Saul: Question The Current Nonprofit Business Model

SaulBy Jason Saul (IL ’89)

The primary sources of revenue for
nonprofits are all in irreversible decline: The federal government is broke,
states are running budget deficits that total $140-billion, the charitable tax
deduction is in jeopardy, and giving has seen the deepest declines ever
recorded.  The Chronicle of
reported in its Philanthropy 400 in October, donations to the
nation’s biggest charities dropped 11 percent last year. What’s more,
contributions to foundations fell 8 percent in 2009, following an almost 20
percent drop the year before.

Truman Scholars working in the nonprofit
sector, I challenge you to think about how we might address this issue. Here’s
what I think:

We are facing the end of
fundraising. Lobbying harder and asking for larger donations will not cut it
any more. I offer that perhaps the reason that all seems like too much of a
struggle for too little money is that we’re focusing on seeking money from the
wrong places and in the wrong way.

For too long in the world of
philanthropy, there has been a substantial disconnect between supply and
demand. Nonprofits “supply” social impact (research, services, advocacy, etc.),
but the “consumers” of that impact (the beneficiaries) are often the least able
to pay. As a result, foundations, donors, and governments are the ones that set
the demand for these services, using their best judgment to choose which
organizations should get financed and which should not.

Consumers spend $227-billion
annually for goods and services related to health, the environment, social
justice, and sustainable living. Corporations spend billions on environmental
sustainability, social responsibility, and volunteerism and other efforts to
keep employees loyal and motivated. Governments spend more than ever on
education and health care results not just because they are social entitlements
but also because they affect our nation’s economic competitiveness. Investors
have allocated $2.71-trillion to socially screened mutual funds, pensions, and
other impact investments. Those dollars mean there’s no reason to focus just on
the $300-billion in charitable contributions but to look at the quest for money
in a whole new way.

The fact is that today social
change is no longer something that operates outside of the economy. As a
result, neither do nonprofits.

In my latest book, The
End of Fundraising
, I help nonprofits figure out how to capture,
market, and sell “high value” outcomes—the outcomes most relevant to actually solving
social problems.

I submit that to solve social
problems, nonprofits must take more entrepreneurial, innovative, and systemic
approaches to their work. This means that groups can’t just keep doing what
they are doing and hope that someone will finance it.

If people are really “buying
impact,” not just giving money to programs, then nonprofits need to devise
better strategies to produce those results. That requires a whole new toolkit:
public-private partnerships, new technologies, new incentives, and cutting-edge
approaches to creating change.

It’s time for all of us to think
about new ways to forge social outcomes into economic currency. It is time for
the nonprofit world to tap into the engine of the economy, not just the fumes.

Jason Saul (IL ’89) is the author
of The
End of Fundraising
, published this month by Jossey-Bass. He is chief
executive of Mission Measurement, a Chicago consulting company that helps
nonprofits, corporations, and government agencies figure out whether they are
making a difference to society. He is also the founder of the nonprofit Center
for What Works.



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