Nonprofit Name Debate

After I wrote about Claire Gaudiani’s Chronicle of Philanthropy article calling for the renaming of the nonprofit section (with Social-Profit Organization as the new term), the Chronicle of Philanthropy’s Give & Take blog featured the discussion:

Prompted by an opinion article in The Chronicle, readers of Tactical Philanthropy are debating whether the term “nonprofit” needs to be tossed in the dustbin of history…

…Though perhaps there are some charity officials who will say it’s best to remember the words of Shakespeare: “What’s in a name? That which we call a rose by any other name would smell as sweet.”

I found reader comments to be fascinating. I’ve excerpted those comments (posted here and to the Give & Take post) below with my reaction:

“Sam Davis”:

This is one of those “Pepsi Fried Chicken” moments.

When Pepsico bought Kentucky Fried Chicken (now KFC), they did not rename it “Pepsi Chicken,” for absolutely solid marketing reasons. It already enjoyed a solid brand position.

“Nonprofit” is a widely, nearly universally known “brand” and there’s no reason to “fix” it. I suspect that those who sit around dreaming up silliness like this have way too much time on their hands.

But of course Kentucky Fried Chicken did rename themselves KFC because “fried” was no longer a good selling point. In the case of KFC, they decided to cease referring to their product as what it is. The renaming of the nonprofit sector would be a move to begin using a term that was appropriate.

“Patrick”:

This seems to be a reoccurring discussion in nonprofit land. Of course any organization, or even a whole sector, can promote itself however it likes, and perhaps from a PR standpoint it makes sense to speak of “social enterprise” or “social profit.” I would point out that “nonprofit” (or “not-for-profit”) has long since been incorporated into state and federal statues and codes, and is a “known quantity”. The term refers to a broad category of entities, but in general, it means an entity organized for specific purposes, which does not distribute income to shareholders. It is a meaningful and useful term and it would be foolish to toss it out in favor of more fashionable language. Of course other terms can be used as missions and purposes vary, but it seems to me they are all species of the broad category called “nonprofit.”

Yes, nonprofit is a legal definition that is not going away. But my firm Ensemble Capital is a “limited liability company”, yet I’ve never once told some I work for a “limited liability company”. Understanding how an entity is structured is critical. Look at Green Dimes (which I’ll be writing about later), this is a for-profit that is trying desperately to put themselves out of business (talk about a social enterprise). Knowing that they are a for-profit company rather than a nonprofit is critical. But the legal definition should not limit how we refer to an entire sector. Especially a sector that is beginning to examine the appropriate use of structures other than the nonprofit legal entity to further their mission.

“Jeremy Gregg” (I assume not the same Jeremy Gregg who writes The Raiser’s Razor, see that Jeremy Gregg’s comment below):

… people know what we mean when we say “I work for a non-profit.”

If we begin saying “I work for a community-owned organization” or “I work for a social enterprise,” people on the ‘outside’ will not understand. And people on the ‘inside’ will likely think we’re just well-funded elitists with too much time on our hands.

Jeremy’s right, name changes are difficult. They should not be made to catch a recent trend. You should not support the idea of a name change unless you think “social enterprise” or “social-profit organization” are terms that will work for the next 50 years or more. That’s one of the reasons why I like the term “social enterprise”. It simply means a project that is undertaken to further social goals (or “public good”). That doesn’t seem trendy to me in the least.

Jeremy Gregg, author of The Raiser’s Razor:

The only distinction about an NPO vs an LLC or other for-profit corporation is tax status, which is dictated by who "owns" the organization. I suggest "Community Owned Organization."

I’d like to use a term that does not refer to a specific tax status, since I think the trend towards using multiple tax statuses to further social missions will stick around.

Nick Temple, of The School for Social Entrepreneurs,

I’m strongly in favour of not dwelling on the debate over definitions. Particularly as, increasingly, the boundaries between sectors/legal structures are becoming more and more blurred. In the future, it will be about the clarity of your aims, the quality of what you do, and the transparency of how you act and communicate that is important, regardless of your legal structure/governance/earned income ratio. Still, if you are interested in the social entrepreneur / enterprise debate, there’s a few posts on the SSE blog (search for ‘definition’) and our del.icio.us. Generally, we favour a broader definition of social entrepreneur / entrepreneurship, rather than one that excludes or could be accused of elitism. Entrepreneurs come in all shapes and sizes, and so do social entrepreneurs.

I generally agree with Nick. As I wrote before, what you do is far more important than what you call it. There’s no need to define a term that excludes people. But in a world where corporate foundations are operating as for-profit entities, nonprofits are floating bonds, venture capitalists are backing startups organized as both nonprofits and for-profits and traditional nonprofits are engaging in some of the most critically important work of mankind, doesn’t referring to this whole thing as something other than a term that explains what the sector doesn’t do make sense?