Making Philanthropy More Business-Like is a Big Mistake

By Larry Kramer, President, The William and Flora Hewlett Foundation

November 7, 2019

This post first appeared on India Development Review and has been reshared from The Center for Effective Philanthropy.

A lot of people today talk about how philanthropy needs to be more business-like, about how we need to incorporate principles from the for-profit business sector into the nonprofit and traditional grantmaking sector. I think that is a big mistake, and I urge you to take care before doing it.

1. People

The people who come into our sector — whether in foundations or in the kind of nonprofits that foundations fund — come with passion for the work, they care about the issues we work on, and care enough to make the financial and other sacrifices the work requires.

To manage them in the same manner you would manage someone in the for-profit world, where the culture and motivations attract people who want to move up the hierarchy and earn a higher salary, is a mistake. The people in these different sectors are different, they come for different reasons, look for different rewards, and should be managed in ways that acknowledge these profound differences.

2. Measure of success

In the for-profit world, there is a single metric for success, everyone agrees on what it is, and it’s easily measured and tracked. It’s simple to know when you are doing well and when you are not, and it’s the same metric and measure for every business.

That’s simply not true for the vast bulk of work in the nonprofit sector. So much of the impact we are trying to achieve is not easily quantifiable; it’s complex. And if you are an organization like us — working across several different fields — what success looks like is incommensurable from one body of work to the next.

3. Competition

In the business sector, the success of your business organization necessarily comes at the expense of your competitors. Whereas in philanthropy, I’m not trying to outdo other foundations, or maximize the glory of the Hewlett Foundation. It’s exactly the opposite: I’m trying to develop and be part of ecosystems of organizations, including other funders with whom I want to partner, in ways that will help achieve solutions to social problems or help improve everyone’s social good. It’s a profound difference at precisely the level where business principles could matter: me with everyone else is not me versus everyone else.

Read the entire article on the Center for Independent Philanthropy’s website. If you’re interested in ways The Alliance to develop or refine your strategic philanthropy, send us an email at person@alliancems.fahrenheitcreative.com or call (601) 968-0061.

Obviously, there are things that overlap. We all want to manage well, we all want our organizations to be efficient and operate appropriately. But those aren’t business principles as such. They are just good practices for running an organization in any sector or endeavor.

For-profit and nonprofit organizations work in different ways, on different problems, toward different goals — and those differences matter. Here are a few things I think are important as distinguishing features:

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