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Should the People With the "Power and the Bucks" Lead Nonprofit Change?

By Mario Morino    | May 29, 2007

Mario Morino

A Discussion Between Paul Shoemaker and Mario Morino... Paul Shoemaker ended his recent post with a great point to which I first pose a consideration and then ask a question.

He said, "I don't think we are going to see true, significant systemic changes in the nonprofit economy unless the funders, the philanthropists, the people with the "power and the bucks" lead the change."

The consideration: I find it disconcerting and potentially exclusionary to think that it will be those of us with the financial resources who will lead the change, for it implies that we fully understand the problems, values, and needs of those we seek to benefit and for the world we imply to create. Sadly, I believe America is a remarkably divided and balkanized society - more so than at any time in my lifetime. I hope, that as "we" come up with the answers to society's problems, we do not inadvertently ordain ourselves as the social engineers with the sole right to define the future of our communities and society.

The question: What force or factor will cause or trigger the change in the funders, the philanthropists, the people with the "power and the bucks" to lead the change? I strongly believe that change is grounded in a cause-and-effect basis. A wise individual shared that true change doesn't occur until what you are used to in your life changes. Things like marriage, birth, death, loss of a job, merger, acquisition, bankruptcy, etc. Profound change is generally the result of a radical event - sometimes obvious, sometimes gradual and pervasive, but nonetheless, just as potent.

I struggle with what power, what changing force will trigger this cross-section of our society to deal with the intractable social challenges that so many before - who were very wise and/or of wealth - never achieved. What will be that trigger to cause the tipping point? Some believe it is the existence of having real outcomes to demonstrate the effectiveness and yields for societal benefit. I don't. Some believe it lies with revamping the financial integrity and reporting so that donors will be less afraid their money is wasted or misused. I don't. Some believe there is a changing psyche of the millennia that will drive change. And, so forth.

It is the absence of this "trigger" that keeps me awake at night. As so many note, we have the resources today to eliminate hunger in America, to totally replace and improve our school systems, to send every kid to college, to ensure immunizations and basic healthcare to every child in the nation - but we don't. Imagine the incongruity of the Bay area or Washington, DC, where lavish parties costing hundreds of thousands, even millions of dollars, occur while within miles kids are dying. We experienced the enormous travesty of Katrina, which unveiled the plight of those in poverty and, many believe, the deep racial divide that continues to affect the nation. I have seen some great efforts come of this, but it might be interesting to understand how little this traumatic event "moved the needle" for those in emerging wealth today. What then keeps us from doing so? Because Paul's right, we do have that power.

I believe that those with the dollars can influence great change and have long maintained that if the opportunity indeed exists, it will be acted on by emerging wealth (those who have recently earned it or those who received it via intergenerational transfers). But, I've had my wings clipped too many times, and candidly justifiably so, by people who have labored with these issues and challenges for many years. The conclusion I've come to - with no basis of fact to underpin it - is that our biggest challenge lies in "finding common ground to achieve common good."

We hope you'll weigh in on this debate and let us know what you think by leaving comments about your thoughts and experiences.


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Note: the preceding was drawn from a private exchange between Paul Shoemaker and Mario Morino. Although not originally intended for a public audience, the idea of posting this exchange was suggested by an interested party who was "listening in."

Part I: Scaling and Growing Nonprofits
By Paul Shoemaker

Part II: Rethinking Nonprofit Scaling: Should Our Focus Be On Growth?
By Mario Morino

Part III: Calling on Funders to Lead Change
By Paul Shoemaker

Part IV: Should the People With the "Power and the Bucks" Lead Nonprofit Change?
By Mario Morino

May 29, 2007 |Tags: nonprofit funding, nonprofit growth, nonprofit management, social entrepreneur | TrackBack

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Comments

Thanks Mario and Paul for a lively and thought provoking exchange. One of the problems in our discussions of the nonprofit sector is that we assume a level of homogeneity that in fact does not exist. Just as we have enormous diversity in profit making enterprises, so too in nonprofits. In business we have family owned, small shops and large conglomerates. We have poorly managed and well managed shops. We have limited infrastructure for management training in most business sectors. All this is true for nonprofits as well. The critical difference in the two sectors is how they are capitalized. Nonprofits are conditioned by funding streams that, by their nature, distort the system. The recipient of the service is rarely the one that pays for the service. The recipient is not able to exert the pressure that consumers of a product or service in the private marketplace can apply. The incentives are all wrong. One way to think about change is to place more power in the hands of recipients themselves through smart card payment systems for nonprofit services. Imagine what might happen if recipients actually could make choices about what's good for them...

Another issue is the high transaction costs to the nonprofit for every dollar received through grants and contributions. The process of applying for grants and conducting fund drives accounts for a substantial portion of the staff time in nonprofit organizations. The effort takes away from the primary mission and is inherently inefficient. It is not that nonprofits are less efficient, it is that the structure of nonprofit capital markets is highly inefficient. What if we funders were honest about our role? We now confuse our role as investors in social R&D with our role as bankers and financiers for the sector. What we need is a mechanism to capitalize the sector that operates more like a bank -- with lower transaction costs and shorter cycle time, that nonprofits can approach for operating funds. We could establish a pooled fund, in essence taxing a small % of foundation assets, to establish a nonprofit finance institution.

Posted by: Barbara Dyer on June 1, 2007 at 5:34 PM

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