More blogs weigh in on the for-profit vs. nonprofit war of words, here, here, here and here.
One of the posts quotes an email from Dave Chakrabarti, a major contributor to the debate on this blog, encouraging his network to weigh in on the debate:
Coming under fire for offering services for free, by nonprofit funders who do not seem to understand the difference between “mission-driven” and “profit-driven”, forces me to suggest that we, as a sector, need to develop stronger language regarding these issues. Most of all, we need to work towards a different model of sustainability, so that we can pose alternate definitions when a potential funder equates “sustainability” with a system based on marginal returns for services offered…
…Responses appreciated. Backup on Tactical Phil would be awesome (I think I’m outnumbered).
One of the interesting attributes of this debate has been the way it has spun off in a couple different directions at once. Currently there are actually three different arguments being waged, 1) Are nonprofits that use earned income strategies better than donation based nonprofits? Does “sustainable” mean not relying on donations? 2) Is it appropriate to tell a group of nonprofits that some of them “suck” or is doing so counter-productive? 3) Should funders avoid wasting time with underperforming nonprofits and allocate capital to top performers? Should nonprofits that provide subsidized services/products to other nonprofits only deliver those services/products to effective nonprofits or any that ask for them?
It is the third question that Mike Brown was discussing when he made his now infamous comment. But I think the splintering of the discussion showcases the lack of shared language between the for-profit and nonprofit mindsets. Rather than call for reinforcements and retreat to our respective corners to refine our side’s language to better “win” the debate, I think we need to cross the great divide and create a shared Vocabulary of Philanthropy.
The “shorelines” and “international borders” that I’ve referred to are places of great turmoil where various forces push against each other. It is in these zones that people feel a need to protect themselves and so quickly fall into line with their side’s “official party line”. People feel safer in groups. But if this cross-disciplinary conversation is going to produce something new and not just be a spectacle, we need more people to drop their defenses and wade out into the middle ground and see what we can find.
For the record, I believe that “earned income” strategies have nothing to do with nonprofit sustainability. Philanthropic donations are a perfectly acceptable way to attain sustainability. The question is do you have a way to finance the service that you plan to offer. Philanthropic donations are just a way for one group to bear the cost of another group’s needs. There is nothing about charging the recipient of a service that makes a nonprofit more sustainable that “charging” another group (i.e. soliciting donations).
16 Comments
Of the 3 arguments being waged:
1) is a complete fiction of an argument, a set of people attacking a straw man. I defy you to find me anyone, connected to or linking to this debate, who has taken up question 1 (“Are nonprofits that use earned income strategies better than donation based nonprofits? Does ‘sustainable’ mean not relying on donations?”) and answered it “Yes.” You sort of did in one of your comments, but the second Dave responded you backed right off. Nobody holds that position. Nobody is arguing it. Tons and tons of people are having a ball of a time piling on the other side.
3) isn’t really an argument either; everyone involved agrees that money should be allocated only to the best. 2) is the only thing there has been any actual disagreement on.
“Some nonprofits are not good” cannot reasonably be interpreted as “Nonprofits should not rely on donations.” This isn’t a no-fault case of confusing language. This is a set of people hearing something that wasn’t said and inventing something to argue with.
Stepping back a little bit from the direct conversation, I would like to reflect on value in general. People that cannot contribute directly in economic markets have to rely on other networks (family, friends, government, nonprofit, etc.) to supply their basic goods of life. I think the underlying dynamic is that based on a person’s capacity, we want everyone to contribute what they can for the good of their communities (networks). If people indicate that they are doing so in verifiable ways, then we tend to find ways as a society to provide for them.
“Suck” is relative. It could refer to a nonprofit’s own standard for measuring success or an external measure. Success could refer to procedural or substantive measures, but the measure should be specified before the label “suck” is applied.
Isn’t it more to the point that things “suck in different ways”, and that we should differentiate and do something about it?
Upon hearing of the comment that “some NPOs just suck” (shortly after it was uttered) my immediate question was: how was it meant?
As we were in the context of applying technology to the social good, if the comment was about the capacity, competence etc. of the NPO.. then yes, I am very much aware that some do in fact “suck”. But in that circumstance the question is how they may transform themselves for the better. It becomes, yes, some suck, and what will you do about it? (And, what have you been doing about it?)
Now there are others that “suck” in a more important way… you may take this as subjective, but I think it is about character of leadership and organizations.
Do they stand up for their mission, do they stand with a wider vision, however narrow their focus? Do they stand up to hypocrisy? Or do they go along to get along?
Perhaps they proceed through rationalizations and a sense of hard-headed realism.
The interesting thing here for those who judge success in financial terms is that some of the NPOs that suck in their hypocritical disservice to humanity are often enough the NPOs that get the attention of wealth and power. Indeed wealth and power may have no appreciation that these entities don’t represent their field in terms of values, effectiveness nor dedication. They may not be aware of anyone else in the field.
There is a reason for such sites as: 501(c)suck
People in the NPO world, and who care about the mission and the causes and the people working for the NPOs are not blind. We know what sucks, and we know what really sucks.
@Holden: Unfortunately, this isn’t that much of a straw man. Antony Chiang’s memory of the session (quoting his comment here) was “…[the comment] was made in the context of a project that wanted funding to give away free websites and free web tools. So absolutely no economic sustainability around what they wanted to get funded. And panelists and audience members alike were trying to get the project reps to at least consider charging some who could afford, or place advertising, or other ways to create earned income.”
To me, that states that no earned income = no sustainability. The nonprofiteer also posts a question from a visitor suffering under a board member interested only in earned income as a measure of sustainability.
Secondly, I’m not sure I agree with you that only the best should be funded / supported. I believe we lack an effective evaluation matrix (a vocabulary, to use Sean’s term) for the nonprofit sector; in this light, it seems premature to choke off *any* nonprofit’s supply lines, since we can’t decide what makes a nonprofit “good” or “bad” in the first place.
To put this another way; I’d agree with you if I had faith that we could make an absolute judgement of a nonprofit’s suckage level, or lack thereof.
Michael outlines several non-quantitative measures of nonprofit success above. Is that enough? Should we work towards quantitative models for proving that feeding the poor is better for the ecology than selling discounted food to the rich? Or is it enough to tell the story?
To #2, I’d say that it *is* appropriate to tell a group of nonprofits that some of them suck, if you’re working within a context to help them change that situation. In a setting intentionally contrived as a competition (as opposed to a collaboration), it seemed rather harsh.
Dave.
Holden, in a strictly literal sense I think you’re right that the arguments being waged are, for the most part, not actually about what was said. However, I think we have a case here of a lot of pent up anger being released. Have you ever had an argument with a significant other where you started off fighting about one thing and a whole lot of other stuff was brought up? Have you ever felt that they were putting words in your mouth?
The issues being discussed here aren’t new. But the free flowing, cross-disciplinary debate is new. There’s not a lot of venues where Dave, you, Ben-Horin, Mike Brown, and all sorts of other people can have a conversation.
Nick, defining and measuring success is critical. But let’s not decide we can pass no judgment until we have all our definitions and metrics spelled out. Can’t we all agree that some nonprofits are not good at advancing their mission? And therefore, in a world with limited resources we should prefer to supply nonprofits that we believe are more effective at advancing their mission?
Dave & Holden: The judges at NetSquared almost all asked about the projects’ earned income strategies. I asked about them too. But at least for me, I just wanted to understand what the revenue model was. Unfortunately most nonprofits said “we’re going to solicit donations”. That’s kind of like a for-profit saying “we’re going to generate revenue”. As long as you have a good plan to get donations (an identified population that will support you, a compelling case, a fundraising strategy, etc), then donations can drive a sustainable economic model.
Did some of the judges have a preference for earned income strategies? Yes. I think that the judges as a whole found it easier to proclaim a project “sustainable” if it had an earned income strategy. But at least in part that was because I didn’t hear even one nonprofit present a fundraising strategy that went beyond, “we’re going to raise philanthropic funds”.
@Dave and Sean: it is totally reasonable to ask what a nonprofit’s revenue model is. If the answer is “We must rely on donations because there is no other way,” that can be a reasonable answer. But it can also be a sucky answer, depending on whom the nonprofit serves and how. Specifically, many of the Net2 projects seek to serve nonprofits, not disadvantaged individuals, and they should be thinking about how they’ll charge for their services. If they aren’t, that’s sloppy of them. Saying that some nonprofits should go beyond donations is not the same as saying that all donation-based nonprofits suck.
@Dave: I am trying to figure out how literally to take your statement that “it seems premature to choke off *any* nonprofit’s supply lines, since we can’t decide what makes a nonprofit ‘good’ or ‘bad’ in the first place.” Are you saying that funds should be distributed evenly among all 501c3’s? (In that case, I’d start a few more …) Or that things should continue to be exactly the way they are, with no one changing their funding allocations, just because this is what we fell into and we must obey inertia? Or what?
There is no “absolute” knowledge of for-profits either. Y’all constantly overstate how much certainty there is in investing. There is roughly zero certainty. The nature of existence is that we never know anything for sure, but we can’t avoid making decisions and bets nonetheless, so we take the best guesses we can. That’s how our personal lives work, that’s how investing works, that’s how donating should work. Talking about certainty is like talking about unicorns.
@Sean: you ask, “Have you ever had an argument with a significant other where you started off fighting about one thing and a whole lot of other stuff was brought up? Have you ever felt that they were putting words in your mouth?”
Yes, excellent metaphor for exactly what has been going on.
With respect to a call for “reinforcements”, military language aside… I have a general sense that NPOs and many public officials have accepted the language of the market, rather than establish what is different about their different spheres of activity.
It is time for those who have a care for the public sphere to stand up for their beliefs. Not to win the day by numbers, but not to lose the day in acquiescence.
The strange feeling in the discussions in the aftermath of the comment at N2Y2 was that of fundamental disconnect and an asymmetry of power.
What I saw was a lost opportunity.
Some NPOs are giving away some services for free. That’s perceived as unsustainable. So those who have made money in a very different world recommend that the NPO charges something for that service offered rather than giving it away.
I was very surprised that I could not make any headway in discussion that this was not a “bad thing”… the NPO that offers service on this basis is part of an ecology of organizations and interests.
What was disappointing was that the business model questions were caught on this one particular point and spilled over into sessions that weren’t directly about the financial model.
With the business and technical expertise assembled, a great deal more could have been explored by reaching creatively into the organizational strategy of the NPOs.
If we followed that we would have some reflection on the ecology of exchange and values. I think it would become clear that there are behaviors in the corporate profit driven world that don’t appear to pay for themselves directly, but which may be viewed as an investment of sorts.
No one asked about the ramifications of charging money in these contexts.
Once we have a billing system, what proportion of revenue is necessary to maintain the billing activity? If the fee for service was nominal and didnt reflect the full cost of the service (as some suggested)… again, is it cost effective to maintain the billing activity, or is it just a matter of making a moral point in favor of a market principle?
Let’s go back to the ecology of exchanges…
Imagine a set of Corporations having excess capacity and desire to contribute to the commonweal, perhaps with a nice write-off to go with it.
Imagine an NPO that aggregates demand among NPOs for particular tech services, and aggregates supply of such surpluses.
They’ve presented an organizational model that may offer some system-wide benefits and efficiencies.
In the particular case in question we have an NPO that is seeking ways to become even more efficient. It is not merely seeking dollars so that it can give something away. If capacity in this aggregating service-oriented NPO is improved by strategic investment in their toolset, they are not “costing more” they are becoming more efficient and leveraging the resources of the donor pool more effectively. Those that are willing to give, and who have an incentive to give will see an increasing “return” on their giving by increased effectiveness.
What they are doing doesn’t suck to me. I see great value in it. But I didnt limit my scope of value to each and every exchange nor to strictly monetary terms.
Last aside: One of the objections appeared in discussion was that all these NPOs that “suck” really dont belong on the web…. I think I found that most offensive.
@ Sean: “As long as you have a good plan to get donations (an identified population that will support you, a compelling case, a fundraising strategy, etc), then donations can drive a sustainable economic model.”
This is illuminating, if it’s a sentiment shared by others at NetSquared. It means that we, for example, should have been much more explicit about our past, present, and future mechanisms for receiving donation support, instead of focusing on the “why we don’t sell our services” question (which we were repeatedly peppered with). I think many nonprofits identify “foundation grant funding” or “private donations” without realizing the need to specify a target audience, past performance with that audience, etc.
I’m unsure that your thought was shared by many of the attendees at the panel, however, since we didn’t receive a single question (that I remember) on who we receive donations from, why they donate, or what we’re doing to maintain those relationships. Instead, we received several questions on why we don’t charge for our services, why we don’t shift our market from those who cannot afford our services to those who can, and how much it would cost per organization if we simply charged them for the new tools we’re planning to build.
@ Holden: I was reacting to the idea that nonprofits that are perceived to “suck” should be starved of resources. I find this thought alarming, because I can think of nonprofits that would suck by earned-income analysis, and yet are very *good* organizations, which deserve support. Similarly, businesses, foundations, and independent donors alike continue to fund a great many organizations that seem, to many of us, to suck. Yet these organizations continue to display perfect sustainability plans despite, in some cases, doing actual harm to the ecology of which they are a part.
While I agree wholeheartedly that we need to apply a performance metric (or metrics) for nonprofits, I think it’s also very clear that funding frequently supports the wrong organizations. Without a nonprofit-focused metric, we risk cutting funds to the organizations that do the *most* good (but don’t earn income) while supporting those that do the least (because they’re organized most like businesses).
In short, I think it’s more important to fix the metric, because evaluation isn’t possible without it. Sure, we might not ever get it perfect, but right now (without a metric) people seem to simply apply a profit vs. loss metric and assume the losers “suck”.
You seem adamant that no one insists on earned income as a hard metric, but posts here and the questions at NetSquared suggest that (as Sean said above), there is at least a tendency to assume this. In light of that tendency, it worries me when we’re exhorted to identify the organizations that suck and cut them off.
@Holden: Oops, forgot one thing. “Specifically, many of the Net2 projects seek to serve nonprofits, not disadvantaged individuals, and they should be thinking about how they’ll charge for their services. If they aren’t, that’s sloppy of them.”
…why? Do you assume that a nonprofit by definition has sufficient resources? From my consulting experience with nonprofits, I felt that for every organization that could afford a few thousand dollars for a consultant-built basic CMS for a website, there was an order of magnitude more organizations that could not. This suggests (to me) that we can help these organizations achieve their mission if we can achieve an economy of scale, to produce those resources (in this example, CMS platforms for websites) and then host / maintain them.
Tech is a particularly good example; most nonprofits agree that it’s difficult to get funding for tech. How many foundations will give grant funding to help an organization market themselves on search engines, or overhaul an amateur graphic design job? That funding is few and far between (though there are a few notable exceptions). Following Michael (Maranda)’s post above, if an organization can aggregate the needs of a large nonprofit audience and develop efficiencies of scale (and of specialization), isn’t it plausible that this will make a better funding case than multiple organizations competing for smaller amounts? Doesn’t this allow an efficiency in the ecology, with less overall dollars resulting in more overall good?
Dave.
@Dave: I don’t know what was said at NetSquared, but I know that of all the people involved in the recent arguments online, the only ones identifying sustainability with income are absent or imaginary. The Nonprofiteer’s post was a 3rd-hand account (her post quoting a letter quoting a man who has had no chance to participate here and is not present). Sean’s comment was offhand and immediately retracted. If I missed something, please link to it.
It seems that you actually do agree that nonprofits that *truly* suck should be starved of resources. What you think there is a disagreement on is what “suck” means. But as I state above, I don’t think there is a disagreement. I think we all agree that some nonprofits suck, that those nonprofits should be starved of resources, and that sucking and relying on donations are two completely different things. I am frustrated because I feel that more careful readings would allow us to skip all the “arguing” about these things. The only real disagreement is whether and when nonprofits that suck should be *told* they suck.
There is something else: saying the Emperor has no clothes is easier in the abstract. In the chance that some arent “looking close enough” … the funders put the NPOs through more and more stringent tests, and those that suck (in my terms) continue to get through.
1. On telling nonprofits they suck – the foundation that employs me has made the decision recently to move from a generic “we get more solicitations than we could ever fund” decline letter to one where program staff actually have to articulate several sentences explaining the basis for the decline.
As each program officer has their own writing style, differences arose in the tone of the declines. Some of these declines were more pointed “We declined you because of X, Y & Z” and some mixed flattery with criticism “Although we were impressed with X, we declined you because of Y & Z.” Some program officers wussed out and just wrote vary vague decline sentences (which I changed as I proofed them because a very vague decline sentence is just as useless as one saying we get more solicitations than we can fund).
Now I tested some of my former colleagues who are still fundraisers – and 10 out of 10 told me they would rather have a brutally honest decline rather than a polite vague one. Some nonprofits don’t realize they suck, and sometimes the suckage can be corrected if someone would only tell them what is wrong and how it can be done better.
2. On the metrics of suckiness – from the point of view of being a former fundraiser and now a grantmaker – I don’t think there will ever be one universal metric for the whole nonprofit sector to measure how effective, efficient, or whatever a particular nonprofit is. The sector is so darn diverse.
One nonprofit metric that I see used to measure how good an organization rates is the old “how much of every dollar is spent on fundraising” question. If anything in the nonprofit sector sucks bigtime – it is the use/misuse of this as a means of evaluation.
Some types of nonprofits just are not “sexy.” It is much easier to raise money for abused animals and sick kids than for drug rehab programs or homeless shelters. Causes that aren’t “sexy” will have higher fundraising costs because it costs more to raise awareness, acquire new donors, etc. Some nonprofits have natural constituencies to support them (higher education has alumni, hospitals have grateful patients, etc.) Many nonprofits do not have this advantage. Those that don’t have to spend more on fundraising. Measuring this across the whole sector is pretty useless. I can only see it being effective if used in concrete sub-sectors of the nonprofit field.
Another metric is the whole “earned income vs. donated income” which I think is a bit flawed. An organization that lacks an earned income stream isn’t inherently flawed or unsustainable. Some organizations just don’t naturally mesh with earned income opportunities.
Instead of trying to shoehorn some type of earned income strategy into every nonprofit – why not help them increase their donated income stream? Excellence in fundraising is not luck. It is a skill-set that can be practiced. It is something that can be invested in. The purchase of donor tracking software, sending staff to professional development, providing funds for a new building – all of these can help advancement shops to become more professionalized and to raise more money, and to keep those donors.
As nice and easy as it would be to have a universal evaluation to see if a nonprofit sucks or not, it just seems unrealistic. Nonprofits are just too diverse. Museums and homeless shelters don’t have a lot in common, so how can you measure them both with the same instrument?
I have more I could say just not enough time to say it right now…
@Holden:
We certainly don’t disagree on how to respond to nonprofit suckage! But we do disagree elsewhere. I believe that there are so many views on how to measure a nonprofit’s effectiveness that we will frequently disagree on *whether* an org sucks or not, even if we agree on what to do if they did suck. In that light, I see many orgs that (to me) suck, but continue to receive tons of funding and support, while others that do an incredible job are starved for resources, and in some cases forced to significantly scale back their operations or even close. Frequently, the organizations that “suck” are at the top of the heap, with the most resources and the fanciest offices.
So I agree with you in principle, but I believe that in practice much of the funding world applies a very different definition of “suck” than I do. Michael Maranda appears to support this perspective as well.
M (above) also suggests that we’re going to need different metrics for different nonprofit subsectors. However, her story is a little different…instead of choking off resources to nonprofits that don’t make the grade, she’s *helping* them make the grade next year. To me, that isn’t a case of refusing a grant to a nonprofit that sucks; it’s recognizing that this group doesn’t suck, and could do an awesome job, if they did things a little differently. She’s actually offering them resources (information, straight from the horse’s mouth) to strengthen them, even when she’s deciding to not offer them funding.
Mike’s original comment at the session included a statement that many of the organizations that “suck” have their hearts in the right places. If this is true, why aren’t we focusing on fixing them? I would argue that many of those orgs don’t “suck” at all, though to Mike they do.
The problem with leaping to a shared vocabulary is that we have to agree on specific meanings for certain signifiers. “Suck” is one of them…without an agreement on the metric to be applied, the statement loses its meaning. What’s more significant (I think) is that we have the opportunity to recognize diverging (and opposing) metrics and start some dialog on why they diverge.
Oh, and Antony’s comment is here: https://www.tacticalphilanthropy.com/2007/06/philanthropic_c.html#comment-71977744
..but he’s definitely not the only one with that viewpoint, since I heard it repeated a few times at the conference and elsewhere.
I’ll quote the relevant bit: “With the disclaimer of fading memory, I seem to recall that this controversial statement (and subsequent explanation/observations) was made in the context of a project that wanted funding to give away free websites and free web tools. So absolutely no economic sustainability around what they wanted to get funded. And panelists and audience members alike were trying to get the project reps to at least consider charging some who could afford, or place advertising, or other ways to create earned income.”
This is an excellent discussion, but I can’t help but echo Michael’s sentiment about opportunity lost. We are being sucked into the MBA language of profit, loss and market shares.
What if this conversation centered around gifts and giving instead of these business laden terms? What does the idea of “non-market production” mean to you? Nick points to the family and personal networks of support, but this space is largely unmeasured and therefore invisible.
It is a criticism of spaces like Net^2 that they are apparently blind to any of these distinctions, so enthralled as they are in business inspired ideas of social enterprise. As far as I’m concerned, this really sucks.
Defining suckage in a consistent way would be a boon to all of humanity. I claim that the world’s problems are all connected to the fact that organizations can consistently loot the common wealth by means which legally entitle them to vast monetary profits. The accumulation of those profits then proffers the power to control the rules by which that power is exercised. That’s the sucking sound of wealth being extracted coercively from local communities across the globe. And they don’t even feel the chains.