The Danger Of Abandoning the Nonprofit Sector

This is a post that originally appeared on the Change.org Social Entrepreneurship blog last March.

With all the excitement and energy around social entrepreneurship, there’s a tendency to dismiss the sector that was working on social impact long before it was cool: the nonprofit world.

These days, nonprofits get far less airtime in the social innovation movement than their for-profit, social entrepreneur counterparts. Perhaps that’s because the for-profit form of social change is new, so it seems more interesting, sexier — more apt to create change. And, of course, the idea that business can be reworked to address public goods is incredibly compelling.

But often the older nonprofit sector is left behind, partly because the sector tends to be risk- and change-averse. Again and again, Ive heard again that innovation will never become part of the nonprofit system — that nonprofits are too set in their ways. Or that the sector is too broken to emerge anew.

That attitude, though, is unacceptable. There’s great danger in dismissing the sector. Sure, it’s inefficient, dysfunctional and broken. Yet it has tremendous potential for innovation. Indeed, without innovation in the nonprofit sector, the broader movement to solve social problems is doomed.

The current hype around for-profit social entrepreneurship sometimes reminds me of the dot.com bubble, or even the more recent unbounded speculation in the financial markets. We have to be careful of the hubris that accompanies new trends. The nonprofit sector is an enormous part of our economy and has a long history of working towards social change. If we were to cast it aside completely, we’d lose the tremendous resources (money, people, mind-share) that are being invested in that sector every day. Without its oldest component, the social innovation movement is weakened.

So instead of tossing it aside, let’s remake it, re-envision, restructure and reinvent it.

What does that mean? It means that the best and the brightest in the social innovation field need to figure out how to innovate in the nonprofit as well as private sector. It means that the social capital market that’s being created to provide financial vehicles for budding social businesses should also include support for social entrepreneurs in the nonprofit space. It means venture philanthropy funds should share investor prospects with social venture funds, and vice-versa.

What’s more, innovation requires that investors interested in a social return own portfolios that include not only social businesses, but also nonprofit deals. Foundations should invest in both for profit and nonprofit social impact organizations. At social innovation conferences, speakers and attendees should come from both sectors. Nonprofits interested in growth should have access to capital and management expertise to scale. And a nonprofit that’s solving social problems should get just as many resources, respect and mind-share as a social business that’s doing the same.

All of this will require a shift in attitudes, not to mention changed laws and accounting standards that can help social entrepreneurs look at both for-profit and nonprofit structures, incentives and restrictions.

There’s no magic bullet for anything out there, particularly social change. But by focusing all of our energy on just one piece of the social innovation puzzle, we run the risk of less change — or none at all.

Tags: broken nonprofit sector, nonprofits and social entrepreneurship, Social Entrepreneurship, social innovation movement, social venture funds, Venture Philanthropy