Nonprofit Newswire | The Difference Between For-Profits and Nonprofits

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September 22, 2010; Source: The Oklahoman | This vituperative anti-nonprofit op-ed by Walter Williams deserves circulation and commentary. Williams is the John M. Olin Distinguished Professor of Economics at George Mason University in Fairfax, Va. and a board member of both the Reason Foundation and Hoover Institution. He is on the advisory boards of Cato Institute, Landmark Legal Foundation, and Heritage Foundation, and an occasional substitute host for Rush Limbaugh’s radio show.

For some reason, Williams writes about nonprofits by taking off on the sexual harassment investigation of the executive director of Philadelphia Housing Authority, a public sector agency. For Williams, the PHA is a nonprofit institution, and nonprofits, he suggests, “pompously” pronounce themselves as “more righteous” than the for-profit sector. Williams disagrees. Here’s his worldview:

“The fundamental difference between nonprofit organizations and their profit-making counterparts is that nonprofits tend to take a greater portion of their compensation from easier working conditions, more time off, favors and under-the-table payments. Profit-making organizations take a greater portion of their compensation in cash, except those that are highly regulated. In the profit-making world, there is much greater monitoring of the behavior of people who act for the organization. Profit-making organizations have a financial bottom line they must meet, or sooner or later, heads will roll. Not so with nonprofits, which have no bottom line to meet. On top of that, incompetence for nonprofits means bigger budgets, higher pay and less oversight.”

Breathtaking analysis and prose there, no? Given his Cato, Hoover, and Heritage positions, one wonders whether Williams’s apparent broad-brush hostility toward nonprofits reflects a new conservative attack on the nonprofit sector, conflating nonprofits and government as the intrusive nanny state that is the enemy in the Tea Party’s “Contract from America” and the Republican Party’s “Pledge to America.”—Rick Cohen

  • Ken Goldstein

    No bottom line to meet? Darn! I’ve been working for all the wrong organizations all these years!

    It might have been fun to spend the last couple of decades in one of Williams’s Bizarro World nonprofits, but I’ve been too busy balancing organizational budgets, working for 10% less than my corporate counterparts (at least), and following strict reporting and regulatory requirements to take advantage of any of the “under-the-table payments” or favors.

    Unfortunately, this attitude does not surprise me. While much of the far-right rhetoric comes in the cloak of “smaller government” it’s the same old culture war attempting to look like financial prudence. And, on average, nonprofits tend to be on the wrong side of the culture war for the Hoover/Cato/Tea crowd.

  • Debra Owen

    I chose to change from for-profit top management in the garment industry to non-profit Executive Director in the arts.

    As a result:
    My salary was cut in half.
    I haven’t had a raise in 7 yrs.
    I work 10-12 hr days … 7 days week.
    My annual vacation is 2 weeks of sleep.
    My job description really does include the kitchen sink.
    I work with (inspire and guide) a volunteer force serving 500-1000 hours per month.
    I work with a very real double bottom-line:
    I’m responsible for earning money by providing services to the community, providing services to the community that don’t earn money, and asking for money from the community to pay for those services.
    I work with a cash flow that demands hard choices on a daily basis.
    The majority of Board Members never “get it” and so interfere and require constant monitoring to stay on track.
    I work with endless “good ideas” that are expected to take top priority without concern for relevance, resources or the demands of another’s good idea.

    I do this by choice. I do this with a sincere smile and pride in what we (the big we) manage to accomplish. I remain committed to serving others and improving my communities quality of life.

    I don’t expect anyone else to like or do my job. I like and do my job. I never forget that everyone I work with is here, with me, by choice.

    Both for-profits and non-profits are important and integral parts of our economy and society. They don’t have the same goals, use the same resources, require the same commitments or serve the same roles.

    Why oh why, is it so damned hard to get the differences and appreciate the values of each? That’s the part I don’t get.

    Debra Owen,
    Executive Director
    Frank Bette Center for the Arts

  • James David Morgan

    Dear Prof. Williams: I just read your comments (cited below) in The
    Oklahoman. Given your ignorance and arrogance, it’s amazing to me that you
    could be a professor of anything, let alone economics. Please go soak your
    head.

    Sincerely,
    Bob LaVallee

  • Dowell Caselli-Smith

    Dear Professor Williams: While a top administrator in a state college system one of my reports was complaining about the College President’s salary (which was twice his own). “No one is worth that much,” he asserted. When I showed him the President made less than half what owners of some small businesses (under fifty employees) in town made he was non-plussed. The President had over three hundred employees to deal with, a state board, the legislature, alumni, faculty and other employees’ contracts, town gown conflicts, IT challenges (to budgets, instruction, and enrollment strategies), shrinking enrollments, and other complexities these small business owners could not even fathom let alone address. Balancing the budget’s bottom line was very much on the minds of all administrators in every meeting with the President. That non-profit President and others certainly work hard for their pay. On the other hand, the seriously bloated salaries of Fortune 500 executives is an ongoing problem that needs attention if American business is to ever be competitive in the international arena. Moreover, many board members of large corporations make more in per diem and honorariums for a few days of meetings than the highest paid non-profit executives. Your emotionalized assertions stray a long ways from the real world of non-profits seeking to meet social and community bottom lines that looks to costs and benefits in longer time horizons than the next stock dividend (like BP).