My recent column in the Financial Times has sparked the biggest response of my year old career as a newspaper columnist. I’ve gotten a ton of email, comments and the Chronicle of Philanthropy featured the column in Philanthropy Today. The response (of people who have contacted me directly) has been overwhelmingly positive. But I hear through the grapevine of at least a couple prominent people who don’t like the column. I’d love to hear any negative feedback that’s floating around our there.
I would like to clarify something in the column that I think deserves further attention (I only get 800 words in the Financial Times, so I have to leave out some points). In the column I say that donors do not understand how social impact is created (they tend to think it is the money they give, so they want to eliminate nonprofit costs, instead of recognizing that it is what the nonprofit does with their money that creates impact). I then state that for-profit investors have a better understanding than donors do of how the input of money (an investment or a donation) is transformed into an output (profit or social impact).
Here’s the important point that I hope is implicit in my column, but that I want to make explicit: for-profit investors and donors are the same people! I’m not suggesting that “for-profit investors” are smarter than philanthropists. I’m saying that when most people put their donor hat on, they also put on some bizarre kind of glasses that make them see the nonprofit world in a completely dysfunctional way. Instead of seeing nonprofits as firms that create value, the way we see for-profit organizations, they see nonprofits as bureaucratic entities that destroy the value of our donation as it travels from us to the “cause” we hope to support. It is only through this Alice in Wonderland looking-glass approach to understanding the social sector that we could possibly justify underpaying nonprofit employees, demanding that nonprofits only spend our donations on their “program”, and worry intensely about “overhead expenses.”
But I am not in the least suggesting that “business people” or “investors” have a better approach. Business people and investors are donors too and they view the nonprofit sector just as bizarrely as other donors. My discussion of how investors understand that for-profits are organizations that produce value is meant as a template for understanding how donors should view nonprofits as organizations that produce value. My additional point is that many of the behaviors that for-profit firms exhibit in their pursuit of maximizing value production (Handsomely rewarding employees in order to attract the best, for instance) are viewed as scandalous in the nonprofit sector.