For-Profit Vs. Nonprofit: The Mission’s the Thing

I just read an interview with Jane Wales, co-founder of the Global Philanthropy Forum and director of the Program on Philanthropy and Social Innovation at the Aspen Institute that really threw me for a loop. (The Global Philanthropy Forum, a renowned gathering of heavy-hitters interested in social change, is meeting in Washington, D.C., this week). In Harvardbusiness.org, she discusses the commitment of the Obama administration to social-change efforts, on the one hand, and the shrinking resources it has, on the other. Then she says:

In times of contraction, you have to turn to those actors who are most agile and flexible. And I’d argue that the philanthropic and nonprofit groups fit that bill–more so than private companies, which are constrained by the need to be responsive to quarterly reports. Nonprofit and philanthropic groups’ funding streams draw down from endowments and are based on three-to-five-year rolling averages–so you’re looking at more of a slope, not a cliff.

Q & A: Jane Wales on Global Philanthropy – HBR Editors’ Blog – HarvardBusiness.org.

I’m not saying that nonprofit models aren’t more appropriate in a lot of circumstances. To name just one among many, many, many examples, PeaceWorks Foundation’s founder Daniel Lubetzky made the organization a nonprofit because he didn’t think its mission lent itself in any way, shape, or form to a for-profit structure. Through the OneVoiceMovement, it seeks to build a grassroots movement of Palestinians and Israelis advocating a two-state solution.

At the same time, for those cases where a for-profit makes sense, it can be considerably more sustainable than a non-profit alternative, because the company doesn’t have to seek hand-outs. And it stands a better chance of attracting experienced professionals who want to do good and also make a decent living. Also, one reason to keep a not-only-for-profit private is so it doesn’t have to answer to the same quarterly pressures that public companies face.

Lubetzky also heads PeaceWorks Holdings, which, among other things, creates for-profit olive and tomato farming, manufacturing and distribution ventures that bring together Palestinian, Israeli, Egyptian, and Turkish farmers and businesspeople. The mission is to help “create peace through business”. (Lubetzky was probably the first one to coin the term “not only for profit” to describe this type of company).

So, it all comes down to one key concern: creating a structure best-suited to the mission. And that’s particularly important in these resource-scarce times.