Yesterday’s discussion

Apparently a lot of people are interested in discussing nonprofit vs. business practices, we even had to move to a bigger conference room. Unfortunately the debate went south pretty quickly. To summarize, “if nonprofits operated more like business then ….” fill in your own (often heavily uninformed) comment and there is our discussion. At four separate occasions I asked people to back their comments and opinions with research or any type of investigation over time that support the claim that businesses are better at solving social problems to the degree that nonprofits should seek to mimic them, but ignorance is apparently bliss or it is “obvious that businesses are more efficient”. Still, efficiency is not effectiveness and once again I had to surrender to foundation executives and nonprofit consultants who are better salesmen than I am.

Perhaps our most interesting debate focused on outcome measures – are OM objective or socially constructed creatures? In particular, when can OM provide useful information about the impact of nonprofit activities? I argued that OM are often more political than actually useful tools to capture effectiveness especially since OM’s tend to be very short-term in nature. Alan Johnson put his finger on this problem when asking is the mainstream ready for output-based aid? In addition, GPOBA had launched an e-book about outcome-based activities and best practices. It is also interesting to notice that even foundation executives cannot still not differentiate between outputs and outcomes.

Bubba

Nonprofits and business practice

I have spent 10 days in Canada discussing social innovation, social economy, eating seafood and predicting the upcoming NHL season. Cleet will be back from his exile tomorrow and we need to prepare for the new semester. Later today I will debate this lovely book that has been hailed as an absolute for philanthropists and nonprofit managers. I suppose the person(s) that put together this discussion believe I will lend support to the basic premise of the book, so eloquently summarized in this review”

Don’t charitable causes deserve the same kind of competitive forces that work to get results in the for-profit sector? Wouldn’t social causes be better served if charitable organizations were headed by the kind of bright, aggressive executives that work in the for-profit sector?

I do agree with several aspects in the book including the common belief that nonprofits are miracle workers that can deliver outstanding value by simply funneling money from A to B and at the same time keep all other costs to a minimum. It is indeed necessary to take on the expectation gap that exists in society. However, the idea that business practices are the same as best practices or practices for success is highly doubtful. Show me the evidence that for-profit business practices are better at solving social issues (and no, theory alone is not enough) and I will seriously start to consider the utility of business practice in the nonprofit sector. Second, I am always surprised when authors write about nonprofits and conduct all their prior research looking at either foundation reports or what consultants write. Why not look into nonprofit research and you will find, for example, that effectiveness is a different animal in the nonprofit sector.

Bubba

Is social entrepreneurship an individual game?

In a recent paper review my analysis was questioned on the basis that I do not pay enough attention to individuals and because Schumpeter “pointed out that entrepreneurship is an individual act” it makes little sense to talk about groups and even less about organizations. It is always striking how reviewers tend to think that there actually is some sort of consensus in (certain aspects) of social entrepreneurship research. Given my interest in Veblenian institutional economics it may come as no surprise that I don’t think indviduals can accomplish anything and there are indeed many scholars who are skeptical about the individual approach. Gartner and Co. made this clear more that 15 years ago: “the entrepreneur in entrepreneurship is more likely to be plural, rather than singular. The locus of entrepreneurial activity often resides not in one person, but in many”. Even Schumpeter reached the same conclusion in his later work: “The entrepreneurial function need not be embodied in a physical person and in particular in a single physical person. Every social environment has its own ways of filling the entrepreneurial function.” Again, what worries me about those reviewing social entrepreneurship articles is not so much their knowledge about the social issues as much as their knowledge about what entrepreneurship is.

Buabba

Status report

The nonprofit landscape is shifting. In May, the IRS began revoking tax-exempt status from nonprofits that failed to file three consecutive annual returns. The first prediction is that as many as 300,000 nonprofits may lose their tax-exempt status, effectively shrinking the nonprofit sector. While many people fear this development I believe it is positive because it will hopefully release passive resources back into the sector. Guide Star just released a report about the revocation process discussing which nonprofits are at risk, what happens to a nonprofit that loses its exemption, and what happens if a donor gives to a charity that has lost its exemption? Also, The Rome Group released the results from its philanthropic landscape survey showing some interesting figures:

• Only 49% of nonprofits said they met their fundraising goals in 2009.
• 87% have reduced all unnecessary expenses.
• 57% have tested new strategies, such as social networking.
• 49% froze all wages and 43% will operate with smaller staffs.
• Half (50%) of local nonprofits have three or fewer months of cash available; 9% have no cushion at all.
• 39% said it is too soon to tell when things will get better, but 41% expect improvement later this year or next.

More about the Group’s findings can be dowloaded here.

Bubba

Poverty

Social entrepreneurship is often viewed as a mean to fight poverty by generating both social and economic value. But what is poverty and (in particular) how can we measure changes in poverty rates? For example, is an absolute approach to prefer compared to a relative measure, and what is the best base for calculating poverty, income or consumption? These are some of the questions discussed in a recent paper by Meyer and Sullivan. They conclude: ”

“A disposable income based poverty measure better reflects the resources available for consumption than the official poverty measure. However, there are important limitations to the Census valuations of nonmonetary resources including health insurance, housing subsidies, and owner occupied housing. Given these limitations and the fact that consumption better captures well-being, rather than measuring the resources available for consumption, it may be preferable to measure consumption directly. A consumption based poverty measure would more accurately capture changes in well-being and the effects of anti-poverty government policies. Going forward, consumption measures will reflect the loss of housing service flows if home ownership falls or the decline in consumption that might be required to repay debts, both of which would be missed by an income measure.”

What is clear is that poverty is much more difficult to measure than it is to understand. Still, those talking about social outcomes and social impact seldom engages in these discussions.

Bubba

Country data

Devcondata is a great source for macro data in developing countries. In our current project about nonprofit entrepreneurship in China we utilized this from IFPRI.

Bubba

derkapitalism.us

Cleet has not been very active on Bubba & Cleetus lately, perhaps because he’s been in Bolivia, perhaps because he is currently hiding in Utah to finish an article. However, sometimes he sends typical Cleet-stuff like this and this. I’m sure he is doing just fine.

Bubba

Mmmm.. red tape

Back from a data gathering trip with focus on how government regulations and foundation bureaucracy impact nonprofit performance over time. It is clear that there is a lot of frustration out there and my initial reaction is that many nonprofits would love to see some of the red tape slashed so they can concentrate on providing services rather than filling out milestone-reports and evaluations that is never followed up anyway. The World Bank blog talked about red tape and productivity last week.

Bubba

Always the same people ….

I have now spent 2 hours listening to nonprofit executive directors discussing the possibilities of social media and a number of consultants claiming that social media is the tool for creating a more entrepreneurial nonprofit sector. After my ten minute presentation the jolly mood was gone and once again I got pointed at (I just don’t know why folks must point finger at me when they speak). My main point was that if new and different information is what these ED’s are looking for (using social media) to innovate, find new opportunities etc. they will not find any such information with their current practices. We can talk about the glory of the existing infrastructure for information hunting and sharing but these people only shares information with people they already know or want to know. Ethan Zuckerman calls this imaginary cosmopolitanism and Eli Pariser talks about filter bubbles that only connects us with what we like and want, not what is necessarily new and different. ED’s must break out from their invisible prisons by doing uncomfortable things but they must to so actively, not listening to another nonprofit consultant or talk to their friends, donors and clients. But there will be more fingers before that becomes a reality.

Bubba

Nonprofit self-employment

I am currently finishing a working paper discussing the population ecology of my hometowns nonprofit sector. Today I presented some preliminary results and the question came up whether nonprofit self-employment is a good proxy for nonprofit entrepreneurship in the region? This is indeed an interesting question but very difficult to handle. So many nonprofits are small and never register (until last year organizations with less than $25,000 didn’t even have to report to the IRS), some stay in the nascent stage for years, and there are a lot of nonprofit zombies that still roam the streets. Self-employment is often used by economists as an entrepreneurship measure but even in the for-profit domain this is not without issues. Perhaps the most knowledgeable scholar I know when it comes to nonprofit demise and death is Mark Hager (here is a list of his publications) and his research shows how difficult it is to get reliable data on nonprofit self-employment. Still, an additional issue to consider is to what extent this type of nonprofit entrepreneurship impacts economic growth and development in a region.

Bubba