The NonProfit Times - June 1, 2008 - (Page 24)

STREETSMART NONPROFIT MANAGER THOMAS A. MCLAUGHLIN Three Corners Why you can’t be more ‘like a business’ ere is another installment in an ongoing attempt to grapple with the enduring question that gets asked of many nonprofits in different ways but always boils down to the same simple question: why can’t you be more like a business? At the risk of oversimplifying, the answer is because we don’t run like a business. Usually what the questioner has in mind is a litany of vague characteristics the person doesn’t see in a nonprofit organization, such as brisk decision-making, streamlined operations, and a clear-eyed focus on the bottom line. People like this typically have a model in mind, and the only thing they know is that the nonprofits they see don’t fit that model.The challenge is to explain to them, in terms they’d understand, the reason for the gap. IT’S THE PHILANTHROPY TRIANGLE Tell them it’s because of the Philanthropy Triangle, which is at the heart of almost all nonprofit activities.Tell them that, in their business dealings in the private sector they don’t need to bother with triangles but instead engage in large numbers of simple two-way transactions. H The standard commercial transaction is composed of two parties, a Consumer and a Provider. Each has value the other wants. The Consumer has money, and the Provider has a product or service.They exchange money for products or services, and both go away satisfied.This uncomplicated relationship is shown below. the consumer. In fact, there is an excellent chance that the funder will never know much about the consumer at all, since the face-to-face contact is often awkward or inappropriate. This is a confusing mixture of unbalanced relationships, as shown below. Consumer Provider Consumer Provider In contrast, the standard philanthropic transaction is a three-way affair. There is still a consumer and a provider, but there is also a Funder. Unlike in the standard commercial exchange where the Consumer is also the Funder, the Philanthropy Triangle splits the Provider role into a provider and a funder, and that makes things complicated. For one thing, the consumer is often not giving the provider any money, or at least not an amount of money that is dictated by market forces. For another, the consumer might not always want to be there (think programs for adjudicated delinquents). Finally, the funder usually never engages directly with Funder Just to complicate matters, in the Philanthropy Triangle the funder could be an entity, such as a foundation or a unit of government, or it could be an individual donor. And the consumer might actually “give” something to the funder -- such as refraining from a second offense -- but it’s more likely that the funder’s real intention is to “give” something to society as a whole, such as a scholarship recipient who goes on to win the Nobel Prize. This might look like bad news, or at least a messy situation, but it’s not. In fact, it is at the heart of the nonprofit sector. When a social dysfunction or need exists, the first call goes out to the standard commercial sector. Individuals and companies in the commercial sector are wildly ingenious about finding ways to solve problems while making money in the process. But for certain situations there is no commercial (“money-making”) opportunity or interest. Think of how uninterested the commercial sector was in responding directly to the early stages of the AIDS epidemic, tsunami relief, or the situation in Darfur. The voluntary sector excels in these situations because of the Philanthropy Triangle. Unlike with the direct, personal receipt of value in a commercial transaction, donors (“funders”) in a philanthropic exchange expect a social return on their investment. THE IMPLICATIONS Many implications flow from these differences. First, most managers are conditioned to evaluate economic exchanges against the simple, well-understood metric of commercial transactions. Evaluating Exceed your expectations, AccuFund. Award winning financial management software for your non-profit organization. • Extensive reporting financial, grant, client & management • Staff’s choice for ease-of-use • Complete selection of fully integrated modules • Low total cost of ownership select Learn more at www.AccuFund.com AccuFund, Inc. I 877-872-2228 I Sales@accufund.com 24 JUNE 1, 2008 THE NONPROFIT TIMES www.nptimes.com http://www.orrick.com/public_finance http://www.orrick.com/public_finance http://www.AccuFund.com http://www.nptimes.com

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The NonProfit Times - June 1, 2008 First Kroc Center Set To Open It’s Layoffs And A Lawsuit At ARC In The Twin Cities Hospices Put On Life Support Contents Who...When...Where...How...What? Idol Charities Still Waiting For Funds Heck Of A Job Play On Words Make Endowments Pay Donor Management Software Who’s Next? Joining The Masses Online Email Evangelism Three Corners Business Briefs Fiduciaries And The 990 Calendar United Way Refocusing On Programs, Reducing Affiliates NPT Jobs Resource Directory

The NonProfit Times - June 1, 2008

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