Letter to the editor – Nonprofits are not businesses

To the editor,

In “Charity needs a champion” [Philanthropy Journal, 3/4/03], Todd Cohen argues that in these times of tax cuts, the solution to our social problems falls on the backs of charitable organizations.

Sadly, this is correct.

But Cohen also argues that charitable organizations “need to be more business-like, entrepreneurial, market-driven and collaborative.”

This second point is mostly wrong.

If what Cohen means by “business-like” is to be more professional in your work, to balance your budgets, to be fiscally and programmatically accountable, to try for real measurable results and results which are long term and sustainable, then he is only stating the obvious.

But to say that nonprofits need to be entrepreneurial and market-driven is to say that they should be exactly what they are not: businesses.

Nonprofit “charitable” organizations exist to provide those services that business will not provide for the very reason that business has not found it profitable to provide these services.

Moreover, those attracted to the nonprofit world tend not to be business people.  The people who are good at making money go into private business.

Philanthropic foundations, by and large, were set up by people who made a lot of money in business, and then decided to use it for the public good. They were not set up by people with few resources who then built them into huge foundations.

Even when nonprofits are successful at establishing a profitable business, the benefit to the nonprofit usually is temporary.

When the recycling movement began, it was almost entirely supported by private, nonprofit groups or through local government assistance. Once it became clear that this would be profitable, private business, with its large amounts of capital necessary to buy trucks and run a large recycling operation, took over.

Through my work in the disability field in foreign countries, I have also seen how successful business ventures started by nonprofits soon spin off into separate, unrelated businesses run by the most entrepreneurial members of the original group.

But even the successes are small compared to the needs that these organizations exist to fulfill. 

For more than 20 years, we in the U.S. have been subjected to a constant barrage of clap-trap about how bad big government is, about how anyone who thinks it is socially useful to pay taxes is a “tax-and-spend liberal,” and about how everyone should pay their own way.

In California, for example, the public schools used to be among the best in the nation. Today, due to all the tax cuts, California now spends less on students per capita than all other states except for Mississippi. The devastating results are apparent.

The best way to solve the social problems that are the raison d’etre of “charitable” nonprofits is to leave the money-making to those who know how, the business community, to collect enough taxes to adequately address the various social ills, and to give the money to those who know how best to spend it — the nonprofit organizations.

Any approach that does not increase available funds to solve social ills is doomed to failure, no matter how well-managed the funds may be.

And no matter how much we might encourage cooperation, as long as there are too many organizations chasing too few dollars, there will be too little incentive to cooperate. 

Marc Krizack

Marc Krizack is director of international operations for the Disability Policy and Planning Institute in Berkeley, Calif.

Leave a Response

Your email address will not be published. All fields are required.