonprofit view, they need more money to do more. No one wants to tackle the real issue… what is the productivity of the nonprofit sector? How do you measure it? Is productivity growing? If you can answer these questions, it is really simple to answer the question of whether a nonprofit can do more with more money.
    (2) Does corporate advice help nonprofits? From the corporate view, “I brilliant & made a billion dollars, how hard can it be to do this nonprofit stuff.” From the NPO view, “The last two brilliant corporate guys that transformed my organization spent a lot of money, failed, decided that nonprofits were ‘screwed up’ and went back to making millions of dollars while I was stuck with an organizational deficit.”

    The truth is always in the middle. There are no panaceas… each side has a huge amount to teach the other and MUST successfully teach one another to achieve positive social change.

    Teaching begins with each side listening to one another and trying hard to respect the alternate point of view.

    The problem with the Palindrome thing is not that corporate ideas are bad, it is that they show no respect for the NPO sector and clearly never listened carefully to NPOs when developing their plans.

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