The Language of Nonprofits

Last night I attended a joint Net Impact Boston/Young Nonprofit Professionals Network event called "The Role of Philanthropy in Solving Social Issues." It featured Phil Buchanan, CEO of the Center for Effective Philanthropy in Boston. While the talk was promoted as being about philanthropy, Mr. Buchanan spent most of his time actually speaking about the "distinct value" and purpose of nonprofits and foundations as separate from their for-profit counterparts. In fact, much of Mr. Buchanan's talk was centered on a discussion of why nonprofits and businesses cannot and should not mix.

One major point of contention for Mr. Buchanan was the idea that all we need to do is take the best practices from the business world, apply them to the nonprofit sector, and instantly nonprofits will be more effective.  This was interesting to me because, while perhaps a bit oversimplified, this explanation is actually the reasoning I used to get into business school, and I think many of my classmates would agree with me. I've worked in nonprofits where the organizations' leaders had no idea how to manage the financials, or had no leadership and management training--and the organizations suffered for it. So why wouldn't I want to go get my MBA, learn how they do it in the business world, and then bring those ideas back to my nonprofit?

Interestingly, Mr. Buchanan said that while nonprofits can and must always find new ways to be effective, "business doesn't have a monopoly on effectiveness." And in fact, to assume that business principles automatically apply to nonprofit scenarios is to deny that the economics of each organization are actually different. For-profit entities have one basic performance measure; no matter what a business sells or what industry it's in, that company can be compared to other businesses using one common language: Profit. A company, no matter how ethical or charitable it might be, would never consistently charge less than what it costs to provide a service or product. And yet, this is what nonprofits do every day.

Mr. Buchanan went on to say that thinking we can have one common metric for performance in nonprofits is foolish: even if we could show that "my donation planted these trees," it's impossible to compare across different projects. Because of this, we cannot assume that taking the language of business (ie: profit) and transposing it onto a nonprofit organization will work. This was one of the big themes of the night: Nonprofits and foundations must resist the temptation to use business jargon when evaluating and implementing their programs, and instead develop their own language (a big example given was the term "Venture Philanthropy," which Mr. Buchanan said was basically a poorly-used business analogy to venture capital that made no sense).

This led into the second big theme of the night: nonprofits have a distinct purpose (separate from business and government) and it needs to stay that way. Mr. Buchanan likened nonprofits to your friendly uncle at the business dinner table who leans over and tells you, "you've had one too many drinks tonight." Nonprofits, he said, often do things that governments and businesses can't or won't do, and for that reason they need to operate differently. Sure, nonprofits should be impact-driven and they should be effective, but they need to develop their own way of getting there. And impact, he said, is not just a business term--it's about getting results, and that's something that everyone wants.

While there were many points throughout the night that I agreed with, by this stage in the talk, I got the feeling that things were taking an unexpected "us against them" turn. Yes, I can see that nonprofits are unique entities and shouldn't just replicate the business world--but should we really keep our nonprofits so separate from business and government that they don't interact? With so much talk these days about partnerships and exchange between nonprofits and for-profits, it was surprising to hear someone so clearly advocating such a distinct divide.

All this talk of nonprofits versus for-profits really hit home for me because this month I start work as a corporate philanthropy intern for a major beverage company. Given what he has said about the distinct purpose of nonprofits (and the fact that business should essentially stay out of the way), I wondered what Mr. Buchanan thought about corporate philanthropy? In general, he said he's found corporate philanthropy to not be very effective. While some companies appear to be doing real work in this area (he mentioned Levi Strauss as an example), most are not. In fact, Mr. Buchanan said that overall he believes corporate philanthropy is not philanthropy--that it's more about a strategic alignment of a brand and a cause than doing real work. He said it's "healthier" to have boundaries around nonprofits, business and governments, and that in fact there is something "scary" about companies being able to define what social causes are important.

My follow-up question to him (which I was unfortunately unable to ask at the time) is: what's so wrong about a strategic alignment of brand and cause? Just because a company is blurring the boundary between itself and nonprofits doesn't mean it's not doing good things. If WalMart wants to deliver low-cost organic produce to the masses, for example, should we say no just because this initiative is coming from a big box store? Sure, not all corporate philanthropy efforts are as effective as they could be, but neither are a lot of nonprofits. It just doesn't seem ok to dismiss for-profit community efforts just because that support isn't coming from the nonprofit sector.

In the end, it was a thought-provoking evening and Mr. Buchanan was an incredibly engaging speaker. He raised some very important questions, and he got me (and the rest of the attendees) thinking, which is always exciting. But now I'm curious: what do you think about the type of relationship that should exist between nonprofits and business? Should we have a clear division, or are partnerships the way to go? I'd love to know your thoughts.

Some additional points and resources that Mr. Buchanan raised in his talk:

• Concern about nonprofit impact metrics: Mr. Buchanan said that finding a common language to discuss impact was a huge challenge, with no right answer. He mentioned the Center for What Works, New Philanthropy Capital, and Root Cause as three organizations engaged in conversation around this issue.
• Nonprofit mergers and joint ventures: As you know from a recent post of mine, the topic of mergers in the nonprofit sector is a popular one. Mr. Buchanan addressed this issue by suggesting that all nonprofits ask themselves, "How can we create the most impact?". If that means a merger, that's what an organization should do. However, he cautioned that collaboration is simply a means to an end (and the not the end itself), and that nonprofits should not collaborate just for the sake of collaboration.