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Our Starry-Eyed Idealization of Markets

Business , Collective Impact , Nonprofit , Philanthropy Add comments

Guest post by Phil Buchanan, president of The Center for Effective Philanthropy

This is the first in a series of six blog posts, which was originally featured on the CEP Blog.


Phil Buchanan, president of The Center for Effective Philanthropy

One of the great puzzles of the day is that we increasingly look, starry-eyed, to business and markets to address or even solve our social problems.

We idealize companies and markets in a way that defies reality, creates unrealistic expectations, diminishes the contributions (past, present, and future) of nonprofits, and confuses our conversation about the very challenges we face. We do so despite the unrelenting procession of examples of the downsides of unchecked pursuit of profit. And in so doing, we run the risk of dismissing the vital role of nonprofits: organizations seeking to make a difference without the pressure and potential conflicts that come with the profit motive.

When I say “we,” I refer to those inside and outside the nonprofit sector who have adopted the business-as-savior perspective. The problem is widespread.

In fact, I believe the nonprofit sector may be losing the public battle to define itself – as MBA programs have increasingly become the centers of discussion about “social impact” and then sought to claim that mantle as the province of business. The November 2011 Harvard Business Review cover proclaims that “great companies… create value for society, solve the world’s problems, and still make money, too.”

Reading this kind of breathless coverage, many may conclude that we don’t really need the nonprofit sector anymore.

But we do.

Let me be clear. Business has an important – indeed crucial – role to play in improving our society. And I fully acknowledge that it is true that many foundations and nonprofits (like many businesses and government agencies) are woefully ineffective. I know. I have spent the past decade working to help foundations improve their effectiveness, and I’d be the first to concede that there is much work to do. That said, I have spent time as a management consultant to corporations, and there is much work to be done there, too.

No doubt, we must continue to push harder to maximize the effectiveness of foundations and other nonprofit organizations (just as corporations and government should improve their performance). We must push for greater clarity on the part of organizations with respect to their goals – and their strategies to achieve those goals. We must support organizations in developing the capacities for disciplined implementation of those strategies. And we must develop sound performance indicators, continually improving on the basis of what we learn about what works and what doesn’t.

These are the challenges we face and we must rise up to meet them. Sometimes, it may make sense to adapt approaches that are more common in business to the nonprofit world. Often, it won’t.

But, regardless, we need to do our work in a way that is rooted in a deep understanding of the particular role and context of nonprofit organizations, rather than in a way that assumes that “business thinking” and market approaches represent the secret formula for nonprofit success. We must be clear that the advocacy of those pushing market-based solutions for all of our social problems, which sometimes takes on a cultish feel, is misguided. It won’t work, and it threatens to undermine the public’s understanding and appreciation of the vital role of the nonprofit sector as distinct from business and government.

I believe that we need to do a better job articulating the role of the nonprofit sector, and that we need to start now.

The consequences of a lack of understanding and appreciation for the role of the nonprofit sector are many – and potentially dire. If lawmakers and the media fail to grasp the distinctive role of the nonprofit sector, the policies that encourage giving and exempt nonprofits from taxes are less likely to be perpetuated. If talented and idealistic young people do not see nonprofits as the center of the action in the pursuit of positive social impact, nonprofits will lose out in the competition for talent. If businesses are portrayed as our best hope for positive social change, and further elevated in their influence on the public debate on crucial issues, we risk becoming a society in which public discourse is dominated to an even greater extent by corporations with a direct financial interest in the outcome. If we see "business" as a synonym for effectiveness, despite the evidence all around us to the contrary, we will fail to appreciate the achievements of the many effectively managed nonprofits that produce positive outcomes for those they serve every day.

In the coming weeks on this blog, I will address a few levels of rhetoric that I think are contributing to the challenge we face in articulating the value of the nonprofit sector. The rhetoric comes from:

  1. those advocating “blurring of boundaries” between sectors;
  2. those who disparage the term “nonprofit;”
  3. those who see “business thinking” as a panacea for the nonprofit sector; and
  4. those who argue that it is companies, not nonprofits, that can best address our toughest social problems.

I argue will that, in each case, the proponents of these schools of interrelated thought, while generally well-meaning, threaten to undermine the strength of the nonprofit sector and our chances of making progress on our most vexing challenges.
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Phil Buchanan is President of CEP. You can follow him on Twitter at @pbuchanan_CEP.

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