A force for good - Part 3
In this post I'm going to talk about tip number 2 for high impact nonprofits: make markets work.
I want to start off by reviewing the definition of a nonprofit. Many people mistakenly think that being a nonprofit means that you cannot make money, pay employees, or sell goods and services. This is totally WRONG. Almost any functioning organization requires a revenue stream and paid employees. The difference between nonprofits and for-profits has to do with ownership. For-profit companies have shareholders, whereas nonprofits do not have shareholders or owners. This is why nonprofits can never have investors that end up owning equity - there is no equity to own! This is also why nonprofits never pay dividends - all profits are recycled back into the company, and plus, there are no shareholders to pay dividends to!
The nonprofit and for profit sectors are often perceived as opposing forces, with the former striving for social change and the latter focused on their bottom line. However, this perception can isolate nonprofits from an important source of financial and political support. The authors of "Forces for Good" argue that the most successful nonprofits treat for profit companies as partners and important resources for growth.
Partnering is different from seeking corporate donations. The model nonprofits in the book did not simply look for handouts from companies. Instead, they found unique opportunities to establish mutual partnerships. For example, one of the nonprofits partnered with American Express and several retail companies to raise money for hunger alleviation. By licensing their logo for other companies to use on their products, they raised awareness for their cause, and through their partnership with American Express, they ended up raising.
The authors also suggest taking advantage of capitalistic incentives to raise funds. Charities often rely on the altruism of their donors for financial support, but personal gain is usually a much stronger incentive for consumers. By combining altruism with consumer incentives, nonprofits can leverage a lot of resources.
As a thought experiment, imagine you want to buy a blanket, and you're deciding between two blankets from two different brands that are identical across all measures. However, if you buy the first blanket, a mosquito net is donated to a family in a low-income country. Personally, I don't see a reason NOT to choose the first blanket over the second one. This relates back to strategically partnering with businesses.
Another option for nonprofits is to run a business that generates revenue from charging for a product or service. Many large nonprofits have a for-profit arm that is responsible for a sizable share of their revenue. Others may sell a certain product to well-off consumers, and use those profits to fund the production of a modified product that will be donated to underprivileged populations. The main idea is that consumer demand is a powerful force, and nonprofits are missing out if they don't take advantage of this.
Nonprofits can also increase their impact by "consulting" for for-profit companies. Often, the corporate sector has a great influence on the work of non-profits, so getting involved in the business operations of corporations can yield great benefits. In the book, the authors mention an environmental preservation nonprofit that worked with McDonalds to reduce their environmental footprint. Each year, McDonalds produced tons of waste in the form of styrofoam, paper, and plastic. This environmental nonprofit worked with McDonalds to analyze the inefficiencies in their supply chain that, if resolved, would lead to lower costs and a smaller environmental footprint. They ultimately ended up convincing McDonalds to ditch the syrofoam, and instead use recycled paper containers and napkins, resulting in a huge reduction in environmental and financial costs.
Imagine if the environmental nonprofit had never considered partnering with for-profit corporations. They would have missed out on a huge opportunity to further their cause. The authors emphasize that it is important to not alienate or "other" the for-profit industry, because a good strategic partnership can go a long way.
How RB is applying this already
We have recently developed a prototype for reusable menstrual pads. While the original goal was to hand over these pads (as well as the instruction sheet for how to make them) to our community constituents in Bolivia, we are now thinking about how we can leverage market forces to turn this into a social entrepreneurship business model.
Admittedly, this is a new idea, which means that we have not seriously thought about leveraging market forces before. We can learn a lot from this tip...
What RB can learn from this advice
A lot. The reusable pads will hopefully prove to be a good starting point to help us gain experience leveraging market forces. We also need to rethink the way we approach corporate fundraising. Previously, we have tried to partner with corporations to get them to match donations or donate a portion of their sales revenue. These are not strategic partnerships; they're us looking for handouts basically. I think that thinking a bit harder about how we can establish mutual partnerships that equally benefit both parties will be the key to unleashing the power of corporate collaborations.