Our country’s nonprofits are swiftly becoming more like their for-profit corporate counterparts.
Recently, Reuters told us nonprofits mimic the language of Wall Street, but for years donors have demanded to be treated as investors, and the institutions have obliged, referring to “returns on investment” and negotiating gift arrangements as contracts. More recently, foundations and individual donors have insisted on outcome metrics, best practices, benchmarking, social impact and performance standards. All of this was unheard of 7 to 10 years ago in nonprofit communities.
Donors and grantors are not alone in creating this change in culture and enterprise organization. Federal and state governments also unite our nonprofit and profit-making corporations. Since Sarbanes-Oxley reforms were levied against the profiteers in 2002, serious talk about identical improvements has trickled down to those with a calling higher than profit. (I’m uncertain what tone to take about this: lamentation; resignation; pride; excitement; exhilaration.)
To my recollection, “board development” didn’t exist 10 years ago. At the least, it wasn’t nearly as much a part of the nonprofit lexicon as today.
State Charity Registration laws, which I study, write and speak about a lot, have been enforced more in the last 18 months than anybody I know can remember. The IRS stepped in here, too, probing more directly in its heavily-revised Form 990, an unusual instance of a federal agency asking about compliance with purely state laws.
Even the legal form of the nonprofit enterprise is becoming indistinguishable from its counterpart. Several states have adopted the Low-profit Limited Liability Company, or L3C. Profit is allowed but must not be the primary objective. (By the way, you should pay attention to Gene Takagi, publisher of the blog at that last link.)
Nonprofits are becoming more like companies.
Part of me longs for the charming days, when do-gooders came together, appointed their parents and friends to boards, raised money, and did their best with heart and head to make a difference in their community. We cannot return to that time, and we shouldn’t. But I partly miss it. It was so much easier.
I’m between resignation and excitement, closer to the latter. Funders and governments demand change and nonprofits are complying, looking more like for-profits, at a pace that is accelerating and will not reverse.
This brings enormous, promising opportunity for smarter, more efficient execution of charitable missions, which should mean better service to those in need throughout the world. (That sentence hits on several subjects debated by bigger thinkers and more august personages than me.) Look at organizations like charity: water and The Center for High Impact Philanthropy to discover the possibilities. (At The Center, I commend Autumn Walden to your attention.)
What examples do you see of the corporatization of nonprofits? Are you excited by what we’re witnessing? Do you miss the old days, or am I alone?