Struggle for the Soul of the Nonprofit Sector

If we become more business-like, which companies should we model: Enron, sub-prime mortgage brokers, Big Pharma? The appeal of being more business-like is due to its superior image, which consists of words and phrases like: lean and mean, efficient, entrepreneurial and innovative. In contrast, the word "nonprofit" conjures images like: ill-equipped, struggling, stressed and ineffective. While Light finds appealing the pursuit of business-like methods, he believes it changes the soul of the nonprofit organization.

But, the pursuit of being more nonprofit-like is a fool's errand too because there is no acceptable definition of nonprofit-like. The term itself defines the industry by what it is not. Using the term is like telling you "I have something in my hand and it is not a horse." It's a true statement, but not at all helpful. As a way out of the conundrum, Light insists we redefine "nonprofit" instead:

Properly defined, the term should refer to the best in the sector ... and it should be aspirational in tone. At a minimum, it should refer to high performance in the service of the public good, and not being mediocre or hanging on for survival's sake. This meaning emphasizes dedication not only to excellence but also to the public, not private, good.

In Managing the Nonprofit Organization, Peter Drucker writes a chapter entitled, "What Is the Bottom Line When There Is No Bottom Line?" To reverse the trend to disregard performance because the bottom line is hard to define, Drucker suggests mission as the starting point when considering performance goals:

In every move, in every decision, in every policy, the non-profit institution needs to start out by asking, "Will this advance our capacity to carry out our mission?" 

 From mission, we are to ask ourselves what fundamental difference are we to make in society and the lives of particular individuals. Performance goals are then carved out to determine what success will look like when we make those fundamental changes through the work of our organizations. It is then that we will be able to answer our investors' "bottom line" question. It is then that we can say we have done everything possible, prudent and legal to increase stakeholder wealth.

Next: Are We Conscious Yet?

What Society Really Thinks About the Nonprofit Sector

Paul Light in Pathways to Nonprofit Excellence paints a grim portrait of the nonprofit industry when he presents evidence that the public does not have confidence in the sector, and what confidence it holds is waning. In the latter days of the last century, the public read about  United Way, Red Cross and Nature Conservancy scandals. This century began with press scrutiny of Habitat for Humanity and Congressional investigations into excessive nonprofit executive salaries.

Light did a follow-up study in 2008. Americans remain skeptical of nonprofit organizations. Only 64% had either a great deal (16%) or fair amount (48%) of confidence in charitable organizations. Not only did respondents believe that the charitable sector wastes resources, the survey also indicated a sharp decline in the effectiveness rating. In 2003, 34% of the sample thought nonprofit agencies were doing a very good job of helping people. The "very good" rating dropped to 25% in 2008.

Light suggests two general methods of regaining public confidence and giving cogent answers to the bottom-line questions: become more business-like or become more nonprofit--like. There are problems with each alternative.

Next: Struggle for the Soul of the Nonprofit Sector