Nonprofits & NGOs

Are Nonprofits Getting in the Way of Social Change?

Solving major social problems is now possible, but not unless the organizations that have been most responsible for making a difference change significantly.

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.

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COMMENTS

  • BY Dr. Parveez Ubed

    ON May 16, 2015 09:49 AM

    Great read. Uplifting news for social enterprises.

  • BY Paul Klein

    ON May 16, 2015 11:27 AM

    Thanks Dr. Ubed

  • Gayatri Tripathy's avatar

    BY Gayatri Tripathy

    ON May 16, 2015 09:24 PM

    Great news.  Thanks for posting/sharing it.

  • Julian Hare's avatar

    BY Julian Hare

    ON May 17, 2015 02:45 AM

    I believe you are quite correct

  • BY Caroline Egan

    ON May 17, 2015 05:21 AM

    A very interesting read. It also raises the question how many nonprofits are actually pursuing a social change agenda as opposed to filling an identifiable gap in the delivery of public services?

  • Robyn Stewart's avatar

    BY Robyn Stewart

    ON May 17, 2015 07:18 AM

    I agree with Carol (above) when she asks whether nonprofits are pursuing social change agendas vs delivering services where there are gaps.  Many nonprofit service providers are responding to social or market failures that provide individual good to the recipients but also public good to communities,  environments, and economies.  However, while they can be more enterprising and entrepreneurial,  I wonder if they could be social enterprises that generate sustainable revenue to stay open and reach the BOP. Locally, theses are the YMCA-YWCA s, food banks, drop in clinics, daycare and after school services needed by the poor and middle classes in North America.  Internationally, they are humanitarian and relief agencies, clinics, school feeding programs, advocacy and human rights organizations.  Civil society, whether domestically or internationally plays animportant role in democracy and development, social welfare and charity. Some larger INGOs are doing this work, but are doing it in ways that hasn’t been agile and adaptive enough to change. That’s what I understand from this article.  That larger organizations can become service delivery bureaucracies serving themselves and concentrating on maintaining revenue and thinking towards growth. That can be unhealthy. Boards, leadership and internal policies should keep the urge to sustain and grow without focusing on why and how we’re remaining relevant to those we serve in check and ensure they go beyond keeping these urges in check but also promote self-assessment, evaluation,  innovation, and agility to be continuously improving what we do, how we do it, and how we know it is making a difference. Becoming an enterprise isn’t always the best way, but there is a trend toward breaking the change work into tasks that leverage core capabilities and allow a variety of new development actors engage together, collaboratively towards more effective and sustainable change. Changes in culture and consumer culture have helped to facilitate this.

  • cpdake's avatar

    BY cpdake

    ON May 18, 2015 07:48 AM

    Whenever I read or hear about “more collaboration” I wonder if funders know or understand the resources nonprofits have in order to do that effectively.

    Take the human services sector. There is a lack of awareness of issues, such as homelessness and hunger. Nonprofits work to try and raise awareness, but are often boxed in with the idea that they are trying to “recruit” or “build” business in order to justify their existence. How do you raise awareness to the general public, when resources are tight about a subject that most people in the community really don’t think or want to think is a real problem?

    I totally understand the idea nonprofits need to be more entrepreneurial in their approach. I would argue that 95% of them don’t have the resources to undertake a massive change management initiative to do it well. I imagine that the Gates Foundation is able to pivot and change immediately when and where it is needed. “Community Food Bank” or “Community Homeless Shelter” isn’t going to be able to do that effectively or quickly because they don’t have the resources to do it.

    So I would side on the fence that nonprofits are not getting in the way of social change, but provide them the resources where they can do the necessary change management.

  • Joseph Zillo's avatar

    BY Joseph Zillo

    ON May 18, 2015 08:24 AM

    Recently I left the the formal nonprofit and for profit world and back to my own ” consulting business” in which I am fortunate enough to be able to spend 50% or more of my time on pro bono activities including rebuilding an orphanage in Nepal as well as working with a local University ind designing (and fundraising) to create a program for finding employment with career counseling for the spouses/partners and their children of veterans who have returned to to the local college.  I must tell you starting in June, I will implement. Having worked in both the nonprofit and for profit worlds , I believe many just like most of the public, are simply not ready to embrace disruption. change. innovation. data-base/metrics decision-making models.  If you ask the millenniums, they are not only on board, but are light years ahead of” oldests” like me who has embraced it 100%.+

    We must not only advocate this new paradigm, but I believe we all have a moral obligation to educate those who are the donors, the leaders, the members, Boards, etc.

    As we all know who embrace the nature of disruption, disruption may seem to be easy - throwing out that system, that procedures, etc, I believe it is the day after that is even more critical, it is this phase to me which will sustain the new paradigm which may be, and I beleive, more important.

  • BY Paul Klein

    ON May 18, 2015 09:19 AM

    I really appreciate all the feedback. It’s clear that there is no definitive answer/approach to social change. The permutations and combination of factors are daunting. The context for INGOs in developing countries is clearly very different that for nonprofits in Europe and North America. Some issues are solvable while solutions for others are still remote enough that a planned obsolescence is unrealistic. Other issues are caused by the success of businesses in monetizing social change - consider the significant increases in chronic health conditions and disease as a result of longer lifespans made possible through better access to more effective medicine. Sadly, it’s not likely that the cancer society is going out of business anytime soon.

    Still, my point remains the same. The structure of non-profits remains a binding constraint to agility and innovation. We need organizations to be less bureaucratic more responsive to the changing contexts in which they operate. We need nonprofits to be biased towards putting themselves out of business - I don’t believe anything less than this is a responsible use of public or private resources. Finally, we need nonprofits to know that is happening all around them by a multitude of players and that new kinds of partnerships are needed.

    Most nonprofits would acknowledge that conventional fundraising has hit a wall. Funders at all levels expect high performance - and have become agnostic about who they support.

    Many nonprofits are being left behind and it’s time for them to catch-up. Otherwise their obsolescence will not be of their own doing!

  • BY Gayle L. Gifford

    ON May 18, 2015 01:14 PM

    This argument is silly. The societal needs that confront us require social, political, technological, cultural, and consumer shifts on a massive scale. I guess I’ve been around long enough to see many nonprofits and the people in them taking risks… like developing a housing first with supports model to end homelessness, like developing CDCs, like taking on civil rights and women’s rights and LGBTQ rights. Like suing the polluters.  Some problems may be solved through innovations like vaccines or health service delivery changes. Many advances may come about by influencing the market… but NGOs have been doing that for years and years already.

    While all this risk taking is happening. however, there also need to be steady, on the ground providers who are mitigating the mess. Like the local food pantry or meal site that makes sure people don’t go hungry day to day. Or the community mental health organization that with insufficient funding provides the only safety net in town. Or the CDCs that are building or renovating the only affordable housing in town.

    Other NGOs are doing the hard work of political advocacy or public policy research or watchdogging over the long haul, day after day, that protects people and the environment in their neighborhoods and on a global scale. There’s a lot of risk taking that involves putting your personal freedom or your financial gain on the line to serve your community. Or challenging your city council or your local business community over permitting issues to protect local wetlands or watersheds. Or confronting the police around racial profiling. Or housing sex offenders or the formerly incarcerated.

    There is a lot of need. And many paths to get there.

  • BY Latha Poonamallee

    ON May 18, 2015 11:07 PM

    Thank you for an interesting read and discussion.

    I come from a long association with social movements;  environmental to health to livelihood. I have seen a variety of extraordinarily well-functioning and dysfunctional organizations of all ilk. Some movements do not show immediate, sexy outcomes which are more desirable to funding agencies in today’s context. In these fields, consistent work builds the infrastructure for change in mental models at a societal level. However, most of this type of work does not begin with the funders but from the passion and belief of the community/leaders. Funding-driven initiatives can also lead to mission drift and a loss of focus on the actual communities.

    Addressing intractable issues that fall into this realm requires all sorts of organizations to work together and create new partnerships. Building partnerships with local NGOs in global contexts is an essential aspect of culturally sensitive initiatives. We see the results of agendas set by the financially mighty from the lobbies in Washington DC to Word Bank led atrocities across the world. “Do we want a McDonaldization of the social sector?” is an important question we need to address.

  • Julian Hare's avatar

    BY Julian Hare

    ON May 19, 2015 12:25 AM

    Many thanks for you post, Latha. You make some very good points. I believe that a great deal of the problem of big Corporations and big Parastatals is a lack of trust in their motives and methods. At the bottom of this lies the prevalent belief that the purpose of a business is to maximise short term profits for the shareholders (at any cost which probably means ignoring huge people, social and environmental costs) With the dogged application of this prevalent belief it is, for now, up to the honesty, passion and purer purpose of non profits to do the important work of trying to fix the mess. A mess that I believe can largely be attributed to the application of the prevalent but wrong belief of their purposethe Corporate entity both big and small.

  • BY Paul Shoemaker

    ON May 19, 2015 03:58 AM

    yes, nonprofits need to change, but FUNDERS and the way the capital markets work are in much greater need of change

  • BY Paroma Bhattacharya

    ON May 19, 2015 07:20 AM

    Great article! Definitely resonates with me as I work in an incubator for social entrepreneurs called UnLtd India. We need to support more entrepreneurial and socially minded individuals to start up social ventures that not only offer new solutions to social problems but who also find a unique way to collaborate with existing players to address social problems in a more effective way.

  • BY Latha Poonamallee

    ON May 19, 2015 07:54 AM

    Julian

    Prevalent beliefs do not come out of a vacuum in people’s minds. Usually, it is based on prior experience. For example, there is a prevalent belief among people of color in the US that they tend to be pulled over (or killed) more often than white people. But, the belief is not unsupported by data. Similarly, the prevalent belief that corporations are not to be trusted have been time and again reinforced by their short-term and self-interested actions.

    I am very interested in social innovation, social change, and social entrepreneurship, but adopting the capitalistic model unreflectively and condemning the nonprofit model is not the solution. What next? All state universities to be converted to for-profit model? I work in one and understand that it is archaic and bureaucratic, but that doesn’t mean we need to go around converting all universities into for-profit models.

    And local non-profits fill gaps that do not get addressed by either high profile funders or government services, especially in third world countries or third world like regions of even developed countries. To toss them all out with a push of a key is not only misguided by also extremely patronising.

  • Simon Bolduc's avatar

    BY Simon Bolduc

    ON May 19, 2015 09:16 AM

    I’m not sure… I do understand the need to change the mindset of charity to entrepreneurship… but… You are talking about societal change, not just resolve a social problem. At this point is not about the capacities or not of Nonprofits organization. It about the capacities of all actors of the society to change. I don’t think we can point out one type of actor to do better…

    If we talking about systemic change, we should use a systemic point of view.

  • Julian Hare's avatar

    BY Julian Hare

    ON May 19, 2015 10:44 AM

    Latha,

    Thank you for your thoughtful and useful post.

    I appreciate what you say.

    Certainly as you say ” adopting the capitalistic model unreflectively and condemning the nonprofit model is not the solution”

    I very much agree with your last paragraph other than not really understanding what you mean by “extremely patronising”

    What I do believe is that unless the “prevalent belief that the purpose of a business is to maximise short term profits for the shareholders (at any cost which probably means ignoring huge people, social and environmental costs” changes, the capacity of non profits to fix up the damage caused by an incorrect and unsustainable application of Capitalism is likely to deteriorate.

    The are big moves taking place internationally that could ultimately deal with this problem.
    The lack of trust in business and politics has been identified as a big negative reality at present

    But this is a discussion on its own.

    I believe the work that the non profits perform, and will continue to perform, is an invaluable and irreplaceable function.

    Unless the culture of business is changed the non profits and the world face a losing battle.

    To understand where I am coming from: I spent 30 years in a for profit company. The past few year I have, and I hope to continue for some time, spent as a passionate member of a non profit organisation which is part of a large international non profit group.

    The challenges that face everyone in the world today are substantial and complex.

    The challenges now and potentially in the future will not be solved without understanding the cause and effect and the resources we require for fixing the damage and for preventing further damage.

    The will not be solved by silo efforts.

  • BY Jessica

    ON May 19, 2015 04:06 PM

    The argument that nonprofits are the problem and need to change seems reductive. Nonprofits and funders share the same space and each share responsibility for participating in a system of charity based in capitalism. It is a system that requires competition among nonprofits for resources. Can you really blame nonprofits for having trouble collaborating when the system provides ample disincentives to real collaboration?

    One fact should also be acknowledged – there is a huge gap between the capacity of small nonprofits versus large nonprofits. My experience is mostly in small nonprofits (budgets under $2m), and so my perspective is skewed in that way. The barriers to real innovation (and collaboration) for small nonprofits is often a capacity one; many are underwater and underfunded. They simply can’t afford to conduct comprehensive field assessments of need; nor is it something that their foundation funders are accustomed to supporting.

    The idea that nonprofits should put themselves out of business is a nice one, but seems to be one based in economic privilege. Entrepreneurs need capital in order to go out and pursue a venture; then they pay back their investors. Social benefit ventures often aren’t money-making ones. How are nonprofit workers to bounce from one venture to another when they are barely making enough to cover their expenses?

    Finally, the professionalization of private philanthropy makes it harder for nonprofits to take risks. As a result, foundations have guidelines resulting from strategic plans; they have imposed structures around decisionmaking (as often happens in institutions). These structures are not are conducive to creative risk-taking. In my experience, foundations are the most risk-averse institutions in the social benefit sector.

  • Cynthia Fox's avatar

    BY Cynthia Fox

    ON May 19, 2015 05:18 PM

    This article was quite useful- at least in stirring a controversial pot. Clearly there are some new, successful, “nimble” initiatives and programs that have resulted using new models of partnership and new approaches. I applaud them, and much like those quoted in the article, would greatly like to see the number of such partnerships and programs with robust, sustainable, positive impact multiply geometrically.

    Unfortunately, the plaint that the nonprofits are the ones “standing in the way” of this kind of progress and impact is a little lopsided. I do not mean to take the complete burden off the nonprofits as responsible parties in the stagnation of progress. Some NGOs and INGOs and intergovernmental organizations and nonprofits charged with addressing key issues facing modern society have stalled in their approaches and impacts, and have indeed become more interested in self-perpetuation than in achieving their missions.

    However, the notion that “some of the world’s most important funders have become impatient with the status quo in the nonprofit sector” lets the funding community off the hook completely, and does not address the issue in our current system of social services: the purchaser of the services (the funder) is not the consumer (the directly affected client) of the services offered. In much part, the nonprofit sector looks the way it does BECAUSE of the funding community, which in my experience has not been risk-taking much in the last 20+ years despite Werthheimer’s stated aim for his programs. The key question from funders to NGOs has been “How much guaranteed bang for my buck am I gonna get if I go with your organization?” Organizations that try new approaches and fail are not refunded, and funders try to find ways to hide the money that they would say has been “wasted” was spent.

    In short, if you surveyed the funding community, you would likely find that the funders’ portfolios have not shown huge appetites for risk in their portfolios. What new approaches have you seen the majority of funders calling for in their RFPs? How are funding organizations structured- do their structures serve as models for the NGOs and nonprofits in organizing themselves? Are funding organizations helping to make matches between themselves, companies, and the nonprofit sector? Are they supporting the nonprofits in such a way that the NGOs and nonprofits are able to sustain their capacity to act as long as the need is there to be addressed (not because the nonprofit needs to survive), to build bodies of knowledge and institutional expertise that promotes the development and testing of new products and services for their clients?

    This article also refers to what the FUNDERS are looking for.  Is that the appropriate starting point for the development of products and services that will be provided to a third party? In the for-profit world, the customers speak with their dollars. If a product or service is “what the people want”, they buy it. They sustain the company by putting their dollars where their wants and needs are. In the philanthropic/nonprofit world “the people” do not satisfied with the output, what does weight does opinion of the consumer hold?

    There is more to be said about the process of working across sectors with companies, for which the ultimate goal is the bottom line- not addressing the intractable problems that challenge the world. (I am not dissing the (potential) corporate partner at all.) But, these challenges will have to wait for another post.

    In the meantime, do not be comfortable in laying the burden of change and the failure to solve big, hairy problems solely at the feet of the NGOs and nonprofits. 

  • Julian Hare's avatar

    BY Julian Hare

    ON May 19, 2015 11:38 PM

    Hi Cynthia and Jessica,

    The title to the article is certainly provocative. Or as Cynthia puts it “stirring a controversial pot”. I take it with a pinch of salt and I am grateful for the debate that has been generated

    The Stanford banner gives it credibility and immediately makes me feel quite defensive about some excellent work being done by Non Profits. Well,the truth is, crucial work in fixing immediate huge problems.

    My view is that these huge problems are mostly created by a socially acceptable embedded For Profit business culture.

    I disagree that “Nonprofits are Getting in the Way of Social Change? This is a most unuseful approach to the massive problems currently being handled by Non Profits because the rest of the system is doing little else than creating the problems..

    Sure, there is lots that Non Profits and Funders can do to improve their effectiveness. But that is another issue.

    It is not useful for the Non profit sector to play a blame game or feel under attack.

    It is going to take a big change of For Profit culture to prevent the Best Efforts of Anybody Else sinking in the sea of financial, people, social and environmental problems that have been created and continue to be created at an accelerating rate.

    I know this is a cliché, but it is going to take a paradigm shift in the thinking in everybody to create the change.

    This includes the Non Profits who seem to have accepted the old paradigm in trying to find solutions to massive problems.

  • BY Emily Rothberg

    ON May 20, 2015 04:14 AM

    Spot on insight, especially for corporate funders: “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.”  Whether “fair” or not for nonprofits, it’s the new reality.  The ability to navigate change is critical to survival.

  • BY Laurie Michaels

    ON June 20, 2015 02:04 PM

    Clearly, philanthropy is a big sector and we are all familiar with different aspects and follow different trends. My interest is contingency funding and accounting for the risks that non-profit programs encounter. The bottom line is this: it is the rarest of funders who is interested in funding risky projects, and the rarest of funders who will financially support one of their grantees whose program needs extra funds due to an unpredictable, unforeseen glitch in their project. We all know any project carries some risk, but donors are not interested in changing their funding structure or their basic attitudes to allow non-profits to be creative and nimble at best or to salvage a project at least. Corporations etc do not treat their grantees nearly as well as their businesses; when they do, non-profits can spend less time trying to duct tape problems and more time trying to put themseleves out of business.

  • BY Simon Berry

    ON July 20, 2015 12:56 PM

    It was great to read this article as it chimes so well with ColaLife’s approach. Every year we ask ourselves the question: Have we achieved what we set out to achieve? Should we close down?

    We are just two executives and don’t intend to grow (= build our own capacity), instead we achieve impact by growing the capacity of existing organisations to do what needs to be done and taking an ‘open source’ approach with our designs, findings and learnings.

    Many commentators have made the point that the majority of the world’s problems could be resolved if we could only get known solutions to the places they are needed. I would make the additional, very important point that the majority of the world’s problems can be solved by existing local organisations or collaborations between them. So before an international NGO (INGO) considers setting itself up in a country it should look at what local organisations exist with the responsibility for doing the thing the INGO wants to do and then the INGO should build the capacity of that organisation and/or help that organisation collaborate with other local organisations. I would go further and suggest that existing INGOs should refocus their efforts on building capacity in local organisations in preparation for their own withdrawal.

    It is relatively easy for an NGO, especially a big international one, to set themselves up and excel at whatever they choose to do because they will be well resourced and will be able to attract the skills (often local skills) they need. The problem with this approach is that it is not sustainable and undermines and disempowers the local organisations.

    I’d like to make one further points if I may. Most funders want to control too much. This was alluded to in the article. We ran a trial in Zambia on access to ORS/Zinc for the treatment of diarrhoea and received global recognition for the results we achieved. However, when it came to scale-up we failed to find a funder who a) wanted to scale-up ORS/Zinc b) right now c) in Zambia. I understand why funders want control (especially those distributing tax payers money), but they can’t have this control AND expect to support the leading edge innovation that is required. Innovation, by definition, is unpredictable and happens in realms and geographies that cannot be predicted.

    Once again, thanks for the article.

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