Can non-profit organizations meet all the needs for-profit businesses currently meet?

I just came across an interesting blog post by Stephen Monrad with title of "Can non-profit organizations meet all the needs for-profit businesses currently meet?" His conclusion is that "If a non-profit organization wanted to produce toothbrushes, there is no reason in principle that it couldn't."

I found it to be an interesting post. What follows is the comment that I left on the blog:

In the original post you say that there "is no reason that I could find that they need to limit their work to charitable or social goals." Well, actually, there is... In the U.S., at least, nonprofits receive their tax-exempt status - 501(c)(3) - from the IRS. The application requires a statement of the organization's charitable, educational, or social goals or mission. Presumably, the IRS reviews that before approving the application... presumably...

But, that doesn't mean that a nonprofit couldn't manufacture toothbrushes. If, somehow, the production of toiletries were related to the charitable purpose. For example, I'm aware of a catering company that is a tax-exempt nonprofit. The nonprofit's mission is to train at-risk populations in how to work in the food industry. New cooks enter the program, are trained, work real catering gigs, and then graduate to make room for the next group of new cooks.

To the clients hiring them for parties, they're just like any other caterer, but to the IRS it's a legitimate social enterprise providing educational assistance. I don't know how to translate that story to making toothbrushes, but you get the point.

A nonprofit can also run a for-profit business. A typical example would be a thrift shop set up to support a social cause. In this case, the IRS sees the profit from that enterprise as "Unrelated Business Income." The nonprofit does pay taxes on that portion of their income, but as long as it doesn't become their primary activity, it doesn't endanger their tax-exempt status for the charitable work.

In one of the comments, Clyde writes, "... Losses are a definite probability, but profit is a no-no, by definition." You'd think so, but "nonprofit" is really a misnomer. Nonprofits can (and, in good years, should) earn more than they spend in order to build reserves for lean years (such as we're now experiencing). What nonprofits are barred from doing is distributing that profit to the Board or principals as dividends. Profit is wonderful, as long as it is re-invested into the charitable mission.

Anyway, thanks for this post - It's an interesting conversation.

Mission-Driven Careers

I know of very few people in the nonprofit sector who are here "just for a job." The few that are don't rise high in the ranks, and don't usually stick it out for very long. Those of us who've made a career of the nonprofit sector do it as part of our personal mission.

Mission is what drives us to work long hours for below average wages and next to no benefits. Mission is what makes all of that bearable, and even inspiring. We may occasionally be tempted to look for greener pastures, but we always end up back on our missions.

Jobs for Change, a part of change.org, is looking to inspire and recruit the next generation of nonprofit leaders - those looking for a mission-driven career. Here's a part of their Vision Statement: "We believe...

• "People are the most important factor in advancing social change. To address the social and environmental problems we face, we need to attract a diverse range of people and the most promising leaders from across the country to work on issues both local and global in scope.
  
  
• "To attract these people, we need to enhance the social sector's ability to recruit, develop, and retain talent. Too many people interested in a career in service do not end up or remain in the sector because of a range of obstacles that include misperceptions about work and compensation, insufficient information about how to take the first steps, or limited recruiting resources from budget-strapped organizations. We need to address these issues."

I've signed on to that vision statement and am pleased to put my name on the list of those who've been mission-driven in our careers, and who hope to inspire the next generation of nonprofit leaders.

Should Your Nonprofit be on Twitter?

By now, I'm sure you've all heard of the micro-bloggging platform, Twitter. In a nutshell, micro-blogs - or "tweets" - are posts of 140 characters or less, typically answering the question, "What are you doing now?" Twitter is also the hottest thing going right now in terms of web 2.0 / social media. But is it right for your organization?

First, some of the criticisms of Twitter: "It's shallow." "It's vapidity to the point of depravity." "Who cares what you're doing right now?" And, when users take the "What are you doing now?" question too literally, those criticisms can be very valid. Posts of "Waiting for the bus," or "Just finished lunch, need to burp," are hardly useful or inspirational to anybody but the person who posted them.

On the other side, a few months back when a US Airways plane made an emergency landing in the Hudson River, Twitter got out the news quicker than any official media and carried the first photo of the evacuation of the plane. The presidential campaign of Barrack Obama demonstrated to community organizers worldwide how Twitter could be used to promote events, get out a message, and raise money for causes. But, again, is it right for your organization?

I personally love Twitter, and previously on this blog I've encouraged all nonprofits to use blogs and other social media as a communications tool. But on Twitter, I have to say that it may not be the best choice for smaller organizations who don't have staff dedicated to either outreach or public relations.

This is because the best use of Twitter requires listening, as well as frequent posting. One of the simplest, but most powerful, tools within Twitter is the reply post. Beginning a tweet with @(username) makes it a reply to that user.

If you're not prepared to quickly read and follow-up on replies to @yournonprofit, your use of Twitter could backfire. Rather than be seen as involved in the community and wanting two-way communication, you risk appearing out-of-touch or as putting yourself above your supporters.

For those organizations who have staff whose primary role is public communications, and who are tech-savvy, Twitter can be a great way to connect with potential supporters, organize activities, and (yes) raise needed funds.

But if Twitter is going to be an after-thought to an over-worked staffer who's focus is elsewhere, it's probably best to stick to traditional blogging for now. But, what you can do is encourage your supporters who are on Twitter to give you plugs (with links) on their Twitter feeds.

How Much Should Board Members Give?

This is the question that has haunted many a nonprofit Executive Director and Development Director. How to encourage Board giving without either asking too little or scaring off new members.

A posting today on the Chronicle of Philanthropy's website asks if "the expectation of giving is something that is simply understood?" and gives a quick roundup of how some organizations answer the question.

The Asian American Justice Center in Washington, asks board members to "either donate or raise $2,500 for the organization - an expectation that is spelled out in their job descriptions."

Gail Perry, a consultant and author in Raleigh-Durham, N.C., says that "Board members will contribute and raise money for organizations that they believe in strongly," and that "They will give the minimum when they 'have' to." Ms. Perry believes that un-engaged Board members will find giving requirements "offensive." "Our job, of course," Ms. Perry goes on to say, "is to get them so fired-up that they are sitting on the edge of their seats ready to ... give."

My experience is that "give or get" policies are popular, but I always encourage my clients to tell their Board that they need to "give and get."

To me, the "getting" is part of their fiduciary responsibility as a Board member to make sure the organization is financially stable and sustainable. The "get" can be done in many ways, from directly asking friends and family, to arranging matching gifts through their employer, to helping plan an event, to writing grant proposals, etc.

The "give," on the other hand, is a recognition of their personal commitment beyond the work. The point I make to Boards is that if they have not personally invested in the organization, why should anybody else? And, I go on, people will know. Perhaps not the average donor, but Major Donors will ask about Board giving, and so will Foundation officers when they come on site visits.

As to how much they should give, I don't believe in stated dollar minimums. Rather, I prefer the phrase, "Board members must give at a personally meaningful level." That means that if a member normally makes $500 gifts to other nonprofits, they should give $750 or $1,000 to the nonprofit they're on the Board of. If they normally give $25 to others, they should give $50 here.

I work with mostly smaller, local organizations, who are particularly timid about the Board member ask because their Boards are more likely to include former clients and neighborhood activists than high-powered international executives and bank owners. An ask that takes ability to give into account, while still recognizing and honoring their commitment to your organization, allows the client representative to give $2 while sitting next to the Doctor who gave $5,000, each knowing they were respected and that they did all they could.

It is up to the Executive Director and Development Director (if you have one) to personally craft the ask, just as you would any Major Gifts ask, based on what you know of your Board member's giving history, occupation, net worth, etc. Explain the "personally meaningful" policy clearly, and ask with confidence.

If your Board member is still reluctant to give, it may be time to question their commitment and start recruiting to fill that seat.

Nonprofit Marketing and Fundraising Zone

I am pleased to announce that as of today, the Nonprofit Consultant Blog is part of the Nonprofit Marketing and Fundraising Zone. The Zone is a topic hub started by Katya Andresen, Nancy Schwartz, and Kivi Leroux Miller for collecting and organizing information around these topics.

I'm honored that my posts will be in the company of posts from some of my favorite nonprofit blogs, including Donor Power Blog, Getting Attention, Kivi's Nonprofit Communications Blog, Studio 501c3, and several more.

You will find a link to the Nonprofit Marketing and Fundraising Zone in the sidebar to the right, along with a search form to find articles on that site compiled from this blog and each of the other participating blogs.