(NYT, 6/27/12, By David Bornstein)
What follows are my reflections, lessons learned, and highlights from reading the article.
Summary:
Bornstein details some of the paradigm differences between the non-profit and for-profit sectors. He makes some allowances for slow non-profit growth, mostly citing our differences in perceptions about funding sources. He outlines the difference between "builders" and "buyers" - builders work on supporting the growth of an organization, whereas buyers are mainly concerned with the quality/quantity of the product. (See Starbucks quote below.) Bornstein puts the onus on non-profits, asking: "What would happen if everyone in the nonprofit sector paid more attention to the differences between build and buy money like everyone does in business?" Designing a growth plan can help align the organization and funders, creating common outcomes and mechanisms for evaluation. In sum, Bornstein motivates non-profit leaders to be thoughtful of our funding strategies, and look toward businesses for some advice.
Opinions:
Opinions:
- It would be interesting to see a comparison of funding perceptions between non-profit and for-profit execs - a survey of their thoughts on funding and how it relates to the functioning of their org/corp.
- I'm not exactly clear on what Bornstein is asking of us non-profit execs - is it to refine our financial paradigm to be more similar to those in the for-profit sector? So there are good points here: a) developing more sustainable funding sources rather than being reliant on grants/foundations, b) focusing more on the product/output and how [members] value them. On the other hand, non-profits may be reluctant to consider their members consumers. Additionally, members do not always have the money to buy the product, which is an argument for why the non-profit exists in the first place.
- Moreover, there's the idea of charity - the non-profit may want to give its services for free. I have mixed feelings about charity, because it sets up a hierarchy - with giving in only one direction, not reciprocated, the giver has power over the receiver. Furthermore this action (giving) doesn't come from a place of solidarity, rather it comes from outside/above, and perhaps mixed in with pity. However, charity helps lots of people every year - those in need, without voice. A provoking article that has helped build this question within me, called "To Hell with Good Intentions," can provide more insight here.
- Another key point is how can non-profits access the "building"-type of funding (equity) he mentions? I don't think Bornstein clearly outlines this.
- In sum, my main take away point is for non-profits to be very thoughtful as to the value of the product we provide - does it add value to the members' lives? If so, how much - can we quantify that monetarily and should we? If not, we should do some serious thinking.
Lessons learned:
- Difference between equity and revenue: "“The role of equity is to pay the bills while something learns to fend for itself.” Equity pays for mistakes and unanticipated problems — hiring the wrong people, expanding to the wrong locations — as managers figure out how to operate at an enhanced scale on a continuing basis."
- Donors Choose and Volunteer Match - both online platforms have used similar strategies (I should look into them for NV)
- "Non-profits can't get investors because we don't have owners" - not sure if this is true - non-profits do get investors, right?
Simply put, builders and buyers think differently. “If you invest in Starbucks, what you care about is Starbucks being healthy over time and lots of people buying the coffee and, in fact, you want the coffee to be high priced,” explains Craig Reigel, current managing director of N.F.F. Capital Partners “But if you buy from Starbucks, you care about getting the best cup of coffee for the lowest price. The way you think about success is completely different.”
"...It was possible to raise money against a plan and that all the investors signed on to the same goals and reporting requirements — a social entrepreneur’s dream."
One of their clients, VolunteerMatch, which helps Americans find volunteer opportunities online, raised $4.2 million in equity to upgrade its Web platform and fee-based services. Since 2007, the organization has doubled its impact, facilitating more than 620,000 volunteer connections in 2011. “If we had tried to go a traditional philanthropic route, it wouldn’t have happened,” explained Greg Baldwin, the organization’s president. “You can’t build an operation and scale it if you’re trying to package 15 different programmatic grants that all have different goals based on the priorities of 15 different foundations.” The growth plan got everyone aligned.Bornstein is also author of the book How to Change the World: Social Entrepreneurs and the Power of New Ideas.
What do you think?
I think asking if the product (although I don't want to use that word because it's restrictive) the org provides adds value to the members' lives is important to think about. It better otherwise you are wasting time. However, I strongly disagree with quantifying that monetarily. I see the benefits of it from a practical standpoint. It would be a convenient measure to compare with other good and services in the marketplace. I disagree with it because I don't think money should be the measure of value, especially for many of the things non-profits provide. Or rather, I think "money" as a means of exchange can be the measure of value (at least to a certain extent), but I don't think it is in our current economic system. At best it is a very perverted measure.
ReplyDeleteMy initial reaction to the question of investors is assuming the Bornstein meant investors that own part of the company and receive some monetary benefit from it. Since no one actually owns the non-profit you can't have those kinds of investors. I think a better options is to look at worker owned businesses or worker cooperatives. Can non-profits look more like those?
My response to the Starbucks quote: What if the builders and buyers were the same people?
The VolunteerMatch quote made me think about why it is the case that their upgrade wouldn't have worked if they were a non-profit. Why is it easier to get equity funding as a company than it is for a non-profit to get grants to expand?. My first try at an answer is that it's easier to get money as a company because everyone investing in it has the single goal of getting more money out of it. That's an easy goal for a lot of people to agree on. A non-profit looking for foundation funding doesn't just need to get foundations to agree on one simple goal, but instead on what the goals are and how to go about achieving them.
Thinking about funding and what kind of money the non-profit is getting is important, but I just want to rant about comparing non-profits to for-profits. Basically whenever someone says non-profits should be more like for-profits, I think it's bullshit. I definitely don't want everything to be run like a business. Yeah, non-profits can learn a lot from businesses and the reverse is true as well. Obviously the reason non-profits exists is because the market doesn't take care of those needs. Finally, on the notion that non-profits are inherently less efficient: efficiency is not always the goal; where is the proof? There are many inefficient businesses. From experience I've seen non-profits do a ton of stuff on an extremely small budget, so if you're talking about efficient use of money, I think non-profits are often more efficient than businesses (especially if you consider the amount some CEOs get paid compared to non-profit EDs)