Is there really a nonprofit – social entrepreneurship divide?
One thing I have had the pleasure of witnessing in my four (!!) years of blogging is how the conversation on social good is changing to incorporate more approaches. I’ve seen this specifically in the growth of social entrepreneurship.
However, the definition of social entrepreneurship seems to change depending on the speaker. Is it someone who starts an organization for the social good? A mindset when it comes to social change that encourages risk taking and focuses heavily on ROI? Then founders of nonprofits can fall into these categories. Or is it something more specific like for-profits with social missions? Many businesses fall into these categories as well.
Given this broad definition of social entrepreneurship, I’ve been a bit surprised by conversations framed as “nonprofits vs. social entrepreneurship.” It seems to be rooted in the idea that when a for-profit component is included in your organizational structure, you can both change the world at a faster rate and make more money than you would by leveraging a traditional nonprofit model.
False (and Troubling) Dichotomy
Unfortunately, this isn’t always the case. Social entrepreneurship endeavors (specifically when using the for-profit designation) can suffer from the same problems that traditional nonprofits do including addressing lack of diversity, proving impact, and, our favorite, securing funding.
So why the rush to praise this approach as a panacea? Part of it, I think, is the belief so heavily ingrained in our culture, that business really is the answer to everything. You’d think after our financial catastrophes and warnings from our greatest business thinkers, that we would take a step back from this thinking. Clearly, we haven’t.
The flip side of this belief is that nonprofits don’t really do much. But they do and I cant imagine what life would be without them. Indeed, they are testimony to the generosity and activism that are woven into the fabric of this country and, many would argue, fuel our economic, social, and political growth.
Given the complexity of social problems and the diversity of talents and resources that can be used to address them, we need to use a more inclusive approach to social change. But what seems to happen when we try to be inclusive is that we begin creating hierarchies.
So what if shifted our focus from “what’s the best single way to solve all of the world’s problems?” to thoughtfully asking: “what works best given the need we want to address, how we want to address it, and the kind of life we want to live?”
Different organizations = different opportunities for changing the world
To start, I think we need to acknowledge how different organizations actually do pursue a social mission. Nikita Mitchell shares a great breakdown on her blog from Inc Magazine:
- Traditional Nonprofit refers to the typical nonprofit model which is highly dependent on grants and donations.
- Nonprofit with Earned Income are nonprofits like the Girl Scouts that earn a significant percentage of their revenues from selling a product or service.
- The Hybrid are organizations that have a mix of both for-profit and non-profit activities. In order to maintain the 501(c)3 status, the for-profit side is legally separated from non-profit activities; however profits are used to support the nonprofit.
- Impact Investing is an investment strategy in which both social impact and financial returns are important.
- B Corporations, which I’ve written about before, are businesses that must prove that they care as much about society and the environment as they do about profits.
- For-Profit with a Social Mission is your typical legal corporation which also aims to make a positive impact on society. Ben and Jerrys is an example, as it has always been determined to “make the best ice cream in the best possible way.”
Additionally, the strategies above apply to businesses/organizations. Individually, how do we act on a daily basis that affects the world around us? Beyond starting organizations, what are some ways we can get more involved in our communities?
Given the social challenges we face, we need to focus on collaboration, learning, and sharing from all people interested in the public good.
What do you think? Should we reframe the conversation?
I think the main thing that nonprofits suffer from both internally and externally, is the non-business mindset. People both in the field and outside the field still view nonprofit BUSINESSES as charities. While the idea of a charity is fine, people have less of a business understanding because of it. It is a not-for-profit business. I believe this leads to the sad, sad notion that all money should go to the “mission” and almost nothing to the “overhead”; i.e. salary and benefits for those doing the work. It is this “overhead” that allows the good to be done. Without quality full-time professionals to do the “business” of the nonprofit, the industry will continue to suffer from high turnover and inefficiency.
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Allison – Thank you for raising this important topic on your blog. Yes, we definitely need to reframe the conversation. I’ve written about the ‘coming together’ or at least blurring of the sectors as well: http://www.goinginternational.com/2011/06/08/impact-without-boundaries/ Historically the ‘sectors’ were much more siloed. The blurring is what is causing a lot of the confusion in terminology. Hopefully we are moving in the direction of looking more at ‘social good’ outcomes and different structures merely as vehicles to get us there.
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I agree with Scott, at times the non profit community is devoid of the proper business practices to sustain themselves effectively.
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We had similar questions at the Foundation Center, so we welcomed 2 experts in this space, Marc Lane and Ben Wirz, to join us for a live chat discussion to help people who want to start up enterprises with social missions make informed decisions about what corporate form to take – nonprofit, for-profit, L3C, B corp, etc. Check it out: http://grantspace.org/Multimedia-Archive/Live-Chats/Nonprofit-For-Profit-L3C-B-Corp-How-to-Choose-2011-08-24
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Allison– I’ve been wondering about the nonprofits vs. social entrepreneurship paradigm for the past couple of months. And depending on whom I speak to, I get different answers. Personally, I believe social entrepreneurship always existed, its just that now it has a category to fit into.
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