Are Nonprofits Getting in the Way of Social Change?

Almost a billion people go to bed hungry every night yet the World Food Program believes that the existing knowledge, tools, and policies, combined with political will, can solve this problem. In 2008, Cornell’s academic staff identified sufficient education in science, critical thinking, and environmental issues; the epidemic of preventable illnesses in the third world; inequitable access to health care; and the shortage of potable and clean water as some the world’s most important problems that are also most easily solved.

While many important socio-economic and environmental problems remain intractable, a combination of increased awareness, new technology, adequate funding, and more collaboration among corporations, civil society, and governments has created a context where effective social change is possible.

The evidence that meaningful change is within our reach is galvanizing changemakers in all sectors. It is also causing us to have very different expectations of nonprofits—the groups that we have seen until recently as the primary catalysts for social change. Today, transformational social change is happening in many ways through the actions of many people, and some of the world’s most important funders have become impatient with the status quo in the nonprofit sector.

According to the J.W. McConnell Family Foundation, business as usual isn’t enough to deliver the results we need. “The nature of our times is such that the magnitude and degree of complexity of our challenges exceed the capacity of any one sector to resolve,” said Stephen Huddart, McConnell’s president and CEO. To support transformation of the nonprofit sector, McConnell created Innoweave to help leaders of community organizations learn about, select, and implement new tools and approaches to generate greater impact and advance their missions.

However, at a time when we need change more than ever, too many nonprofits are constrained by a slow-moving, institutional, and self-interested model. “One of the reasons that I left being a nonprofit executive director was that I realized that I was consistently putting the needs of my organization above the interests and the needs of the clients we were serving,” said David Wertheimer, deputy director for the Pacific Northwest Initiative at the Bill & Melinda Gates Foundation.

The most progressive funders want charities to recognize that philanthropic support should be allocated to the most risky new social programs—game-changing initiatives that are getting better results. “We believe here at the Gates Foundation, and I believe in my work in family homelessness, that the philanthropic sector dollar should be the most risk-tolerant, highest-risk dollar in the game of making systems change happen,” said Wertheimer. “Private philanthropic sector dollars should be the catalytic agent that promotes change in the system.”

Many charities are mired in an old approach to social change that is also reflected in how they raise funds. Competition for funding with “no strings attached” is fierce at a time when donors are expecting more collaboration. When asked recently about how the nonprofit model needs to change, Sir Richard Branson, founder of the Virgin Group said categorically, “More collaborative efforts. We need the collective efforts of countries and companies to step up and play their part—setting strong goals, having clear plans, and openly demonstrating progress."

Today’s funders want social change organizations to do whatever it takes to get the biggest results at the lowest cost in the shortest period of time. Some are also walking the talk: “We are a time-limited charity—we will spend our last dollar 30 years after the death of the last of our original three trustees,” said Wertheimer. “The goal for the Gates Foundation is to have the impacts that we’re seeking to have in the context of the 21st century.”

Funders are expecting significant change from charities, starting with an intention of being much less institutional and much more entrepreneurial. “We need to focus on what works, especially what works at scale,” said Jay Coen Gilbert, cofounder of B-Lab a nonprofit that serves a global movement of entrepreneurs using the power of business to solve social and environmental problems. Other changes that would move organizations toward solving issues more quickly in a way that resonates with funders include:

• Introducing pay-for-performance executive compensation that linked salaries and bonuses to specific social change objectives
• Establishing an annual review of all programs to identify initiatives that other organizations could better deploy or commercialize in partnership with the private sector
• Prioritizing innovation by introducing a new “exit strategy” protocol for major supporters that calls for diminishing investment requirements as social change outcomes improve

On the last point, the Gates Foundation and others have recognized that an open-ended approach to social change is no longer adequate. The new imperative for nonprofits that are addressing solvable issues is to plan for their own obsolescence. Planning to put a nonprofit organization out of business won’t be easy. However, it would be a bold way to way to mobilize action and galvanize support—especially from funders who know that solutions are possible, and view the systemic and human costs of inertia as unacceptable.

Nonprofits are losing their monopoly as the most effective agents of social change. Unless they evolve, corporations, B Corps, and social enterprises that are just as committed to solving social problems and perhaps better able to make a difference will eclipse them.

Read more stories by Paul Klein.