There are several books that influence both the nonprofit and forprofit sectors, providing valuable guidance to each and The Innovators Dilemma is one, noted for the impact it had on Steve Jobs in this article from Harvard Business Review.
An excerpt.
“In the lead up to today's release of the Steve Jobs biography, there's been an increasing stream of news surrounding its subject. As a business researcher, I was particularly interested in this recent article that referenced from his biography a list of Jobs's favorite books. There's one business book on this list, and it "deeply influenced" Jobs. That book is The Innovator's Dilemma by HBS Professor Clay Christensen.
“But what's most interesting to me isn't that The Innovator's Dilemma was on that list. It's that Jobs solved the conundrum.
“When describing his period of exile from Apple — when John Sculley took over — Steve Jobs described one fundamental root cause of Apple's problems. That was to let profitability outweigh passion: "My passion has been to build an enduring company where people were motivated to make great products. The products, not the profits, were the motivation. Sculley flipped these priorities to where the goal was to make money. It's a subtle difference, but it ends up meaning everything."
“Anyone familiar with Professor Christensen's work will quickly recognize the same causal mechanism at the heart of the Innovator's Dilemma: the pursuit of profit. The best professional managers — doing all the right things and following all the best advice — lead their companies all the way to the top of their markets in that pursuit... only to fall straight off the edge of a cliff after getting there.
“Which is exactly what had happened to Apple. A string of professional managers had led the company straight off the edge of that cliff. The fall had almost killed the company. It had 90 days working capital on hand when he took over — in other words, Apple was only three months away from bankruptcy.
“When he returned, Jobs completely upended the company. There were thousands of layoffs. Scores of products were killed stone dead. He knew the company had to make money to stay alive, but he transitioned the focus of Apple away from profits. Profit was viewed as necessary, but not sufficient, to justify everything Apple did. That attitude resulted in a company that looks entirely different to almost any other modern Fortune 500 company. One striking example: there's only one person Apple with responsibility for a profit and loss. The CFO. It's almost the opposite of what is taught in business school. An executive who worked at both Apple and Microsoft described the differences this way: "Microsoft tries to find pockets of unrealized revenue and then figures out what to make. Apple is just the opposite: It thinks of great products, then sells them. Prototypes and demos always come before spreadsheets."
“Similarly, Apple talks a lot about its great people. But make no mistake — they are there only in service of the mission. A headhunter describes it thus: "It is a happy place in that it has true believers. People join and stay because they believe in the mission of the company." It didn't matter how great you were, if you couldn't deliver to that mission — you were out.”
Showing posts with label Social Enterprise. Show all posts
Showing posts with label Social Enterprise. Show all posts
Tuesday, November 1, 2011
Thursday, July 28, 2011
Social Entrepreneurship Lights the Dark
These kinds of innovations, as reported by Fast Company, just leave one gasping 'get-atta-here' at times, Bravo!
An excerpt, with photo and links at the jump.
“We have lightbulbs made from glowing metal filaments, fluorescent gas, and LED diodes. And now we have one made of water. There is also a virtually unlimited supply since the "bulb" is composed of nothing more than one-liter plastic bottle, water, and bleach. The simple technology can be installed in less than an hour, lasts for five years, and is equivalent to a 60-watt bulb.
“It works simply: The water defracts the light, letting it spread throughout the house instead of focusing on one point. The bleach keeps the water clear and microbe-free.
“Developed by students from the Massachusetts Institute of Technology focused on "appropriate technologies," the solar bottle bulb is illuminating poor settlements across the Philippines, where the organization Isang Litrong Liwanag ("A Liter of Light") has already installed 10,000 of them. “With the Solar Bottle Bulb project, a brighter Philippines is going to become a reality,” Illac Diaz, a social entrepreneur installing the bulbs, told a Filipino publication. You can watch a video of the bulbs in action here.
“Millions of poor homes in Manila--and far more around the world--are left in the dark because metal roofs block all light and there are no connections to the electrical grid in cramped informal settlements. This simple bottle bulb, installed through a sealed hole cut in the metal roofs, provides a surprising amount of light by deflecting sunlight into gloomy interiors.”
An excerpt, with photo and links at the jump.
“We have lightbulbs made from glowing metal filaments, fluorescent gas, and LED diodes. And now we have one made of water. There is also a virtually unlimited supply since the "bulb" is composed of nothing more than one-liter plastic bottle, water, and bleach. The simple technology can be installed in less than an hour, lasts for five years, and is equivalent to a 60-watt bulb.
“It works simply: The water defracts the light, letting it spread throughout the house instead of focusing on one point. The bleach keeps the water clear and microbe-free.
“Developed by students from the Massachusetts Institute of Technology focused on "appropriate technologies," the solar bottle bulb is illuminating poor settlements across the Philippines, where the organization Isang Litrong Liwanag ("A Liter of Light") has already installed 10,000 of them. “With the Solar Bottle Bulb project, a brighter Philippines is going to become a reality,” Illac Diaz, a social entrepreneur installing the bulbs, told a Filipino publication. You can watch a video of the bulbs in action here.
“Millions of poor homes in Manila--and far more around the world--are left in the dark because metal roofs block all light and there are no connections to the electrical grid in cramped informal settlements. This simple bottle bulb, installed through a sealed hole cut in the metal roofs, provides a surprising amount of light by deflecting sunlight into gloomy interiors.”
Tuesday, May 24, 2011
Social Enterprise
A successful effort once again demonstrating how social enterprise can work when done right, and how intrinsically generous the American people are, as this story from the St Louis Post-Dispatch reveals.
An excerpt.
“In case you missed the recent media blitz, this week marked the one-year anniversary of Panera Bread Co.'s experimental pay-what-you-want nonprofit cafe in Clayton.
“Yes, one year later, the cafe is still kicking.
“Based on its success, Panera's foundation has transferred two more cafes to the nonprofit model — one in Dearborn, Mich., and one in Portland, Ore. — under the name Panera Cares.
"Amazing," said Ron Shaich, executive chairman of the Sunset Hills-based company that operates locally as St. Louis Bread Co. "The cynics said we'd never make it."
“But others wondered whether Panera picked somewhat of a sure thing by putting this concept in Clayton, where there are plenty of well-heeled customers who can afford to pay their fair share. (The cafe gives patrons a 'suggested funding level" instead of a set price and leaves it up to the customer to decide how much they want to or can pay.)
“These folks said it would have been a far bolder statement to put the cafe in a low-income neighborhood. That's what a group of activists did a couple of years ago when they opened the Urban Studio Cafe in old north St. Louis, just down the street from Crown Candy. That cafe had set prices, but the proceeds were used to provide jobs in the cafe to local residents.
“But it never turned a profit and was forced to close earlier this year. A couple have opened a for-profit business in that space called La Mancha Coffeehouse.
“Urban Studio Cafe's demise does not necessarily mean that such a model can't work in poorer neighborhoods.
“But Shaich says those who would want him to do that perhaps misunderstand his original intention. It wasn't to cure poverty — but to start by helping those who are struggling to get by.
"This is about middle-class folks who are unemployed and who need a hand up," he said. "It's about us."
An excerpt.
“In case you missed the recent media blitz, this week marked the one-year anniversary of Panera Bread Co.'s experimental pay-what-you-want nonprofit cafe in Clayton.
“Yes, one year later, the cafe is still kicking.
“Based on its success, Panera's foundation has transferred two more cafes to the nonprofit model — one in Dearborn, Mich., and one in Portland, Ore. — under the name Panera Cares.
"Amazing," said Ron Shaich, executive chairman of the Sunset Hills-based company that operates locally as St. Louis Bread Co. "The cynics said we'd never make it."
“But others wondered whether Panera picked somewhat of a sure thing by putting this concept in Clayton, where there are plenty of well-heeled customers who can afford to pay their fair share. (The cafe gives patrons a 'suggested funding level" instead of a set price and leaves it up to the customer to decide how much they want to or can pay.)
“These folks said it would have been a far bolder statement to put the cafe in a low-income neighborhood. That's what a group of activists did a couple of years ago when they opened the Urban Studio Cafe in old north St. Louis, just down the street from Crown Candy. That cafe had set prices, but the proceeds were used to provide jobs in the cafe to local residents.
“But it never turned a profit and was forced to close earlier this year. A couple have opened a for-profit business in that space called La Mancha Coffeehouse.
“Urban Studio Cafe's demise does not necessarily mean that such a model can't work in poorer neighborhoods.
“But Shaich says those who would want him to do that perhaps misunderstand his original intention. It wasn't to cure poverty — but to start by helping those who are struggling to get by.
"This is about middle-class folks who are unemployed and who need a hand up," he said. "It's about us."
Thursday, May 19, 2011
Nonprofits/Forprofits
Here is a list of ten nonprofits that act like forprofits, from The Street.
An excerpt.
“BOSTON (TheStreet) -- The line between for-profit companies and nonprofit charities continues to blur.
“The organizational creep of nonprofits into areas that seem more in keeping with the for-profit world is nothing new. In an effort to boost their bottom line, many charities have branched out into other investments -- real estate holdings, property management, paid endorsements and retail sales among them.
“Drawing executive expertise has meant having to offer private-sector-sized salaries. Money donors ponied up for a given cause is often diverted to legal fees and political lobbying.
“And the organizational structure of some nonprofits has evolved in new directions.
“In 2007, Google(GOOG_) launched Google.org, an effort defined as a for-profit charity. Seeded with 3 million shares of company stock, it has primarily funded alternative-energy projects. Other nonprofits are looking closer at "hybrid" models to combine profit-driven strategies with charity-minded outcomes.
"For many years nonprofits have often used for-profit subsidiaries or a fee-for-service approach," says Ken Berger, president and CEO of Charity Navigator, a service that evaluates the financial health of more than 5,500 American charities. "In fact, the biggest piece of income for nonprofits is not individual contributions or government money -- it comes from fee-for-service income. This notion of hybrid, or the 'for-profit nonprofit,' is nothing new at all."
An excerpt.
“BOSTON (TheStreet) -- The line between for-profit companies and nonprofit charities continues to blur.
“The organizational creep of nonprofits into areas that seem more in keeping with the for-profit world is nothing new. In an effort to boost their bottom line, many charities have branched out into other investments -- real estate holdings, property management, paid endorsements and retail sales among them.
“Drawing executive expertise has meant having to offer private-sector-sized salaries. Money donors ponied up for a given cause is often diverted to legal fees and political lobbying.
“And the organizational structure of some nonprofits has evolved in new directions.
“In 2007, Google(GOOG_) launched Google.org, an effort defined as a for-profit charity. Seeded with 3 million shares of company stock, it has primarily funded alternative-energy projects. Other nonprofits are looking closer at "hybrid" models to combine profit-driven strategies with charity-minded outcomes.
"For many years nonprofits have often used for-profit subsidiaries or a fee-for-service approach," says Ken Berger, president and CEO of Charity Navigator, a service that evaluates the financial health of more than 5,500 American charities. "In fact, the biggest piece of income for nonprofits is not individual contributions or government money -- it comes from fee-for-service income. This notion of hybrid, or the 'for-profit nonprofit,' is nothing new at all."
Tuesday, May 17, 2011
Morality of Outcome
I’m reading a great book, Uncharitable: How Restraints on Nonprofits Undermine Their Potential, whose theme can be determined by this excerpt:
“Ironically, by denying charity the tools of capitalism while allowing the for-profit sector to feast on them, we place charity at a severe disadvantage to the for-profit sector, on every front and at every level. The hands of charity are tied, while the for-profit sector scoops every penny off the economic table. Charity is segregated from the rest of the economic world. And this apartheid is the result of its own ideology. It is in the name of charity that capitalism is banished. Indeed, charity could not be undermined with more homage paid to charity. But the principal beneficiary of this charity is the for-profit sector. The poor are left to take some solace in the fact that charity observed all the discrimination with great frugality.
“It is a further irony that we prohibit charity from using the tools of capitalism to rectify the very disparities some would claim capitalism creates. We allow people to make huge profits doing any number of things that harm the poor, but prohibit anyone from making a profit doing anything that will help them. Want to make a million selling violent video games to kids? Go for it. Want to make a million funding the cure for childhood leukemia? You are a parasite. The illogic is breathtaking. The ramification is even more so: if free-market ideology could rectify the disparities some claim are created by free-market practices, isn’t the nonprofit ideology that obstructs it the problem in the first place? (p. 9, italics in original)
“Ironically, by denying charity the tools of capitalism while allowing the for-profit sector to feast on them, we place charity at a severe disadvantage to the for-profit sector, on every front and at every level. The hands of charity are tied, while the for-profit sector scoops every penny off the economic table. Charity is segregated from the rest of the economic world. And this apartheid is the result of its own ideology. It is in the name of charity that capitalism is banished. Indeed, charity could not be undermined with more homage paid to charity. But the principal beneficiary of this charity is the for-profit sector. The poor are left to take some solace in the fact that charity observed all the discrimination with great frugality.
“It is a further irony that we prohibit charity from using the tools of capitalism to rectify the very disparities some would claim capitalism creates. We allow people to make huge profits doing any number of things that harm the poor, but prohibit anyone from making a profit doing anything that will help them. Want to make a million selling violent video games to kids? Go for it. Want to make a million funding the cure for childhood leukemia? You are a parasite. The illogic is breathtaking. The ramification is even more so: if free-market ideology could rectify the disparities some claim are created by free-market practices, isn’t the nonprofit ideology that obstructs it the problem in the first place? (p. 9, italics in original)
Wednesday, May 4, 2011
Sector Shifting
Nonprofit to private, private to nonprofit, government partnering with nonprofits and forprofits, and combinations of all; what matters is the mission, the porpose, and the best way to get it done, in this case, it's all about farming and gardening education, as reported by the Tacoma News Tribune from Bellingham, Washington.
An excerpt.
“EVERSON - Cloud Mountain Farm is going through big changes, but they're not yet visible to passers-by.
“Owners Tom and Cheryl Thornton plan to sell their popular business to a yet-to-be-determined entity that will convert their 20-acre farm into a nonprofit center to provide education and hands-on training to new and experienced farmers and gardeners.
“The couple, who started Cloud Mountain as a commercial orchard in 1978, will continue to work and live at the farm, and Cheryl Thornton will sit on the center's new board of directors.
“They're already well-known for offering workshops and other educational programs, and for experimenting with crops and growing techniques, all while diversifying their farm nestled against the western flank of Sumas Mountain.
"It's a continuation and expansion of what we're already doing," Cheryl Thornton said. "The center brings it full circle."
“The transaction is being handled by Whatcom Community Foundation, which manages numerous funds, including at least two geared to helping local agriculture - the Sustainable Whatcom Fund and the Whatcom Farm Incubator Fund.”
An excerpt.
“EVERSON - Cloud Mountain Farm is going through big changes, but they're not yet visible to passers-by.
“Owners Tom and Cheryl Thornton plan to sell their popular business to a yet-to-be-determined entity that will convert their 20-acre farm into a nonprofit center to provide education and hands-on training to new and experienced farmers and gardeners.
“The couple, who started Cloud Mountain as a commercial orchard in 1978, will continue to work and live at the farm, and Cheryl Thornton will sit on the center's new board of directors.
“They're already well-known for offering workshops and other educational programs, and for experimenting with crops and growing techniques, all while diversifying their farm nestled against the western flank of Sumas Mountain.
"It's a continuation and expansion of what we're already doing," Cheryl Thornton said. "The center brings it full circle."
“The transaction is being handled by Whatcom Community Foundation, which manages numerous funds, including at least two geared to helping local agriculture - the Sustainable Whatcom Fund and the Whatcom Farm Incubator Fund.”
Friday, March 25, 2011
Art & Philanthropy
Using art to further causes nonprofits advocate for to encourage philanthropy is a powerful resource and this article from the Wall Street Journal, focusing on its use with environmental efforts, reveal the application’s effectiveness.
An excerpt.
“Effective activism is an art form, some say. With Clean Air Network, the Hong Kong environmental group, advocacy is art.
“If you’ve walked through the IFC mall’s atrium this week, you’ve probably seen the art exhibition by the nonprofit group, which is dedicated to raising awareness about pollution in Hong Kong. The show runs there through Sunday, and then moves to Hong Kong’s convention center on April 1 as part of the preview of Sotheby’s spring sale there.
“The auction house will sell the works on April 4 to raise money for the Clean Air Network.
“Art is a popular and approachable means of reaching a broader swath of the public,” says Joanne Ooi, the group’s chief executive.”
An excerpt.
“Effective activism is an art form, some say. With Clean Air Network, the Hong Kong environmental group, advocacy is art.
“If you’ve walked through the IFC mall’s atrium this week, you’ve probably seen the art exhibition by the nonprofit group, which is dedicated to raising awareness about pollution in Hong Kong. The show runs there through Sunday, and then moves to Hong Kong’s convention center on April 1 as part of the preview of Sotheby’s spring sale there.
“The auction house will sell the works on April 4 to raise money for the Clean Air Network.
“Art is a popular and approachable means of reaching a broader swath of the public,” says Joanne Ooi, the group’s chief executive.”
Friday, February 4, 2011
Redevelopment Funds
As many states, ours is one, debate the future of redevelopment funds which have driven some urban development for several years, it is worthwhile to consider, as this article from the Wall Street Journal does, allowing the effort to become a nonprofit enterprise.
An excerpt.
“Some cash-strapped states have identified another job they want to shift to the private sector: economic development.
“A number of governors are working to turn their development offices into some form of nonprofit private entity, a move that would transfer the task of giving out state grants, tax breaks and other economic incentives from the hands of government.
“The idea, which has as much to do with economic philosophies as with saving money, is mainly gaining ground in states with Republican governors, including Ohio, Wisconsin, Iowa and Arizona.
"It's a matter of greater flexibility and the ability to act more like a chamber [of commerce] rather than a state agency," said Wisconsin's new Republican governor Scott Walker, adding that private groups are better equipped to create jobs and attract companies.
“As tax revenue has shriveled in recent years, cities and states have moved to privatize various operations, such as state-run liquor stores, local libraries and parking meters.
“Seven states, including Michigan and Florida, already have some form of private group filling the economic-development role. Critics say handing this power to a private entity can create conflicts of interest, because the nonprofits usually have boards made up of public officials and private business leaders. This can create conflicts as these boards help steer tax breaks and incentives.
“Also, in many cases private economic-development agencies aren't subject to the same standards for public disclosure as government agencies, even though they receive government money. In Ohio, where newly elected Gov. John Kasich has proposed dissolving the state's Department of Development and creating an entity called JobsOhio, lawmakers have pushed to increase disclosures and allow the state's inspector general to investigate the proposed entity.
“Advocates say it makes sense to separate the task of creating jobs from large government agencies that often have a broader mission. In Wisconsin, the current Department of Commerce has responsibility for regulation as well as economic development. Among the 400 employees in Ohio's Department of Development, 60 are focused on economic development; the balance handle areas including homeless programs, community development and home energy assistance.”
An excerpt.
“Some cash-strapped states have identified another job they want to shift to the private sector: economic development.
“A number of governors are working to turn their development offices into some form of nonprofit private entity, a move that would transfer the task of giving out state grants, tax breaks and other economic incentives from the hands of government.
“The idea, which has as much to do with economic philosophies as with saving money, is mainly gaining ground in states with Republican governors, including Ohio, Wisconsin, Iowa and Arizona.
"It's a matter of greater flexibility and the ability to act more like a chamber [of commerce] rather than a state agency," said Wisconsin's new Republican governor Scott Walker, adding that private groups are better equipped to create jobs and attract companies.
“As tax revenue has shriveled in recent years, cities and states have moved to privatize various operations, such as state-run liquor stores, local libraries and parking meters.
“Seven states, including Michigan and Florida, already have some form of private group filling the economic-development role. Critics say handing this power to a private entity can create conflicts of interest, because the nonprofits usually have boards made up of public officials and private business leaders. This can create conflicts as these boards help steer tax breaks and incentives.
“Also, in many cases private economic-development agencies aren't subject to the same standards for public disclosure as government agencies, even though they receive government money. In Ohio, where newly elected Gov. John Kasich has proposed dissolving the state's Department of Development and creating an entity called JobsOhio, lawmakers have pushed to increase disclosures and allow the state's inspector general to investigate the proposed entity.
“Advocates say it makes sense to separate the task of creating jobs from large government agencies that often have a broader mission. In Wisconsin, the current Department of Commerce has responsibility for regulation as well as economic development. Among the 400 employees in Ohio's Department of Development, 60 are focused on economic development; the balance handle areas including homeless programs, community development and home energy assistance.”
Monday, November 15, 2010
Impact Investing
This new brand of philanthropy is described in a report from The Monitor Institute.
An excerpt.
“What is Impact Investing?
“In New York City, a low-income mother is moving into an apartment on land developed with a loan from the New York City Acquisition Fund. The Fund, created in 2004, aims to facilitate the construction of 10,000 units of affordable housing in a city with rapidly diminishing affordable housing stock. The Fund came together when private foundations made $32 million in low-interest, subordinated loans and a city-based charitable trust invested $8 million on similar terms, enabling commercial banks to raise and place more than $160 million of commercially priced debt into the fund.
“In rural Tanzania, a student is reading at home by the light of an electric light bulb powered by a solar panel her mother bought on credit from a local distributor. The distribution business could reach her village because of an equity and working capital investment made by E+Co, a nonprofit mezzanine fund focused on making debt and equity investments in businesses that develop and sell modern energy services.
“In Cambodia, a small business is expanding with debt from a microfinance bank. The bank is originating new loans after accessing commercial capital markets through a $110 million loan fund structured in 2007 by Blue Orchard, a Swiss microfinance-focused asset management company, and Morgan Stanley. The loan fund, rated by Standard & Poor’s, was syndicated on commercial terms among institutional investors, such as pension funds, in Europe and the United Kingdom.
“The New Yorker moving into her first home, the student in Tanzania studying under electric light, the small-business owner in Cambodia expanding her payroll—none of these people would recognize one another as coparticipants in the same emerging industry. Neither, perhaps, would the commercial banker placing debt in the Acquisition Fund, the high-networth individuals investing in E+Co, or the German worker whose pension fund invested in microfinance through Blue Orchard.
“Yet these are all examples of the proliferation of activity occurring as a new industry of impact investing emerges. This industry which involves making investments that generate social and environmental value as well as financial return, has the potential to complement philanthropy and government intervention as a potent force for addressing global challenges at scale. This document is intended to shed light on the industry’s recent emergence and highlight the challenges it faces in achieving its promise.” (p 3)
An excerpt.
“What is Impact Investing?
“In New York City, a low-income mother is moving into an apartment on land developed with a loan from the New York City Acquisition Fund. The Fund, created in 2004, aims to facilitate the construction of 10,000 units of affordable housing in a city with rapidly diminishing affordable housing stock. The Fund came together when private foundations made $32 million in low-interest, subordinated loans and a city-based charitable trust invested $8 million on similar terms, enabling commercial banks to raise and place more than $160 million of commercially priced debt into the fund.
“In rural Tanzania, a student is reading at home by the light of an electric light bulb powered by a solar panel her mother bought on credit from a local distributor. The distribution business could reach her village because of an equity and working capital investment made by E+Co, a nonprofit mezzanine fund focused on making debt and equity investments in businesses that develop and sell modern energy services.
“In Cambodia, a small business is expanding with debt from a microfinance bank. The bank is originating new loans after accessing commercial capital markets through a $110 million loan fund structured in 2007 by Blue Orchard, a Swiss microfinance-focused asset management company, and Morgan Stanley. The loan fund, rated by Standard & Poor’s, was syndicated on commercial terms among institutional investors, such as pension funds, in Europe and the United Kingdom.
“The New Yorker moving into her first home, the student in Tanzania studying under electric light, the small-business owner in Cambodia expanding her payroll—none of these people would recognize one another as coparticipants in the same emerging industry. Neither, perhaps, would the commercial banker placing debt in the Acquisition Fund, the high-networth individuals investing in E+Co, or the German worker whose pension fund invested in microfinance through Blue Orchard.
“Yet these are all examples of the proliferation of activity occurring as a new industry of impact investing emerges. This industry which involves making investments that generate social and environmental value as well as financial return, has the potential to complement philanthropy and government intervention as a potent force for addressing global challenges at scale. This document is intended to shed light on the industry’s recent emergence and highlight the challenges it faces in achieving its promise.” (p 3)
Saturday, November 6, 2010
Privatization
This strategy for reducing government costs often involves nonprofits assuming the service delivery previously held by government, and, as this article from Governing reports, sometimes it works out real well, and sometimes not.
An excerpt.
“Back in 2008, the U.S. Senate voted to privatize the operation of the Senate restaurant, which was not only losing money at an alarming clip -- roughly $2 million a year -- but also serving lousy food. As the joke went at the time, the food was bad but at least the portions were small.
“The move to privatize caused anguish for the Democratic majority at the time. Democratic Sen. Robert Menendez of New Jersey argued against contracting out, telling the Washington Post that "you cannot stand on the Senate floor and condemn the privatization of workers, and then turn around and privatize the workers here in the Senate and leave them out on their own." California Democratic Sen. Dianne Feinstein said, "It's clearly not the sort of thing I ran for the Senate to do."
“To her credit, Feinstein opted for privatizing the restaurant rather than watching taxpayers subsidize a substandard operation. But for many, the decision to outsource seemed to be the moral equivalent of an attack on government, an admission that government isn't any good at anything.
“On the flip side, there are some who seem eager to privative at all costs.
“During the occupation of Iraq, the Bush administration appeared content to drive the majority of projects through hastily arranged contracts with private providers, many of them on a no-bid basis. A recent article in the Los Angeles Times notes the "legacy of waste" associated with this approach. This assessment is largely based on the findings of Stuart Bowen, the special inspector general for Iraq, whose job it was to review these contracts. In many cases, these contracts turned into costly white elephants, like the $40 million spent on a prison that has never been opened. "Billions of dollars have already been spent and billions have been wasted," Bowen said.
“Ideology often serves as an impediment to good decision making. Why can't we simply agree up front to the blazingly obvious truth about privatization: In some cases, it leads to better services and lower costs; in other cases, it doesn't.
“The political embrace of preconceived positions regarding government and markets simply doesn't help. Clinging to the notion that a government-run restaurant is inherently better (or worse) than a privately-run restaurant is ridiculous. The proof really is in the pudding -- that is, outsourcing decisions are best judged by their outputs and costs.
“Once we get past the ideology, we can focus on what really matters: the results. We can look at the evidence and start to see the conditions that make successful privatization more likely. Is there an established private market for this service? Are the deliverables relatively straightforward to measure? Is there good data about internal costs that allows for a meaningful comparison of in-house and outsourced services?
“There is evidence that when the conditions are right, outsourcing can be a great way to deliver public services for less, in areas ranging from fleet maintenance to janitorial services, from wastewater treatment to street sweeping. Acknowledging this isn't the moral equivalent of attacking democratic government.
“There is also evidence that outsourcings can go awry. Corrupt bidding practices can lead to problems. Large, complex outsourcings, as with IT systems and the like, depend on highly skilled contract administration, and do not always end well. Acknowledging this isn't the moral equivalent of attacking the free enterprise system.”
An excerpt.
“Back in 2008, the U.S. Senate voted to privatize the operation of the Senate restaurant, which was not only losing money at an alarming clip -- roughly $2 million a year -- but also serving lousy food. As the joke went at the time, the food was bad but at least the portions were small.
“The move to privatize caused anguish for the Democratic majority at the time. Democratic Sen. Robert Menendez of New Jersey argued against contracting out, telling the Washington Post that "you cannot stand on the Senate floor and condemn the privatization of workers, and then turn around and privatize the workers here in the Senate and leave them out on their own." California Democratic Sen. Dianne Feinstein said, "It's clearly not the sort of thing I ran for the Senate to do."
“To her credit, Feinstein opted for privatizing the restaurant rather than watching taxpayers subsidize a substandard operation. But for many, the decision to outsource seemed to be the moral equivalent of an attack on government, an admission that government isn't any good at anything.
“On the flip side, there are some who seem eager to privative at all costs.
“During the occupation of Iraq, the Bush administration appeared content to drive the majority of projects through hastily arranged contracts with private providers, many of them on a no-bid basis. A recent article in the Los Angeles Times notes the "legacy of waste" associated with this approach. This assessment is largely based on the findings of Stuart Bowen, the special inspector general for Iraq, whose job it was to review these contracts. In many cases, these contracts turned into costly white elephants, like the $40 million spent on a prison that has never been opened. "Billions of dollars have already been spent and billions have been wasted," Bowen said.
“Ideology often serves as an impediment to good decision making. Why can't we simply agree up front to the blazingly obvious truth about privatization: In some cases, it leads to better services and lower costs; in other cases, it doesn't.
“The political embrace of preconceived positions regarding government and markets simply doesn't help. Clinging to the notion that a government-run restaurant is inherently better (or worse) than a privately-run restaurant is ridiculous. The proof really is in the pudding -- that is, outsourcing decisions are best judged by their outputs and costs.
“Once we get past the ideology, we can focus on what really matters: the results. We can look at the evidence and start to see the conditions that make successful privatization more likely. Is there an established private market for this service? Are the deliverables relatively straightforward to measure? Is there good data about internal costs that allows for a meaningful comparison of in-house and outsourced services?
“There is evidence that when the conditions are right, outsourcing can be a great way to deliver public services for less, in areas ranging from fleet maintenance to janitorial services, from wastewater treatment to street sweeping. Acknowledging this isn't the moral equivalent of attacking democratic government.
“There is also evidence that outsourcings can go awry. Corrupt bidding practices can lead to problems. Large, complex outsourcings, as with IT systems and the like, depend on highly skilled contract administration, and do not always end well. Acknowledging this isn't the moral equivalent of attacking the free enterprise system.”
Thursday, November 4, 2010
Evaluating Social Enterprise
The social enterprise concept is an excellent one, bringing forprofit principles into the nonprofit world, and when handled correctly, benefits both.
Many New York social enterprise efforts have recently been evaluated, as reported by the Wall Street Journal.
An excerpt.
“Hundreds of New York's social-service organizations are short-changing the people they are supposed to serve by focusing on money-making schemes, according to a report released Wednesday by Pace University.
“By pursuing income-related activities such as selling donors' contact information to third-party marketers and running online shops, nonprofits have diverted income away from service activities, says Rebecca Tekula, the report's author.
"Organizations that spend money and divert resources to other activities do so at the detriment of the homeless, domestic violence victims and people who need these services," says Ms. Tekula, executive director at the Wilson Center for Social Entrepreneurship at Pace University. "Social enterprise may be an innovation," she says, but it is one that can tempt nonprofits into a substantial "mission distraction."
“Researchers analyzed the tax forms of 700 social-service organizations across New York County between 2000 and 2005. The organizations in the sample raised an average of $1 million in so-called unrelated business income, putting the money toward average expense budgets of $19 million.
“The report found that organizations that engage in unrelated business activities, often called social enterprise programs, are more likely to run less efficient shops than their peers. As income from peripheral businesses went up, the share of a contributed dollar that went to actual services went down, according to the report.
“While Ms. Tekula says the report does not prove causality, she maintains that the high correlation between poorly performing nonprofits and those that pursue income-generating projects is cause for concern.
"Organizations with unrelated businesses were not investing profits in their mission-related services," Ms. Tekula says. "Instead, profits were reinvested in the business, and losses were subsidized with funds that might have gone to clients."
“For instance, she points to God's Love We Deliver, an organization that prepares meals for people with serious illnesses, which in 2006 lost about $100,000 on merchandise it sells via holiday catalogs. Since then, it has made between $36,000 and $55,000 a year through online sales, according to tax forms.
“God's Love maintains that the real loss was closer to $7,000 and that the larger number reflects an Internal Revenue Service accounting rule that requires charities to record donated goods as expenses, even if the charity did not pay for them.
“The sales ventures "either break even or have a positive bottom line every year," says Karen Pearl, the group's president and CEO. "Our catalog and gifts are a teensy part of our $9 million budget but it helps keep God's Love in the forefront of peoples minds, hearts and ultimately in their giving."
“Covenant House, a $37.6 million New York-based nonprofit that provides food, shelter and crisis care to homeless youth, has earned between $500,000 and $700,000 a year by renting out its list of donor contact information to third-party marketers. Meanwhile, only half of the nonprofit's revenue went to run its programs, with the other half going toward administrative and fund-raising expenses, according to Ms. Tekula's analysis.
"List rentals aren't an ideal way to earn money but it translates into a source of income that can help hundreds of kids," says Tom Manning, a spokesman for Covenant House.
“Because Covenant House is an umbrella organization with 18 affiliates, its administrative expenses appear higher when looked at alone, Mr. Manning says. Including the affiliates, which run the bulk of the organization's programs, he says the amount spent on programs rises to more than 71% of its expenditures.”
Many New York social enterprise efforts have recently been evaluated, as reported by the Wall Street Journal.
An excerpt.
“Hundreds of New York's social-service organizations are short-changing the people they are supposed to serve by focusing on money-making schemes, according to a report released Wednesday by Pace University.
“By pursuing income-related activities such as selling donors' contact information to third-party marketers and running online shops, nonprofits have diverted income away from service activities, says Rebecca Tekula, the report's author.
"Organizations that spend money and divert resources to other activities do so at the detriment of the homeless, domestic violence victims and people who need these services," says Ms. Tekula, executive director at the Wilson Center for Social Entrepreneurship at Pace University. "Social enterprise may be an innovation," she says, but it is one that can tempt nonprofits into a substantial "mission distraction."
“Researchers analyzed the tax forms of 700 social-service organizations across New York County between 2000 and 2005. The organizations in the sample raised an average of $1 million in so-called unrelated business income, putting the money toward average expense budgets of $19 million.
“The report found that organizations that engage in unrelated business activities, often called social enterprise programs, are more likely to run less efficient shops than their peers. As income from peripheral businesses went up, the share of a contributed dollar that went to actual services went down, according to the report.
“While Ms. Tekula says the report does not prove causality, she maintains that the high correlation between poorly performing nonprofits and those that pursue income-generating projects is cause for concern.
"Organizations with unrelated businesses were not investing profits in their mission-related services," Ms. Tekula says. "Instead, profits were reinvested in the business, and losses were subsidized with funds that might have gone to clients."
“For instance, she points to God's Love We Deliver, an organization that prepares meals for people with serious illnesses, which in 2006 lost about $100,000 on merchandise it sells via holiday catalogs. Since then, it has made between $36,000 and $55,000 a year through online sales, according to tax forms.
“God's Love maintains that the real loss was closer to $7,000 and that the larger number reflects an Internal Revenue Service accounting rule that requires charities to record donated goods as expenses, even if the charity did not pay for them.
“The sales ventures "either break even or have a positive bottom line every year," says Karen Pearl, the group's president and CEO. "Our catalog and gifts are a teensy part of our $9 million budget but it helps keep God's Love in the forefront of peoples minds, hearts and ultimately in their giving."
“Covenant House, a $37.6 million New York-based nonprofit that provides food, shelter and crisis care to homeless youth, has earned between $500,000 and $700,000 a year by renting out its list of donor contact information to third-party marketers. Meanwhile, only half of the nonprofit's revenue went to run its programs, with the other half going toward administrative and fund-raising expenses, according to Ms. Tekula's analysis.
"List rentals aren't an ideal way to earn money but it translates into a source of income that can help hundreds of kids," says Tom Manning, a spokesman for Covenant House.
“Because Covenant House is an umbrella organization with 18 affiliates, its administrative expenses appear higher when looked at alone, Mr. Manning says. Including the affiliates, which run the bulk of the organization's programs, he says the amount spent on programs rises to more than 71% of its expenditures.”
Wednesday, September 29, 2010
Local Parks, Privatization & Nonprofit Management
As this story in today’s Sacramento Bee notes, the only proposal submitted to take over Gibson Park would privatize it, creating a social enterprise, and if that works to keep this beloved park open to the public, that is very good news.
The grassroots group formed to examine how to increase taxes—which is very bad news—to fund regional parks is also considering a nonprofit conservancy, which is very good news.
An excerpt from today’s Bee story.
“Sacramento County only received one bid from someone looking to take over Gibson Ranch – a proposal from former Rep. Doug Ose, a developer who wants to run the public park as a for-profit venture.
“This revelation, which county parks officials mentioned at a Tuesday hearing on the future of regional parks, leaves the Board of Supervisors with few clear options for the park, which supervisors have already determined they can't afford to keep open. The head of county parks, Janet Baker, said her department doesn't have a backup plan and officials aren't sure what they'll do if Ose's proposal doesn't pass….”.
“A grass-roots working group of parks supporters has started the legwork to get an initiative on the ballot in November 2012, which – if passed – could create a regional park district similar to the East Bay Regional Park District. The working group updated supervisors on its progress at Tuesday's board meeting.
“Thanks to $50,000 in donations, the group has commissioned the Trust for Public Land to study the feasibility of several options for structuring a new district and to essentially poll public opinion to see if a measure might pass.
“Another consultant is preparing a budget estimate and studying a nonprofit conservancy option.”
The grassroots group formed to examine how to increase taxes—which is very bad news—to fund regional parks is also considering a nonprofit conservancy, which is very good news.
An excerpt from today’s Bee story.
“Sacramento County only received one bid from someone looking to take over Gibson Ranch – a proposal from former Rep. Doug Ose, a developer who wants to run the public park as a for-profit venture.
“This revelation, which county parks officials mentioned at a Tuesday hearing on the future of regional parks, leaves the Board of Supervisors with few clear options for the park, which supervisors have already determined they can't afford to keep open. The head of county parks, Janet Baker, said her department doesn't have a backup plan and officials aren't sure what they'll do if Ose's proposal doesn't pass….”.
“A grass-roots working group of parks supporters has started the legwork to get an initiative on the ballot in November 2012, which – if passed – could create a regional park district similar to the East Bay Regional Park District. The working group updated supervisors on its progress at Tuesday's board meeting.
“Thanks to $50,000 in donations, the group has commissioned the Trust for Public Land to study the feasibility of several options for structuring a new district and to essentially poll public opinion to see if a measure might pass.
“Another consultant is preparing a budget estimate and studying a nonprofit conservancy option.”
Tuesday, September 21, 2010
Fulfilling Mission
The mission social entrepreneurs embrace when they decide to put their energy and passion towards bettering the world, need not always—though almost always—be fulfilled through nonprofit status.
This article from the Chronicle of Philanthropy blog notes another way.
An excerpt.
“I recently bumped into Debbie Reck, founder and executive director of Writers’ Express, a youth writing program.
“Her organization has had real success with its curriculum and has seen increasing demand for its programs from other markets in recent years.
“Debbie and I have spoken a few times over the past year about the quality of the group's programs and how it has been trying to find the right funding partnerships to help it expand.
“It had relied on a couple of committed funders and some supportive board members. But it had never connected with significant “equity investors” that could provide the capital necessary to help grow and support its infrastructure. As a result, it hadn't yet been able to scale up—to replicate its work on a larger scale.
“When I had last talked to Debbie at the end of 2009, she told me that she felt caught between funders who were asking her to adjust the Writers' Express goals to meet their own funding priorities and private-sector companies that saw real value in Writers’ Express programs. These companies were looking to commoditize the organization's programs for broader distribution.
“Debbie’s goal, though, was simply to hold on to the mission of Writers’ Express—to give all students the power to explore their ideas, the skills to communicate them clearly, and the conviction that the world wants to hear them.
“So when I saw Debbie earlier this month, I was anxious for an update. She explained that after many years of trying to scrape together philanthropic funding to keep Writers' Express moving forward, she had decided to take the private-sector route. She sold most of its programs to a national company, Wireless Generation, which provides tools and services to 200,000 teachers and 3 million students.
“Debbie had moved with the programs to the new company and when I asked her what the decision meant for her, I was struck by the response.
”It’s great," she said. "Finally I can focus on mission."
This article from the Chronicle of Philanthropy blog notes another way.
An excerpt.
“I recently bumped into Debbie Reck, founder and executive director of Writers’ Express, a youth writing program.
“Her organization has had real success with its curriculum and has seen increasing demand for its programs from other markets in recent years.
“Debbie and I have spoken a few times over the past year about the quality of the group's programs and how it has been trying to find the right funding partnerships to help it expand.
“It had relied on a couple of committed funders and some supportive board members. But it had never connected with significant “equity investors” that could provide the capital necessary to help grow and support its infrastructure. As a result, it hadn't yet been able to scale up—to replicate its work on a larger scale.
“When I had last talked to Debbie at the end of 2009, she told me that she felt caught between funders who were asking her to adjust the Writers' Express goals to meet their own funding priorities and private-sector companies that saw real value in Writers’ Express programs. These companies were looking to commoditize the organization's programs for broader distribution.
“Debbie’s goal, though, was simply to hold on to the mission of Writers’ Express—to give all students the power to explore their ideas, the skills to communicate them clearly, and the conviction that the world wants to hear them.
“So when I saw Debbie earlier this month, I was anxious for an update. She explained that after many years of trying to scrape together philanthropic funding to keep Writers' Express moving forward, she had decided to take the private-sector route. She sold most of its programs to a national company, Wireless Generation, which provides tools and services to 200,000 teachers and 3 million students.
“Debbie had moved with the programs to the new company and when I asked her what the decision meant for her, I was struck by the response.
”It’s great," she said. "Finally I can focus on mission."
Tuesday, July 20, 2010
Philanthropy in United Kingdom
Much of what is now happening in the UK in philanthropy has already happened in America, where venture philanthropy and social enterprise have well-established roots.
An excerpt from the Independent article.
“The co-founder of Microsoft, Paul Allen, is planning to give most of his $13.5bn (£8.8bn) fortune to charity after his death, on top of the $1bn he has given away in the past 20 years. Mr Allen revealed his intentions in response to a call in May from fellow Microsoft founder Bill Gates and investment guru Warren Buffett, urging US billionaires to pledge to give away half their wealth.
“British philanthropy took a significant hit from the recession, with total donations down by 11 per cent last year and pledges of £1m or more falling 13 per cent. But if the Gates "giving pledge" was heeded by all of the UK's billionaires, it could yield up to £60bn.
“Even in good times, British philanthropy is a shadow of that in the US, where benefactors are both more upfront about giving, and simply do more of it. However, the situation is changing.
“Theresa Lloyd, an expert adviser on philanthropy, said: "The idea of an obligation to fellow citizens and future generations is very powerful in the US, whereas here it is not. But things are changing, and over the next 10 or 20 years will change even more."
“The character of philanthropy itself is also changing. In 1989 three-quarters of Britain's richest people had inherited their wealth; by 2009 the same proportion had made it themselves. As a result, philanthropy is moving away from traditional trusts and towards a more entrepreneurial approach.
"The division between philanthropy and business is blurring, powered by philanthropists who are self-made and have a very active approach to bringing about social change," said Cheryl Chapman, the managing editor of Philanthropy UK, a government-funded project of the Association of Charitable Foundations.
“One such case is the "Big Give", set up by the Reed Recruitment founder Alec Reed, which links donors to relevant causes and offers match-funding. Another is the Fifteen Foundation, set up by Jamie Oliver in 2002 to train other chefs from disadvantaged backgrounds. Charities themselves are approaching fund-raising with a different attitude. The disability organisation, Scope, launched Britain's first private equity-style financing for the voluntary sector last month, under which donations of £1,750 and a three-year loan of £7,000 can be ramped up to £18,000.
“An industry is also developing to help potential philanthropists ensure their donations are as effective as possible. New Philanthropy Capital, a think tank and advisory service, was set up by two former Goldman Sachs partners who spotted that the mass of data available to mainstream investors had no parallel in the third sector. And Coutts, the private bank, has recently launched an advice service for clients wanting to get involved with social enterprises.
“The rise of self-made wealth is also boosting interest in education projects, says Salvatore LaSpada, the chief executive of the Institute for Philanthropy. "Many of our great entrepreneurs came from humble backgrounds and want to use their wealth to create opportunities for people coming behind them," he said.”
An excerpt from the Independent article.
“The co-founder of Microsoft, Paul Allen, is planning to give most of his $13.5bn (£8.8bn) fortune to charity after his death, on top of the $1bn he has given away in the past 20 years. Mr Allen revealed his intentions in response to a call in May from fellow Microsoft founder Bill Gates and investment guru Warren Buffett, urging US billionaires to pledge to give away half their wealth.
“British philanthropy took a significant hit from the recession, with total donations down by 11 per cent last year and pledges of £1m or more falling 13 per cent. But if the Gates "giving pledge" was heeded by all of the UK's billionaires, it could yield up to £60bn.
“Even in good times, British philanthropy is a shadow of that in the US, where benefactors are both more upfront about giving, and simply do more of it. However, the situation is changing.
“Theresa Lloyd, an expert adviser on philanthropy, said: "The idea of an obligation to fellow citizens and future generations is very powerful in the US, whereas here it is not. But things are changing, and over the next 10 or 20 years will change even more."
“The character of philanthropy itself is also changing. In 1989 three-quarters of Britain's richest people had inherited their wealth; by 2009 the same proportion had made it themselves. As a result, philanthropy is moving away from traditional trusts and towards a more entrepreneurial approach.
"The division between philanthropy and business is blurring, powered by philanthropists who are self-made and have a very active approach to bringing about social change," said Cheryl Chapman, the managing editor of Philanthropy UK, a government-funded project of the Association of Charitable Foundations.
“One such case is the "Big Give", set up by the Reed Recruitment founder Alec Reed, which links donors to relevant causes and offers match-funding. Another is the Fifteen Foundation, set up by Jamie Oliver in 2002 to train other chefs from disadvantaged backgrounds. Charities themselves are approaching fund-raising with a different attitude. The disability organisation, Scope, launched Britain's first private equity-style financing for the voluntary sector last month, under which donations of £1,750 and a three-year loan of £7,000 can be ramped up to £18,000.
“An industry is also developing to help potential philanthropists ensure their donations are as effective as possible. New Philanthropy Capital, a think tank and advisory service, was set up by two former Goldman Sachs partners who spotted that the mass of data available to mainstream investors had no parallel in the third sector. And Coutts, the private bank, has recently launched an advice service for clients wanting to get involved with social enterprises.
“The rise of self-made wealth is also boosting interest in education projects, says Salvatore LaSpada, the chief executive of the Institute for Philanthropy. "Many of our great entrepreneurs came from humble backgrounds and want to use their wealth to create opportunities for people coming behind them," he said.”
Sunday, June 20, 2010
Local Nonprofit & Social Enterprise
It is always encouraging when grassroots nonprofits (as has this program helping families without fathers) develop a social enterprise capability—the Social Enterprise Alliance has great expertise in the field—reported by the Sacramento Business Journal.
An excerpt.
“St. John’s Shelter Program for Women & Children, a Sacramento shelter for homeless women with children, is launching a restaurant and catering service next week.
“Plates Cafe and Catering Project is scheduled to open June 23 in the Depot Park industrial complex at Florin-Perkins and Fruitridge roads in Sacramento, St. John’s executive director Michele Steeb said.
“Plates Cafe will serve breakfast and lunch Monday though Friday, as the only on-site food-service provider for the 2,500 workers at the industrial park. Catering services will start later.
“The cafe and catering service will provide employment to women being served by St. John’s while training them for careers in food service, catering, retail and hospitality, according to a program summary. The goal is to prepare these women with children for industries that tend to offer flexible work schedules, and help them become self-sufficient.
“Simultaneously, Plates will generate funds for St. John’s.”
An excerpt.
“St. John’s Shelter Program for Women & Children, a Sacramento shelter for homeless women with children, is launching a restaurant and catering service next week.
“Plates Cafe and Catering Project is scheduled to open June 23 in the Depot Park industrial complex at Florin-Perkins and Fruitridge roads in Sacramento, St. John’s executive director Michele Steeb said.
“Plates Cafe will serve breakfast and lunch Monday though Friday, as the only on-site food-service provider for the 2,500 workers at the industrial park. Catering services will start later.
“The cafe and catering service will provide employment to women being served by St. John’s while training them for careers in food service, catering, retail and hospitality, according to a program summary. The goal is to prepare these women with children for industries that tend to offer flexible work schedules, and help them become self-sufficient.
“Simultaneously, Plates will generate funds for St. John’s.”
Wednesday, June 16, 2010
Cause Marketing
Many nonprofits use this format to reach people, and done well, it is a very good thing, but done to excess, it is a very bad thing.
This post from the Advertising Age blog looks at that.
An excerpt.
“Those of us engaged in cause branding in 2010 can't conceive of its demise. But as true believers, we also must avoid being naive about practices that can erode its effectiveness as a brand builder and a vehicle for societal change. A recent unscientific poll conducted here on AdAge.com asked for our collective opinions about whether or not cause marketing was doomed because of overexposure to the consumer. A wide margin of those who responded said consumer fatigue was going to happen. Are they right, or were they just the usual vocal minority of people who find it easy to criticize without offering suggestions?
“What I do believe consumers will grow tired of are product promotions that masquerade as cause marketing programs. Product promotions are designed to do one thing: Sell products. Simply adding a donation from the sales proceeds doesn't qualify as real cause branding anymore. Cause has to be about engaging the consumer beyond the sale of one product. Companies need to demonstrate that they care about the cause every day, not just the day of the transaction.
“Likewise, nonprofits need to be mindful of the types of corporate partnerships they pursue. While the money from a purely transactional cause-marketing program may be tempting, nonprofits should make sure the partnership makes sense. Is there a natural tie between the corporation and the nonprofit, or is it forced? Will the consumer remember anything about the cause once the promotion ends? And what will the money being donated specifically fund?
“When cause marketing is done well, no explanation is needed. The partnership instantly makes sense. The consumer is engaged repeatedly throughout the year. And everyone knows where the money is going and what it will accomplish. The true power and reach of cause marketing is missed if companies are simply slapping a nonprofit logo on a consumer product and thinking the consumer will remember them after the transaction is over.”
This post from the Advertising Age blog looks at that.
An excerpt.
“Those of us engaged in cause branding in 2010 can't conceive of its demise. But as true believers, we also must avoid being naive about practices that can erode its effectiveness as a brand builder and a vehicle for societal change. A recent unscientific poll conducted here on AdAge.com asked for our collective opinions about whether or not cause marketing was doomed because of overexposure to the consumer. A wide margin of those who responded said consumer fatigue was going to happen. Are they right, or were they just the usual vocal minority of people who find it easy to criticize without offering suggestions?
“What I do believe consumers will grow tired of are product promotions that masquerade as cause marketing programs. Product promotions are designed to do one thing: Sell products. Simply adding a donation from the sales proceeds doesn't qualify as real cause branding anymore. Cause has to be about engaging the consumer beyond the sale of one product. Companies need to demonstrate that they care about the cause every day, not just the day of the transaction.
“Likewise, nonprofits need to be mindful of the types of corporate partnerships they pursue. While the money from a purely transactional cause-marketing program may be tempting, nonprofits should make sure the partnership makes sense. Is there a natural tie between the corporation and the nonprofit, or is it forced? Will the consumer remember anything about the cause once the promotion ends? And what will the money being donated specifically fund?
“When cause marketing is done well, no explanation is needed. The partnership instantly makes sense. The consumer is engaged repeatedly throughout the year. And everyone knows where the money is going and what it will accomplish. The true power and reach of cause marketing is missed if companies are simply slapping a nonprofit logo on a consumer product and thinking the consumer will remember them after the transaction is over.”
Saturday, May 1, 2010
Benefit Corporation
A new form of corporate structure is emerging which allows a for profit organization to define its mission within its work, an interesting idea, as reported by Business Week.
An excerpt.
“Maryland today became the first state to legally create a new corporate form known as a “benefit corporation” that will let social entrepreneurs codify their missions in their corporate charters.
“The law is modeled on proposals by B-Lab, a Berwyn, Pa.-nonprofit that certifies socially responsible companies. The law lets entrepreneurs commit their for-profit ventures to a specific public good, and requires them to report on contributions to that goal and submit to auditing of their impact. Having official “benefit corporation” status allows entrepreneurs to consider stakeholders like employees, communities, or the environment in business decisions. Under existing corporate law, company directors can face lawsuits if considering outside stakeholders is seen to damage the financial interest of shareholders.
“We wrote nearly a year ago on the difficulty social entrepreneurs have fitting their hybrid missions of making money and doing good into existing corporate forms. The tangled arrangements they get into (nonprofits controlling for-profits, etc.) can be costly to set up and limit their ability to raise money from outside investors. Adopting the “benefit corporation” form signals that our economic institutions — in this case the laws that govern corporations — are catching up with the growing interest in the social enterprise sector. (This was one of two big ideas on my radar this year.) “If you care about accelerating the development of this emerging marketplace, the first step is providing the legal infrastructure,” Jay Coen Gilbert, one of the co-founders of B-Lab, told me last week.”
An excerpt.
“Maryland today became the first state to legally create a new corporate form known as a “benefit corporation” that will let social entrepreneurs codify their missions in their corporate charters.
“The law is modeled on proposals by B-Lab, a Berwyn, Pa.-nonprofit that certifies socially responsible companies. The law lets entrepreneurs commit their for-profit ventures to a specific public good, and requires them to report on contributions to that goal and submit to auditing of their impact. Having official “benefit corporation” status allows entrepreneurs to consider stakeholders like employees, communities, or the environment in business decisions. Under existing corporate law, company directors can face lawsuits if considering outside stakeholders is seen to damage the financial interest of shareholders.
“We wrote nearly a year ago on the difficulty social entrepreneurs have fitting their hybrid missions of making money and doing good into existing corporate forms. The tangled arrangements they get into (nonprofits controlling for-profits, etc.) can be costly to set up and limit their ability to raise money from outside investors. Adopting the “benefit corporation” form signals that our economic institutions — in this case the laws that govern corporations — are catching up with the growing interest in the social enterprise sector. (This was one of two big ideas on my radar this year.) “If you care about accelerating the development of this emerging marketplace, the first step is providing the legal infrastructure,” Jay Coen Gilbert, one of the co-founders of B-Lab, told me last week.”
Sunday, April 25, 2010
Innovative Social Enterprise
A story from Springwise about a company that has found a creative way to use old fire hoses and make some money for nonprofits in the process.
An excerpt.
“Back in 2006 we covered German Feuerwear, which creates bags and belts from used fire hose. Feuerwear is still going strong, but we couldn't resist mentioning a similar venture we recently came across in the UK that expands the notion and adds a charitable twist.
“Much like Feuerwear, Elvis & Kresse crafts high-fashion bags, belts and other accessories from used fire hose collected across the UK. The company also goes beyond fire hose, however, and reclaims various types of other industrial waste materials as well, including coffee sacks, sail cloth, air traffic control flight strips, optician's boxes, parachute silk and office furniture textiles. Fabrics including the parachute silk, for example, are used to line Elvis & Kresse's wallets and bags; many of the other materials are used in its packaging. The company has reclaimed some 45 tons of waste materials so far, it says. Elvis & Kresse donates 50 percent of the profits from its fire-hose line to the Fire Fighters Charity. It's also supporting two separate coffee grower initiatives in Nicaragua and Guatemala. Elvis & Kresse items are available both online and from select retailers in England, Wales, France, the Netherlands, Switzerland, Hong Kong and Australia; pricing begins at GBP 18.50 for a fire hose-based key ring.”
An excerpt.
“Back in 2006 we covered German Feuerwear, which creates bags and belts from used fire hose. Feuerwear is still going strong, but we couldn't resist mentioning a similar venture we recently came across in the UK that expands the notion and adds a charitable twist.
“Much like Feuerwear, Elvis & Kresse crafts high-fashion bags, belts and other accessories from used fire hose collected across the UK. The company also goes beyond fire hose, however, and reclaims various types of other industrial waste materials as well, including coffee sacks, sail cloth, air traffic control flight strips, optician's boxes, parachute silk and office furniture textiles. Fabrics including the parachute silk, for example, are used to line Elvis & Kresse's wallets and bags; many of the other materials are used in its packaging. The company has reclaimed some 45 tons of waste materials so far, it says. Elvis & Kresse donates 50 percent of the profits from its fire-hose line to the Fire Fighters Charity. It's also supporting two separate coffee grower initiatives in Nicaragua and Guatemala. Elvis & Kresse items are available both online and from select retailers in England, Wales, France, the Netherlands, Switzerland, Hong Kong and Australia; pricing begins at GBP 18.50 for a fire hose-based key ring.”
Wednesday, April 21, 2010
Nonprofit Business Statements
A very good reminder that there is a lot about our work in the nonprofit sector that often relys on thinking like a business, from Blue Avacado.
An excerpt.
“Although every nonprofit has a mission statement that defines the organization's core purpose and work, many are unaware of its useful companion, the business model statement: a brief summary that spells out the organization's economic drivers. Like a mission statement, a business model statement acts as a touchstone: a reminder and a guide for the organization's focus and strategies.
“Nonprofit executives and board members usually have a good sense of the various types of funding that support the organization, but they may have a harder time explaining the organization's business model. Let's imagine a childcare center with the following mission statement: "We provide high quality child care in a cross-cultural setting." A first draft of their business model statement might read: "Our funding comes from government, parent fees, and fundraising."
“This statement lists all the types of funding, but doesn't speak to the strategy for financial sustainability of the center. A second draft may come out this way: "We provide high quality child care for children with diverse racial, cultural and economic backgrounds, by combining government subsidies for low-income children with full-pay tuitions, supplemented with some parent fundraising."
“Although this statement lacks graceful wording, it does explain the organization's strategy for financial sustainability, and it links that financial strategy with its program strategy. While mission statements are meant to be external messages as well as internal guides, a business model statement is primarily for internal use.
“A Latino theater offers another example of a business model statement: Their first draft stated, "We produce plays and conduct youth workshops, sustained through a mixture of ticket sales, foundation grants, workshop fees, and an annual benefit."
“Similar to the childcare center's model, this descriptive statement contains all the elements of the business model -- the methods by which the organization accomplishes its mission and generates revenue. But while it lists the programs and revenue streams, it's not specific about the drivers for either the programs or finances. The business model statement should help focus the leadership's attention on what keeps this organization sustainable. A more focused business model statement was developed: "We produce Spanish and English plays supported by ticket sales and foundation grants, and supplemented by net income from youth workshops and an annual gala."
An excerpt.
“Although every nonprofit has a mission statement that defines the organization's core purpose and work, many are unaware of its useful companion, the business model statement: a brief summary that spells out the organization's economic drivers. Like a mission statement, a business model statement acts as a touchstone: a reminder and a guide for the organization's focus and strategies.
“Nonprofit executives and board members usually have a good sense of the various types of funding that support the organization, but they may have a harder time explaining the organization's business model. Let's imagine a childcare center with the following mission statement: "We provide high quality child care in a cross-cultural setting." A first draft of their business model statement might read: "Our funding comes from government, parent fees, and fundraising."
“This statement lists all the types of funding, but doesn't speak to the strategy for financial sustainability of the center. A second draft may come out this way: "We provide high quality child care for children with diverse racial, cultural and economic backgrounds, by combining government subsidies for low-income children with full-pay tuitions, supplemented with some parent fundraising."
“Although this statement lacks graceful wording, it does explain the organization's strategy for financial sustainability, and it links that financial strategy with its program strategy. While mission statements are meant to be external messages as well as internal guides, a business model statement is primarily for internal use.
“A Latino theater offers another example of a business model statement: Their first draft stated, "We produce plays and conduct youth workshops, sustained through a mixture of ticket sales, foundation grants, workshop fees, and an annual benefit."
“Similar to the childcare center's model, this descriptive statement contains all the elements of the business model -- the methods by which the organization accomplishes its mission and generates revenue. But while it lists the programs and revenue streams, it's not specific about the drivers for either the programs or finances. The business model statement should help focus the leadership's attention on what keeps this organization sustainable. A more focused business model statement was developed: "We produce Spanish and English plays supported by ticket sales and foundation grants, and supplemented by net income from youth workshops and an annual gala."
Sunday, March 21, 2010
Social Entrepreneurship
This story of a successful capitalist and his subsequent social entrepreneurship is a great reminder of the inner goodness that has come to define much of the world of American capitalism, and that is a very good thing.
An excerpt from the article from Philanthropy Magazine.
“Patrick Byrne is an entrepreneur—a self-described “rapacious capitalist.” His father, John J. Byrne, turned around auto-insurance giant GEICO. While he did, Warren Buffett began accumulating its stock, eventually purchasing the entire company. In the process, Mr. Buffett met 13-year-old Patrick, and he became what Mr. Byrne describes as “one of his life’s great teachers.” While a teenager, Mr. Byrne started his first business. He bought a wholesale lot of 500 pine trees—paying $8 each—and retailed them at Christmastime for $28 apiece.
“Mr. Byrne went on to Dartmouth College, where he earned his B.A. in philosophy and Asian studies. He won a Marshall Scholarship and received a master’s degree from Cambridge University. After picking up a certificate from Beijing Normal University, he returned to the States and earned a Ph.D. in philosophy from Stanford University. While in his 20s, he also pursued his dream of becoming a heavyweight boxer.
“Everything was put on hold when cancer struck. Mr. Byrne fought back, beating the disease three times. Afterward, he re-focused his energies on business, eventually serving as chairman, president, and CEO at Centricut, a manufacturer of industrial torch consumables, and later at Fechheimer Brothers, a Berkshire Hathaway–owned manufacturer of police, firefighter, and military uniforms.
“In 1999, Mr. Byrne bought a small, bankrupt firm that had been serving the flea-market industry. Four months later, he relaunched it as Overstock.com, an online retailer specializing in the discount liquidation of overstocked inventory. Under his leadership as chairman and CEO, the company’s annual revenues have soared, from $1.8 million a decade ago to approximately $900 million today. Mr. Byrne’s success in business has allowed him to support causes that create similar opportunities for others.
“Mr. Byrne works to reform American education through his service as chairman of the Friedman Foundation for Educational Choice. Founded by the late Nobel Prize–winning economist Milton Friedman and his wife, Rose, the Friedman Foundation is the nation’s original advocate of school choice.
“Mr. Byrne also works extensively in the field of international development. In 2001, he launched Worldstock, a store within Overstock that sells handcrafted products from artisans in the developing world. An average of 60 percent of the sales price is passed back to the suppliers, generating more than $40 million to date for more than 10,000 craftsmen in the developing world.
“Since 2005, Mr. Byrne has built 22 private schools throughout Africa, India, Asia, and Latin America, all of which are structured around a profit-making enterprise to sustain their ongoing operations. Each of the schools is named for his mother, Dorothy Byrne. They have educated more than 7,000 students worldwide.
“Philanthropy spoke with Mr. Byrne about his background in developing countries, his work on behalf of school choice, and his use of for-profit entities to achieve charitable ends.”
An excerpt from the article from Philanthropy Magazine.
“Patrick Byrne is an entrepreneur—a self-described “rapacious capitalist.” His father, John J. Byrne, turned around auto-insurance giant GEICO. While he did, Warren Buffett began accumulating its stock, eventually purchasing the entire company. In the process, Mr. Buffett met 13-year-old Patrick, and he became what Mr. Byrne describes as “one of his life’s great teachers.” While a teenager, Mr. Byrne started his first business. He bought a wholesale lot of 500 pine trees—paying $8 each—and retailed them at Christmastime for $28 apiece.
“Mr. Byrne went on to Dartmouth College, where he earned his B.A. in philosophy and Asian studies. He won a Marshall Scholarship and received a master’s degree from Cambridge University. After picking up a certificate from Beijing Normal University, he returned to the States and earned a Ph.D. in philosophy from Stanford University. While in his 20s, he also pursued his dream of becoming a heavyweight boxer.
“Everything was put on hold when cancer struck. Mr. Byrne fought back, beating the disease three times. Afterward, he re-focused his energies on business, eventually serving as chairman, president, and CEO at Centricut, a manufacturer of industrial torch consumables, and later at Fechheimer Brothers, a Berkshire Hathaway–owned manufacturer of police, firefighter, and military uniforms.
“In 1999, Mr. Byrne bought a small, bankrupt firm that had been serving the flea-market industry. Four months later, he relaunched it as Overstock.com, an online retailer specializing in the discount liquidation of overstocked inventory. Under his leadership as chairman and CEO, the company’s annual revenues have soared, from $1.8 million a decade ago to approximately $900 million today. Mr. Byrne’s success in business has allowed him to support causes that create similar opportunities for others.
“Mr. Byrne works to reform American education through his service as chairman of the Friedman Foundation for Educational Choice. Founded by the late Nobel Prize–winning economist Milton Friedman and his wife, Rose, the Friedman Foundation is the nation’s original advocate of school choice.
“Mr. Byrne also works extensively in the field of international development. In 2001, he launched Worldstock, a store within Overstock that sells handcrafted products from artisans in the developing world. An average of 60 percent of the sales price is passed back to the suppliers, generating more than $40 million to date for more than 10,000 craftsmen in the developing world.
“Since 2005, Mr. Byrne has built 22 private schools throughout Africa, India, Asia, and Latin America, all of which are structured around a profit-making enterprise to sustain their ongoing operations. Each of the schools is named for his mother, Dorothy Byrne. They have educated more than 7,000 students worldwide.
“Philanthropy spoke with Mr. Byrne about his background in developing countries, his work on behalf of school choice, and his use of for-profit entities to achieve charitable ends.”
Subscribe to:
Posts (Atom)
