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| Path: Main Street : Resources & Library : Research Articles : Feature Article |
"Social Entrepreneur" - The Nonprofit Oxymoron
By Buzz Harris, Development Resource Center
May 4, 2009
"Dude! How'd you get a leash on that cat?"
Hurley, struggling with a peeved Siamese, looked up. "Oh hey Mike! No man, this is my dog."
"Uh, I hate to break it to you Hurley, but that's a cat."
"Well, yeah - technically. But, dude, in our crowd it's so much cooler to have a dog, so I decided, you know, to call it a dog."
Mike, nonplussed, could only shake his head.
Since the late 1990s I've noticed increasing confusion about the nature of nonprofit groups. Phrases such as "social entrepreneur" and "social business" have become ubiquitous. Yet they are used without much consideration of the meaning of the words or the concepts behind them. Let me illustrate:
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$ →I use this diagram in all of the Development Resource Center's nonprofit fundraising and governance courses. It demonstrates the core difference between nonprofit and for-profit groups. The top line represents for-profits. They make goods or services in order to generate income, and hopefully a profit (the dollar sign). Their core mission is to make money, and that is as it should be.
The second line is a nonprofit mission diagram. Nonprofits seek out funding in order to perform a social good or create some change in the world (education, social services, arts, sporting, political advocacy, etc.). The money, to them, is a means to accomplish their public service goal. The public service goal is their core mission.
I'm not claiming that one of these models is intrinsically better than the other. They are, though, very different, and it is crucial that an organization's stakeholders realize which model they are using. Is the goal of your work to make money or to accomplish a public service mission? The answer to this question makes a profound difference in how you structure your project.
This brings us back to Hurley's dog/cat. He has a cat, but his friends think that dogs are the cool pet to own. His solution to feeling like a hip pet owner is to call his Siamese a dog, leash it, and attempt to take it for a walk. Social entrepreneurship, in a nonprofit context, is a dog/cat.
We live in a society that lionizes entrepreneurship. Its French root means "to take in hand," and to us it means a scrappy, resourceful, pulled-up-by-his-bootstraps kinda individual who has a business dream and works like hell to make it succeed. This person is smart, capable, and worthy of admiration.
Our culture does place some value on public service work. Ask most Americans about the nonprofit sector, though, and you will hear two things: some level of respect for the idealism behind the work, and a bit of head shaking about nonprofits' perceived lack of efficiency and financial acumen. Not exactly a ringing endorsement.
Add in the popular American belief that unregulated, for-profit financial markets are infallible and beneficent (a sentiment that, before last September, was gunning for a transfer from economics to its true home - theology). Is it any wonder that in such an environment people interested in public service work want to bask in the warm light of the socially-approved "entrepreneur?"
If this were just a semantic football match I wouldn't worry about it. Allow me to borrow from actual theology (and lived experience) to show that it is not. Lex orandi, lex credendi is Latin for "the words that you pray show what you believe." Words and phrases like "entrepreneur," "Chief Executive Officer," "profit center" and others used frequently in the nonprofit world today come out of a for-profit world and a for-profit mindset. This can lead people to forget the mission of their group.
For example, the public radio station in Philadelphia, WHYY, recently hired a president and CEO for an annual salary of almost a million dollars. Their board was taken to task by many in the local community and by the Philadelphia Inquirer for paying such an inflated salary. The executive directors of other major PBS affiliates that are much larger and more successful than WHYY (such as WNYC in New York and WGBH in Boston) are paid far less. Part of the public justification for this pay package was that, "WHYY is a player in the media landscape, which is largely populated by commercial ventures." And WNYC and WGBH are not? The WHYY board forgot that they are a nonprofit.
In the early 1990s a colleague of mine started a group in Oregon to educate people about the lives of lesbian, gay, and bisexual people as a means of reducing prejudice. It was called the Oregon Speak Out Project. He believed passionately that for-profit structures were more efficient than nonprofit ones, so he created the group as a for-profit. Since money was a statement of value, he charged all of his volunteer speakers for their training. He also charged the audiences to whom they spoke. He paid himself and his staff rather well to reflect the importance of what they were doing. The project fell apart very quickly.
Many of their volunteers resented being charged to pay the staff. Some audiences could not afford or were reluctant to pay the speaking fees. The for-profit structure made it hard for people to trust that their money would go to the group's mission and not to benefit its private owners.
There is a nearly identical organization in Boston which, at the time, was called the Gay, Lesbian, and Bisexual Speakers Bureau. It is organized as a 501(c)(3) nonprofit, and it has been going strong for thirty-five years. Its donors, speakers, and audiences trust that the funds that they provide are directed to carrying out its mission because the group is required to do so. A 501(c)(3) nonprofit is an organization with a public service mission that is not run or organized for private gain (according to the IRS and the U.S. Internal Revenue code).
There is a context in which "social entrepreneur" fits. The for-profit world. There are some rare for-profit businesses that have found a way to make private profit co-exist with providing a public good. The Grameen Bank in Bangladesh pioneered commercial micro-credit lending to the rural poor. It is owned largely by its own borrowers and operated on a for-profit basis. In my experience, such businesses are created by individuals who care passionately about the people with whom their business works and the issues that affect them. They have also managed to strike a difficult balance between making a profit and honouring their passion. I'm currently studying these businesses in an effort to understand the characteristics of their unique niches.
If you want a cat, get a cat. If you prefer dogs then, by all means, get a dog. But be clear about which one you want and why.
Buzz Harris is the executive director of the Development Resource Center, whose mission is to teach the fundamentals of successful fundraising and governance to nonprofits and NGO's. The DRC offers inexpensive, web-based distance-learning and in-person courses on fundraising and board service. Buzz can be reached at www.developmentresource.org/contact.
Opinions expressed by columnists are their own and do not necessarily reflect the views of CharityVillage.com®.
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