The Non-Profit Sector Provides Sustainable Solutions Where Business Fails

Entrepreneurship has a key role in society, not least in business which exists for profit. But business cannot do everything. It is the non-profit sector (NPO), however, that has the edge in working for the interests of you and me, the ordinary people in the community. So why does business criticise civil society for not operating like a business.

Along with an obsession about measuring the impact of organisations; the attempted application of King III principles to the nonprofit sector; the emergence of rating agencies to advise donors which organisations are good or bad (against business standards) and complaints about salaries paid to non-profit personnel, there seems to be a misunderstanding of the role of civil society and the contribution it makes to our lives.

Lest there be any misunderstanding, I must stress that I am not against business or entrepreneurship.  So why am I writing about this? 

Firstly, while business is a key component of our society and provides jobs and services, there is a great deal that business cannot do. 

Secondly, I am tired of people making assumptions about the civil society sector so that organisations are only seen through the prism of ‘charity’. There are thousands of civil society organisations and very few are just ‘charities’. 

Charity implies giving to the needy – providing for the immediate needs of destitute people. Although there are organisations that do this and play an important role, most NGOs run programmes that do not just alleviate needs, but also transform people’s lives. These are development organisations – not charities. 

And thirdly, the critique that somehow ‘charities’ need to function like businesses is unreasonable. Nonprofits cannot be run like businesses – their whole reason for being is not about profit and production, but about social change. Their trustees or board members do not earn directors’ emoluments; they do their work for social benefit.
 
Running a non-profit is as complex, and probably more complex, than running a business because of issues of accountability to a wide range of stakeholders – their board, beneficiaries, donors and the public. There are multiple layers of nuanced relationships and networks on which every non-profit relies for success.  It has far less control on its outcomes than a for-profit as it is dependent on people and relationships outside the organisation, from funding through to social impact.
 
It’s time to move on from the antediluvian concept of ‘charity’ as the notion that some rich man’s wife is running a ‘help group’ to keep her busy and therefore charity leaders should not receive fair pay for their work.  And it must be said that excessive salaries are not nearly as common as in business. In fact it is hard to conceive how one can even compare non-profit salaries with the business sector.
 
The latter usually offers attractive financial perks such as share options, massive retirement packages, company cars, entertainment allowances. Reports abound of executives who leave their jobs with fat cat ‘bonuses’, let alone those who receive payout deals to cover up their wrongdoing or as part of the political power play.   It is thus astonishing that business people feel they can pontificate on how non-profits should be run.
  
In contrast, the way business is practised has led to some of the key problems in the world.

Two of these, poverty and climate, are based on the concept of extraction, a business principle. Thanks to this, our earth is warming and millions of people have been marginalised and abused with the resultant poverty that is overwhelming us, aggravated by the financial crisis with its genesis in questionable banking practices globally.
 
Justifiably it can be asked what happens if a non-profit abuses its funding? The abuse of funds can never be defended and organisations must account for their expenditure and income to donors and stakeholders. However, in comparison to business this is small change. We have just seen the massive corruption in banks and financial services companies, the bedrock of business, which led to the global recession. Are these the practices that the non-profit sector is being asked to emulate?

Against this civil society can cite significant achievements, done without using business principles. Amongst these are the abolition of slavery (opposed by business), the environmental movement (derided by business as tree huggers), the right to ARV treatment in South Africa and the women’s movement, not forgetting the pressure on the SA government to change in the 1970s and 1980s.
 
The belief that those days are over is naive. Who will protect the freedom of the press, who will protect our human rights, who will continue to push the women’s agenda when it has fallen off government’s programme, who will stand against violence against children and who will campaign against global warming? Who is working with the poor to ensure that business people can sleep safe and sound?  Not business. Its role remains profit. Where social responsibility has become a part of operations, it is a side-show and not its core business.

So is the non-profit sector just an easy scapegoat, maybe because civil society holds business and government to account?

Non-profits are not just the sum total of their service delivery, but have a social, economic and political role to play. This doesn’t fit the neat little concept of ‘charity’, but is the reality of what is a dynamic and innovative sector doing the non-extractive work of our world. These are not “charities”, but organisations society cannot do without.
 
They are not making profit, but they are working for your and my interests.  We should be thankful they exist. Without them, societies descend into darkness.

-  Shelagh Gastrow is executive director at Inyathelo – the South African Institute for Advancement. This article first appeared in the Cape Argus newspaper. It is republished here with the permission of the author.