55278554a317b-1428653396-Dreame_DanMcCool_For_KathleenVohs
Art by Daniel McCool, Brooklyn

Do Non Profit Organizations Need a Business Plan?

By Michal Kabatznik

How big-business plans to invest in 'doing-good' is damaging the non-profit world

 

I recently attended a conference on impact investing.  Lately, I can’t escape this phrase, it keeps popping up everywhere as the, magic answer to everything. Impact investing refers to investments ’made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return.’ It is a form of socially responsible investing that serves as a guide for various investment strategies. A session at the conference encouraged top family foundation offices, who traditionally lend their support through philanthropic models, to instead shift their focus to impact investing in social businesses. As the crowd murmured in agreement, I raised my hand and asked if this meant that non-profit organizations are irrelevant, and if so, what about issues and projects that need support but just can’t create revenue? What is the business model for supporting starving children? After the session I was commended several times on my thought-provoking question, but still I never received a clear answer. Are non-profits dead? Are social businesses the answer?

 

Traditionally, there has always been a clear divide between businesses and non-profit organizations. The business or ‘for-profit’ sector focuses on expansion, market share and mostly, revenue. Profit is king and all other elements of the business may be considered mere after-thoughts and/or PR ploys. Non-profit organizations, on the other hand, focus on poor and under-privileged populations and causes.  Large checks were written (often by the same executives of the aforementioned businesses) with the understanding that the money would go to ‘doing good’ and not much was asked for in return.  Today we are seeing a shift in both sectors as the world becomes more interconnected and the lines between industries blur.

 

Much of this shift and blurring of old paradigms is related to technological innovation in our world. For example, I recently had a video conversation with a friend 5,000 miles away while simultaneously reading an article published that day in a French newspaper (and I don’t know French). I did all this while sitting on the beach watching the sunset. A series of events that seems so mundane today was not possible 5 years ago, and was the stuff of science fiction 10 years before that. Today you can run a multi-million dollar company on a smartphone while sitting in your living room and wearing footsie-pajamas. Physical constraints that limited us in the past no longer do, and we have instant access to any information we could possibly want on a device that sits in our pockets. This new availability of information has made us the most knowledgeable generation in history and in turn one of the most conscientious ones; we are more aware of where our food comes from, who made our clothes, and exactly how bad our car is for the environment. We hold businesses and producers more accountable than ever before and they in turn, cannot hide the more unsavory aspects of their businesses as they once could.

 

Corporate Social Responsibility (CSR), a term that has been floating around since the 1960’s, used to serve as a way for businesses of the past to ‘check the box’ of social awareness. While activities varied, many times it was merely a photo opportunity or a donation to a non-profit organization. Today, CSR is moving from being a side project in many companies and is becoming a core value and an integral part of the business plan and strategy. Businesses are becoming exceedingly aware of their social impact, an impact that is now viewed as a source of increased revenue rather than a drain on company resources.

 

Non-profits are also experiencing a shift in the opposite direction. Thanks to a blurring of industries and an increase in financial-accountability, organizations who were once entrusted with ‘doing good’ and creating social change, are faltering under the weight of big-business expectations. Today donors request detailed reports, outlining quantitative results and organizations are expected to deliver with clear proof of project outcomes and long-term effects.

 

This begs the question, if businesses are now focused on social impact and non-profits are expected to act like businesses and show similar results, are non-profit organizations obsolete? Are social businesses the new non-profits? Is impact investing the new philanthropy? This is a dangerous assumption.

 

I support businesses being more humanity-oriented by including social impact in their business models and strategies, but to have for-profit businesses conquer non-profit organizations is ill-advised. While businesses will always need to turn a profit in order to survive and flourish, certain non-profit organizations may shift into the social business model (essentially becoming for-profit) and will decide that this is where they are headed. I applaud this pivot and believe that it will assure a vibrant future for many organizations.

 

Other non-profit organizations need to be just what they are – organizations that work without thought of profit and just for the benefits of ‘doing good’. To be sure, it is important to hold organizations accountable and assure that donor money is effectively spent, but holding these entities to business standards is simply not fair. What kind of impact can we ask of panda bears and humpback whales (other than to keep reproducing and not to go extinct)? Shall we ask each 10 year-old child to provide a detailed description of her life’s goals to ensure she will provide good return on investment before we admit her to the after-school program in the Bronx? These seemingly humorous statements seem outlandish but are in fact rooted in truth.

 

There will always be causes that will not make sense as a business investment but are no less important than those that are. While accountability, interconnectedness and the blurring of sectors is good, and businesses having more awareness of the world and of social impact is phenomenal, we must make sure that we do not rule out the importance of the non-profit organizations around the globe. Organizations who are filling a crucial space where government is unable to operate and businesses are unwilling. Besides, I want my children to live in a world with panda bears and humpback whales.

 

If you enjoyed this entry, explore similar entries within this category
You must be logged in to add bookmarks Click here to login