Fighting the Business Takeover of the Nonprofit Sector

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Read Michael Edwards’ book, Small Change: Why Business Won’t Save the World. It’s his response (critical, fortunately) to the philanthrocapitalism movement. It’s his challenge (come on people, let’s wake up) to society. It’s an invitation (a much-needed battle cry) to you and me to fight. Edwards’ book gives us some history and good explanations of key concepts. He dissects, questions, and compliments. He offers specific steps for reforming philanthropy and assuring social transformation. He makes us think—and that is good and necessary. Like me, Edwards wants to “provoke a conversation” so there’s public discourse. And through public discourse, we can hear each other, learn from each, and ensure a stronger future for philanthropy and its results.

In sum, philanthrocapitalism claims that the “traditional ways of solving social problems do not work, so business thinking and market forces should be added to the mix.” Or, in other words, “business thinking and market methods will save the world.” (And make a lot of money for a limited number of people, too!) Now that’s where I get stuck, and so does Edwards: the excessive admiration for business thinking and market methods. Let’s see…would that be General Motors’ almost-bankruptcy and the 2010 BP oil spill? I guess all those philanthropic responses to natural disasters, civil rights, poverty, education, the arts—from NGOs and millions of people—don’t count for much? Weren’t sufficiently efficient? Didn’t produce meaningful and long-lasting results?

It’s human to want quick solutions and facile answers. But nonetheless, it reflects a dangerous naïveté and an insulting lack of awareness and understanding about what is required to make change. For example, this philanthrocapitalist approach hopes to fix the problems caused by capitalism. Honestly, I’m not trusting that. This approach fixes problems but doesn’t change the underlying systems like racism or sexism. I want more than Band-Aids; I want real change. Moreover, philanthrocapitalists represent only a small portion of our society, but hold a disproportionate amount of control. That doesn’t work for me. I believe everyone should and must have access.

Philanthropy—and the value of the nonprofit sector—is about social transformation. Edwards justifiably asks, “Can these new approaches transform societies, or do they simply treat the symptoms of social problems in more efficient ways?” I know my answer. What’s yours?

Sure, philanthrocapitalism can make a difference. It can find cures for various diseases and produce jobs. But that doesn’t fix the systemic issues that confront our society—things like greed and inequality, fear and prejudice, privilege and disadvantage. Edwards notes, “Few areas of business expertise translate well into the very complex social and political problems where solutions have to be fought for and negotiated—not produced, packaged, and sold. And, so far at least, there aren’t many philanthrocapitalists who are prepared to invest in the challenges of long-term institution building, the deepening of democracy, or the development of a different form of economy in which inequality is systematically attacked.”

Economic growth doesn’t fix racism, sexism, homophobia, and the fundamental inequities of our world. Economic growth doesn’t fix poverty, either; just look at the growing disparity in income over the last few decades. As Edwards says, “no great social cause was mobilized through the market in the twentieth century.” And I don’t believe that the market will ever mobilize any great social transformation.

But that’s okay. That’s okay as long philanthrocapitalists quit promoting their excessive value and societies stop looking for quick fixes. Business thinking is different than nonprofit sector thinking. Capitalism—even philanthrocapitalism—focuses on the financial bottom line first. The bottom line in the nonprofit sector is different. The bottom line is mission, not money. The bottom line is the common good, not the marketplace’s good. The result is social transformation, not reinforcement of the status quo. Certainly, nonprofits need to follow some good business practices to stay healthy, but the bottom line is fundamentally different.

Edwards defines civil society as, “the things we do together, not because we want to make a profit or earn a material reward, but because we care enough about something to take collective action…. [Civil society] provides a space free of government control and the pressures of the market, a space in which private citizens can organize for public work…. It’s that independence that enables civil society groups to hold government and business accountable for their actions and to act as crucibles for new or unpopular ideas, for democratic politics and the birth of social movements, and for speaking truth to power…”

I think Michael Edwards’ book Small Change is a must-read for anyone working in the nonprofit sector. Read it. Read it now. Share it with your organization’s leadership. Also read Jim Collins’ monograph Good to Great and the Social Sectors. As Collins writes, “We must reject the idea—well intentioned, but dead wrong—that the primary path to greatness in the social sectors is to become ‘more like a business.’”


This column is derived from Simone Joyaux’s Strategic Fund Development: Building Profitable Relationships That Last (3rd edition), published by John Wiley & Sons. Visit the author’s website to learn more about this book, considered a standard in the field.

  • Charlie Bernstein

    Though it’s not an original thought (I think I picked it up from something the late Ed Chambers of Industrial Areas Foundation wrote), it’s worth saying here: businesses, government, and nonprofits function well when they act like themselves and poorly when they try to act like each other.

    What needs to be added is that when businesses try to reshape government and nonprofits in their own image, it’s driven sometimes by charitable egotism and sometimes by intentional malice. What better way to stifle reform than from the inside of oversight agencies and nonprofit board rooms? A good current example: the business-dominated Komens Foundation, which, with one or two minor exceptions noted in the depths of its website, denies environmental causes of cancer.

  • Eugene Fram


    I agree, “Business thinking is different than nonprofit sector thinking.” Also that nonprofits have a variety of different bottom lines. However, I am still confident that the business model of governance is better for many, not all, nonprofits, despite the history of Enron, Tyco, Penn State and other business style disasters.

    Thousand of nonprofits have successfully adopted my governance model (Policy vs. Paper Clips, Third edition 2011,) Even Michael Edwards, with whom I have had some dialog related to his book and mine, has filed a qualified endorsement of my book on Amazon.

    “Policy vs Paper Clips” is an excellent resource for non-profits and their boards. Initially I was put off by the author’s use of the “corporate model” to describe his recommendations, since I am suspicious of the idea that non-profits should act like a business in order to be effective i.e. they should seek to earn a return on their “investments” by pursuing a narrow range of activities. However, the model presented in the book is simply intended to convey a sense of professionalism, discipline and organizational skills, and it is difficult to argue with that. Highly recommended for staff, trustees, fundraisers, foundations and anyone else with an interest in non-profit governance.”

    Let’s be careful not to throw the proverbial baby out with the bath water. You have further interest in my blog;


  • Reed M. Benet

    I haven’t read either the Philanthrocapitalism or Small Change books Ms. Joyeaux cites in this article, and thanks to her I intend to, yet going just on what she writes I’ve got to say that this article is a personal rant.

    But perhaps that should be expected from an author who seemingly unapologetically categorizes one third of her blog postings as “personal rants,” with a second being entitled what I find as a further unprofessional “pet peeves.” Yes, Ms. Joyaux might be joking with these categorizations, and maybe she’s even being self-effacing through these blog categorizations, but who would know?

    While Ms. Joyeaux certainly succeeds in “provoking a conversation,” to the point of me spending time on this comment as well as intending to read the two books she mentions, yet I find that rants are a poor way to achieve her stated goal that “through public discourse, we can hear each other, learn from each, and ensure a stronger future for philanthropy and its results.”

    She calls for reasoned discussion and then rants. Conveniently for her she sets up straw men definitions and arguments for philanthrocapitalism and then knocks them down. Her article is rife with opinions and lacking in data. She calls for everyone to pursue a no compromise battle essentially to the death against philanthrocapitalism, when her own definition of philanthrocapitalism is a pretty reasonable “business thinking and market forces should be added to the mix,” which does not exclude traditional philanthropy like she suggests we should exclude philanthrocapitalism. Even her further philanthrocapitalism definitional basis being that “traditional ways of solving social problems do not work” doesn’t seem so unreasonable, because if traditional philanthropy did indeed clearly work, we wouldn’t be arguing about it. And her statements of “I think Michael Edwards’ book Small Change is a must-read for anyone working in the nonprofit sector. Read it. Read it now. Share it with your organization’s leadership…” is a type of boldfaced (and frankly I get embarrassed for her) hucksterism.

    Sure, everyone comes from their own perspective and they base their own solutions on the experiences they’ve had. As a matter of full disclosure, I came across the term philanthrocapitalism when I was trying to articulate the thoughts I was having in terms of how to fix what I see are the too many problems with particularly foundation led and executed philanthropy. And a reasonable and synergistic with traditional philanthropy form of philanthrocapitalism is exactly what I think we need to achieve. And my working hypothesis is that the most important thing philanthrocapitalism can achieve is to create an alternative and parallel pursued path towards the same goals and with concretely set success milestones (that do not need to be just financial metrics) that allows for traditional philanthropy to prove itself better or worse. Does such threaten Ms. Joyeaux? Does that explain her wild vehemence?

  • Simone Joyaux

    Thanks, Gene and Charlie, for your comments. I like the statement from Ed Chambers….about acting like one’s self, Charlie. On my “non-conspiracy theory” days, I think the demand for NGOs to act more like for-profit businesses is – as you note, Charlie – charitable egotism. On my “conspiracy theory” days – which seem more frequent sometimes – I think of intentional malice. Or maybe just arrogant arrogance?
    Gene, I think good governance is good governance. I don’t think it belongs to either the nonprofit or for-profit sector. One of my favorite governance pieces was written by Ken Dayton and published by the Independent Sector. Dayton was CEO of the Dayton-Hudson Corporation. His job description for the board of directors works for all types of corporations, whether for-profit or nonprofit.
    Good and bad performance depends upon the people involved and the systems and processes and procedures those people set in place and enforce. No matter whether government or nonprofit or for-profit. As you say, professional and discipline. No argument there.

  • Simone Joyaux

    Thanks, Reed, for your comments. I appreciate the time you took and the thoughts you’ve shared.
    “Unraveling Development” is a column, not a journalist’s report. The column reflects my opinions, which I’m pretty clear about stating pretty clearly. At other times, this column shares the body of knowledge and my experience and expertise, which I’m also pretty clear about.
    You are correct: I do rant. That’s why my own website has blogs called personal rants. Visitors can ignore the personal rants and read the professional tips. I also recommend – enthusiastically – books and blogs and websites that I’ve found helpful or insightful. Hucksterism? Enthusiasm? Hmmm…
    I don’t say get rid of philanthrocapitalism. I say It’s not the answer its admirers claim it to be. Read Michael Edwards’ book. He is much more articulate than I am about this topic. That’s why I’m so enthusiastic about his book.

  • Mike McGalliard

    Business thinking and nonprofit thinking are different, but that’s not at all a good thing. Nonprofits are businesses that for the most part are built to solve social problems. They are highly inefficient, unstable, and for the most part ineffective. And it’s quite sad that the dollar compels a greater focus on efficiency, performance and results more than social problems. In other words, you’d think nonprofits would be some of the most effective, results-oriented organizations in the world, but they aren’t.

    I didn’t read the book, only the review. While I’d agree that maximizing profit isn’t a good motivator for social ventures, neither has been a bleeding heart. And “business expertise” has everything to do with running effective nonprofits, which have been painfully starving for a lack of this expertise.

    Nonprofits are businesses, and given the gravity of the problems they say they are trying to solve, they need to start acting like it,

  • Simone Joyaux

    Thanks, everyone, for your new comments. Of course, nonprofits must operate “like a business” in certain areas. All businesses – whether nonprofit or for-profit – for example, must balance the books, comply with legal and regulatory functions, handle personnel matters appropriately, etc.

    Of course, efficiency and effectiveness are important to any business. That does, however, beg the question of how a particular business defines efficiency and effectiveness. Bill Gates and Steve Jobs defined those terms differently. Amazon and Nordstrom’s might define customer-centered differently. And nonprofits define their results and impact differently than for-profits. Read Jim Collins’ marvelous monograph called Good to Great and the Social Sectors. He talks about the differences in measures in for-profits and nonprofits.

    I disagree with the statement that nonprofits are “highly inefficient, unstable, and for the most part ineffective.” Let’s see… The Civil Rights and environmental movements. More to be done. But huge progress. Harvard University and the U.S. system of higher education…threatened by government cuts but still one of the best in the world. Nonprofit hospitals and regional theaters. Can all these NGOs be stronger? Yes. Are they already pretty darn strong? Yes, many are. Are they better than BP and its Gulf oil spill. I’d say yes.