Social Enterprise as a Solution to NGO Redundancy

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]