Trends in Philanthropy

There’s more than one way to change the world

March 04 2014

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By Mark Brewer, Foundation President/CEO

More than 100 independent sector executives and board members attended the recent Trends in Philanthropy event at the Orlando Museum of Art to explore two of the more burning questions on the minds of nonprofit leaders. They are both rooted in the simplicity of the sector’s structures and passion for mission. The first question is hard to ask: How can I prevent fraud from destroying my organization? The second question is hard to understand: Is there a better structure to achieve our mission than a tax-exempt 501(c) 3 status? In many quarters neither question has ever be asked.

In a sector where the social problems organizations are trying to solve are much bigger than they are, there is a clear angst about just how sophisticated the solutions should be. Will donors and other charitable investors be open to the cost of more and better administration? Moreover, the very entrepreneurial nature of nonprofit organizations sometime causes them to oversimplify the capacity needs of the organization. The dichotomy here is that as stock market investors, we rarely invest in companies because of the products they currently have on the market. Instead, we want to invest in companies run by people who have the capacity to continue to produce products that will sell in the future. However, when we have our charitable giving hats on we too often want to “fund” only current programs, leaving the organizations that provide the programs to wither on the vine. “Overhead” is a dirty word in the nonprofit sector.

Lynda Dennis opened the Trends in Philanthropy event with a discussion on the growing problem of fraud in the nonprofit sector. The UCF professor provided compelling reasons why board members and professional staffs should be paying closer attention, and why financial oversight should be part of every organization’s operational strategy. As she made the case, the mood in the room clearly indicated the difficulty leaders have with this problem. Everybody wants to prevent it, many don’t think it can happen to them, and some don’t want to talk about it because when it happens, it can destroy reputations and taint the entire sector. Dr. Dennis provided clear rational for investing in the prevention of fraud and providing the transparency that makes fraud tougher to hide. She also set the stage for thinking more about the intricacies of the “business models” used by nonprofits. One reason fraud is so easy to hide is the simplicity of many nonprofit operational models. Saving money here could ultimately be a “penny wise and pound foolish” proposition as more donors and funders question the credibility of the sector. Just days after the event, scholar Mark Rosenman, in an opinion piece called “Dishonesty by People in Positions of Trust is Eroding Public Confidence” in The Chronicle of Philanthropy, called for nonprofit sector executives to take leadership in holding all nonprofits accountable.

I had the honor of presenting a short session on Hybrid Organizations and introducing a panel of all-star nonprofit CEOs who are on the cutting edge of changing business models in the sector. (Click here for the presentation.) Hybrids are becoming the “flavor of the month” in sector journals and around tables where younger social entrepreneurs sit. However, they are really the natural product of social entrepreneurial approaches to the business of social change.

Contrary to the popular belief in the private sector, social entrepreneurialism was actually born in the independent sector as nonprofit CEOs wrestled with more sustainable revenue streams and better ways to measure results. The private sector stepped in as younger entrepreneurs starting for-profit businesses began putting as much focus on the social outcomes of the business as traditional entrepreneurs do on the balance sheet. Now, as more states look for ways to incentivize this kind of economic development, there are new kinds of business entities available. From B-corps to L3C’s that can accept capital from both the private sector and the nonprofit sector, social entrepreneurs now have a growing inventory of structures to house their social change platforms.

The panel, made up of Glen Casel, CEO at Community Based Care of Central Florida, Carol Wick, CEO at Harbor House of Central Florida, and Julie Colombino, CEO at REBUILD Globally represented a large complex organization that changed their business model to better fund the root causes of their mission, a small entrepreneur who needed a strategy to create sustainable change in Haiti, and an organization that has a history of providing services to victims of domestic violence. All are on a journey to make their organizations more (socially) entrepreneurial and to find the right mix of revenues and investment capital to get to the big solution goals they have taken on.

As funders, philanthropists, and a new generation of independent sector leaders think through how to apply entrepreneurial strategies to social problems big and small, a new paradigm is emerging for us all to move toward better-defined strategies to move the needle in human services, the arts, education, healthcare, and civic agendas. This is a great time to be a social entrepreneur, a philanthropic investor, or part of an organization with a mission to take on the big issues!

The Central Florida Foundation is the place to get engaged. Whether you are interesting in a giving strategy that promotes entrepreneurial strategies for issues you care about or a nonprofit using these strategies to make a difference, the Foundation can help you learn and connect to people with the same interests.

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