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Social Enterprise as a Solution to NGO Redundancy

| Thursday December 1st, 2011 | 1 Comment

Department of Redundancy Department

The non-profit economy is growing three times faster than the US economy, and if NGOs were an economy, it would be the seventh largest in the world. That’s according to Nancy Lublin, CEO of dosomething.organd founder of Dress for Success.

Nancy moderated a panel at the Social Innovation Summit entitled “Where to Start, Where to Aim.” The two panel participants were both from foundations: Paul Carttar from the Social Innovation Fund, and Jacquelline Fuller from Google’s philanthropy arm. All three panel members spoke freely about the problems in the NGO sector and the solutions they seek through their funding methods.

Lack of Data, Lack of Transparency
Both funders cited past success as one of the key ways they judge prospective projects to fund. It’s a good way to thin the pack because many NGOs resist sharing detailed information about their successes-and failures.

Said Jacquelline, “Grantees don’t really want results be totally public because they don’t want failures to be public. At Google, there is no shame in taking a bet on a big idea– we just want to test it and fail fast if we’re going to fail. We want to see the same attitude from the organizations we fund, but the stakes are higher for an NGO. It would be great if they could say ‘we bet on this technology and it didn’t work, so others in our industry should avoid it,’ but NGOs can’t say that because there’s a lot of financial risk in failure.”

Paul noted that his foundation makes the executive summaries of all the grant applications they receive public, and they publicize the 3rd party critiques of the applicants that win grants. They do this so that likeminded organizations can find each other and team-up and so that their grant process can be transparent. But, since they’ve increased transparency, applications have dropped off sharply.

Since there is a limited number of donor dollars and a growing number of non-profits, competition can be fierce, which makes transparency a scary proposition.

Are NGOs the right solution?
At the end of this panel, I was left wondering where socially responsible businesses fit into the paradigm. Many of the panels at this conference featured either staff from corporate philanthropy arms *or* former corporate employees who left to found NGOs. This is a valueable path to making change, but it isn’t the only one.

When the tools of business are applied to NGO models, redundancies vanish.
Toward the end of the panel, Nancy asked the panel to tackle the problem of redundancy in NGOs. This is an issue she discussed last year in Fast Company, so I know it’s been percolating for her for a while.

Indeed it is a big issue. CharityNavigator lists 28 NGOs in New York City working on HIV and 75 working on Education, and that leaves out all the registered NGOs which are too small for CharityNavigator to track. Education and HIV are both tremendously important issues which need to be address locally as well as internationally, but when there are that many players in the mix, they end up competing against each other for funds rather than working together to solve problems.

Nancy posited: if there are two donut shops sitting next to each other and one is mouse-filled and sells stale donuts, and the other is as good as Krispy Kreme in its heyday- Mousy Donuts is going out of business unless it wraps itself in a 50c3 and gets grants to feed the hungry and then it can stay in business in perpetuity, despite delivering a substandard product.

All three panelists agreed that redundancy is a huge problem in the sector and that their are two solutions: consolidation and using data to select the most effective NGOs to grant.

There is of course, a third solution: socially responsible business.
Companies that exist to solve a social or environmental problem must maximize efficiency in order to stay in business. By intertwining the goals of financial health with economic and social health (the famed triple bottom line) organizations can thrive, solving the world’s ills and making money at the same time. Redundancy is taken out of the equation because when the less-good and less-effective business models fail, they go out of business.

The pressure to keep a company alive makes the principals rigorous with their refinement of their effectiveness. That’s good for the business, and good for the people and planet that are served by the business.

[Image credit: da.bo, Flickr]


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  1. December 02, 2011 at 14:18 pm PDT | Chuck Blakeman writes:

    Jonathan,

    We are a Congolese-owned company with a U.S. counterpart (registered companies in both countries); with full import export licensing and full chain of custody documentation. Our purpose is to solve poverty in the Congo through ugly, evil, horrible capitalism; without the ugly, evil or horrible part.

    After 100 years of non-profits/NGOs, and other aid to Africa, Africa as a continent is worse off economically than it was 100 years ago. The NGOs didn’t cause this; they just contributed significantly to the problem and not the solution.

    We are exporting agricultural and minerals from the DR Congo, directly from Chiefs and their tribes (no large corporations involved, no government-owned mines), leaving a very significant portion of the profits with the local miners and the mine owners, then bringing back another very large portion of the profits to build schools, clinics, potable water, roads –all the basics. Except we’re going to do it differently, using local capitalism as the base, not handouts or free infrastructure.

    The head of the school and the teachers will own the school. The clinics will be owned by the doctors and nurses. The potable water system will be owned by someone or a very few someones – not the “community”. The restaurant will be owned by the proprietor, etc. Everything we do will be owned by somebody who will take pride in it, and we will train them how to make money and build on what they have. The business training will be far more important than the many millions we will bring to the effort.

    NGOs are great at short term things like earthquakes, disease, wars, pestilence and food shortages. But they have proven dismally bad at solving any long-term problems. Enough Project proudly extolled the presence of 270 aid organizations in Goma, Congo alone, as proof that aid organizations were keeping the region alive. To the contrary, their overlapping presence are a big part of what has destroyed the region. Many of them are only there to make money off the madness. And they won’t go out of business because, unlike a capitalist venture, they get to tell people they are successful without proving it.

    500 million people have come out of poverty in China and India alone in just the last 20 years, and there is not a single NGO that can claim a part in it. It was all ugly, evil, horrible capitalism. And some of it was definitely ugly, evil and horrible. But most of it was the creation of small, local, sustainable economies full of mom and pops and 1-50 employee companies. That is beautiful LOCAL capitalism, because in that environment potable water, clinics and schools have a lasting value.

    And all of that was unintentional. What if we decided to intentionally bring local economies to the poorest places on earth (Congo is #1)? Money isn’t the answer – the NGOs have proved that for 100 years. We are using the funds from our company to set up an L3C which will be a for-profit company created to do social good in Africa, starting in the DR Congo. And that social good will be focused on funding full-fledged companies of 2-20 stakeholders (not micro-finance, a step above that), but much, much more importantly, bringing in thousands of already successful business owners from other countries to partner with and train the local business owners.

    Handouts don’t work. But vision and dreams built on training and the funding to build these small, local companies does. China and India have proved it. We plan to prove it in Africa and solve systemic poverty in Africa in 20 years through the building of local economies – capitalism gone good. Intentionally.

    Reply Or REGISTER HERE if you are new.

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