On Monday the Wall Street Journal published a special section on Philanthropy. The cover story was Should Philanthropies Operate Like Businesses? One article argued "yes" while the other argued "no." Both articles left me dissatisfied.
Bronfman and Solomon, authors of "The Art of Giving: Where the Soul Meets a Business Plan," argue that, like business investors, donors should expect specific goals and measurable outcomes from the non-profits they support. I completely agree this is smart business, but they fail to comment on many other critical aspects of what is smart business leaving the reader to think that having a plan, collecting data, measuring results, and striving to improve is all it takes to be a well run business.
Edwards, author of "Small Change: Why Business Won't Save the World," argues "social change is.. messy, unpredictable, politicized and subject to conflicts of interest and interpretation." Business oriented philanthropy threatens "the capacity to do whatever it takes to reach your goal and the freedom to use it creatively." In business terms, he is saying non-profits need to be able to innovate. He is actually supporting what is also smart business.
The real hero of the section is an interview with Tierney, author of "The Donor Guarantee Trap," who discusses the importance of overhead for non-profits. "Without the necessary investments in overhead, without a doubt the organization underperforms." Investing in the sustainability of the people and organization administrating programs is also smart business. We know VC firms will patiently delay the short term ability for a start up to be profitable in order to invest more in infrastructure resulting in greater gains later.
TAKEAWAY:
Non-profits should operate more like businesses and I like donors wanting clear goals and measurable outcomes, but if we want long term gains, we cannot just fund program after program. We must also embrace other smart business practices like investing in innovation and infrastructure.
For another look at the need to invest in the sustainability of the people running our vital community programs, please see my earlier post on Courage to Lead
I agree with Tierney. One of the big problems we are having in the grant world with a couple of small non-profits I'm on the board of is that it is difficult to get a line item of any significance approved in the budgets for Overhead. Without this, it is difficult for us to make the investment in our staff & infrastructure that is critical to the future development of these organizations. It is a real conundrum.
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