Increasingly, I see people looking starry-eyed to business and markets to solve social problems.
In so doing, they run the risk of dismissing the impact of nonprofits – and diminishing the value of organizations that seek to make a difference without creating the potential conflicts that come with the profit motive.
Pretending companies hold all the answers puts at risk our ability to deal with our most pressing societal problems.
The rush to disparage nonprofits and the stampede to embrace the idea that for-profits – or for-profit models – can more easily combat our toughest social problems deny reality.
Many crucial objectives simply cannot be accomplished while generating a financial return. In health care, for example, research recently cited by The New York Times showed that nonprofit hospitals experienced a decline in service quality when they switched to a for-profit model.
The laudable push for companies to commit more energy to dealing with social problems should not obscure the need for strong independent nonprofits that focus on mission, not profit.
And while nonprofits can learn from companies and companies can learn from nonprofits, it is a mistake to deny their differences.
There is a crucial distinction between an institution that reinvests surpluses in its mission and one that faces unrelenting pressure to distribute profits to shareholders. Yet an increasing number of people both inside and outside the nonprofit world seem drunk on the Kool-Aid of business superiority.
Here are three practical questions to ask when you’re figuring out how to achieve a social goal:
•Does the pursuit of profit conflict with or facilitate the achievement of your goal? How likely are profit and social impact to be in tension?
•What kind of choices and information do people have? Markets work best when people have choices and when there is good information. Do those conditions apply?
•Are you addressing an issue that results from a market failure, such as environmental degradation? If you don’t understand capitalism’s role in contributing to a problem, you probably won’t be able to rely on capitalism to find a solution.
Now decide which organizational model makes the most sense – and don’t assume that a pure nonprofit isn’t the way to go.
(Phil Buchanan is president of the Center for Effective Philanthropy, and a regular columnist for the Chronicle of Philanthropy.)
