Nothing Can or Should Substitute for Philanthropy, Part 1

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Simone Joyaux

I’m worried by what I see as an excessive focus on generating revenue by nonprofits.

There’s a new old chant in town: “Let’s start a business where customers buy stuff and then we won’t have to rely so heavily on donations!” Articles proclaim that nonprofits are “finally wising up.”

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It’s kinda like revenue is better than charitable contributions. Somehow, the reliance on donations is seen as somewhat demeaning. Even the term “nonprofit” suggests—in our capitalistic, profit-driven society—that to be nonprofit is less-than. (As an aside: Notice the trend of foundations to hire for-profit business leaders as CEOs. The message is that there is nothing unique about the nonprofit sector; there is no special knowledge or skills needed. Nonprofits—including foundations—are so incompetent that they have to hire for-profit business leaders to get better.)

In summary, the equation seems to be: Revenue is better than charitable gifts. Customers produce revenue so customers are better, better than donors.

Generating Both Revenue and Charitable Gifts
Let’s step back a moment. Since time began, many nonprofits have generated both revenue and charitable gifts. So the new news is pretty old. Just more egregious with moneymaking entrepreneurs sneering about how to start business ventures.

Theatres and symphonies produce revenue by selling tickets and refreshments. Museums generate revenue with admissions and gift shop sales. Colleges and universities charge tuition. Hospitals charge fees paid by insurance companies and government contracts.

In addition to revenue streams, these organizations run fundraising programs that garner charitable gifts. When I worked at Trinity Repertory Company, one of the top regional theatres in the U.S., we generated 70 percent of our income from revenue and 30 percent from charitable gifts. Nonprofit hospitals, on the other hand, may get only 10 percent of their income from gifts.

Revenue is great, as are the customers that produce the revenue. Nonprofits that can generate admissions, sales and the like may well enjoy a more balanced financing stream.

Uniqueness of nonprofits / NGOs
But nothing substitutes for donors and their charitable gifts. I repeat: Nothing substitutes for donors. And not because of the money. Donors are different than customers.

The uniqueness of any and all nonprofits is philanthropy, voluntary action for the common good. (Thanks, Bob Payton, for that glorious definition. Bob was the first professor of philanthropics in the U.S., and author of the wonderful book, Why Philanthropy?)

Voluntary action for the common good . . . the uniqueness and, yes, the strength of nonprofits. Individuals, families, businesses, service groups, and faith groups giving their time and / or their money to build strong communities. Moms and dads and little kids and teens volunteering in the soup kitchen and cleaning up rivers.

People with a little and lots of money giving gifts to help others. The woman who sent a few dollars to help a charity. The school kids who sent all the pennies they collected. The banker, the janitor, the nonprofit executive director, the pastor—all sending donations to causes they care about. And sure, Bill and Melinda Gates, too.

Voluntary action for the common good. Nothing substitutes for these donors. I say “these donors,” not their gifts. Again, it’s not the money, it’s the donors. It’s the meaning of donors investing, committing, engaging in a cause.

Donors worry about the lives of others and the state of the world. Donors want to make a difference. And nonprofit charitable organizations are the means by which donors make that difference. Nonprofits / NGOs are the conduit for donors to live out their feelings and fulfill their aspirations.

Nothing can substitute for these loyal donors. Nothing can substitute for voluntary action for the common good, not even buying things.

See Part 2 in my next column.

  • David Seals

    Do you think the common argument for earned over contributed is really predicated on the assumption that consumers are more reliable than donors? And if so, is that true? Which do you think goes away faster in a recession?

  • Kelly Kleiman

    Amen, sister–this nonsense about earned income has gone more than far enough. If businesses could make money serving poor people, they’d already be doing it. There is no substitute for a recognized common obligation to help one another, whether reflected in the tax structure or the charitable sector or both.

  • Kristine Ruggles

    Your timing couldn’t be better; I’m working with a founder/director who views donors & donations as a poor model for the women we serve. The organization is focused on role modeling “self sufficiency” through product sales failing to recognize the intrinsic social value of giving.

  • Martin Murphy

    To Kelly. Businesses are already making money by selling to “poor people” and have done since the year dot!

    Personally I would rather not accept donations. I appreciate the great intent of those who give and I’m not saying that intent shouldn’t be respected but all this nonsense about stop striving for earned income is just that; nonsense!

    Earning our own income is a trend that is set to grow it’s that simple.

  • Simone Joyaux

    Hi everyone. Thanks for the conversation. First, let me be clear: I think it’s important that – when possible – a nonprofit charitable organization generate revenue. From box office to tuition to fees, etc. Yes, generate revenue. That’s very good! (By the way, I don’t refer to that as earned income. It’s revenue, sales. Saying “earned income” suggests that charitable organizations don’t “earn” charitable gifts.)

    Producing revenue is not new. It’s part of the nonprofit sector’s modus operandi and has been forever. At the same time, charitable giving is also part of the sector and, I believe, should not be minimized.

    The definition of philanthropy is voluntary action for the common good. I agree with Kelly, “there is no substitute for a recognized common obligation to help one another.” That’s philanthropy. That’s community building. That’s civic capacity. And organizing – associating (called the nonprofit / third / independent sector) is central to democracy. Read Alexis de Tocqueville, for example.

    So to be a philanthropy means we welcome / we encourage voluntary action for the common good – both time and money. People volunteer as board members. People (and businesses, civic groups, etc.) voluntarily give money.

    This is much bigger than merely appreciating the great intent of those who give. Philanthropy is a keystone of a healthy society. All the great movements of history – Civil Rights, the environmental movement, the women’s movement, stop smoking movement…. All of that is giving. All of that is philanthropy… community organizing… living democracy.

    Philanthropy is a critical element of every society, every group of people since the beginning of time, helping one another, helping to build healthy communities. There is “intrinsic social value to philanthropy and philanthropic organizations.”

    So the nonprofit / NGO sector — charitable, philanthropic organizations — have two great missions, I think: whatever is your organization’s unique mission, e.g., literacy or whatever — PLUS the mission to promote, encourage philanthropy. And not just for your organization but for society at large. Whether someone gives to your organization or to another, it’s philanthropy and it helps make the world go round.

    So that’s my rant for the day.

  • Simone Joyaux

    P.S. I think donors are more stable than customers. That’s what I think – no research to back me up – only what I observe. For example: Donors say “I won’t buy a ticket to the event because I don’t have enough money. But I’ll continue giving my gift.” In these tough times, I’ve seen corporations reduce their sponsorship of events – but still invest in program.

    Check out Giving USA’s analyses during recessions – and the report for 2009, just released. Even during a recession, people still give – and not just the affluent or wealthy still give. Those who are less affluent still give even as they face their own financial challenges.

    Donors can still be loyal during tough economic times – as long as organizations are good relationship builders – and know how to nurture donor loyalty.

    I suspect that the same people who will be less consumption driven in a tough economy will still give to charity.

    But let’s hope some researcher will actually research this at some point.

  • Troy Coalman

    AGREED! Philanthropy can not be replaced with consumer revenue! By the very nature of being an NPO/NGO we are not here to “sell things”, we are here to serve! It is ignorant to think that one can replace one for the other. We can however have a balance between traditional capitalistic / consumer driven revenue and donor funding. I have to do this on a regular basis, but we can never loose sight of our donors. Donors are far more reliable and stable than consumers. Yes cultivating donors takes longer, but once you acquire them you have great success. Selling a “one off” items is based in instant gratification and lacks sustainability. We are not here to sell “hats, gloves and scarfs”, we are here to serve and support our communities. Long live philanthropy!