Inspired by naivete and idealism, the idea of running a company where service and value are by definition more important than profit seemed like a good idea. Why couldn’t we run a non-profit as efficiently and effectively as a for-profit, reinvesting any returns into the business to generate ever-increasing benefit to our targeted beneficiaries?
Professor Muhammad Yunus, Nobel peace prize winner for his role in Grameen Bank and the microlending industry in Bangladesh, defines a social business as a company created and designed to address a social problem; a non-loss, non-dividend company. The idea is to be financially self-sustainable with any profits realized reinvested in the business itself. In South Africa there’s no specific legal entity that this describes, a non-profit company (NPC) being the closest fit.
Almost 2½ years on, what have I learnt?
- Equity and capital invested in a business is largely based on the jockey, the team, the vision and the amount of trust in your ability to make that vision happen. The company, through senior management (or entrepreneur), and the Board of Directors decide how to spend that money. How much should be allocated to marketing, how much to product development, what staff need to be prioritised?
As a rule, funders of nonprofits don’t get that freedom. The funding application (often taking weeks to complete by multiple staff members) usually requests clear descriptions of where the money will go, and if the outcome isn’t an almost immediately visible deliverable, you’re unlikely to get a call back.
It’s tough to have to prioritise something that your leadership and management feel is not in the best interests of the company’s long term success, for the sake of a cash injection.
- No surprise here, but financial backing is way more difficult to secure when you’re a non-profit. People and companies have (usually) worked hard for their money, and even offering carrots like tax-deductible donations fails to hide the fact that donations are not investments (unless you’re looking at it from a moral or faith perspective).
This is exacerbated during recessions such as the one we are in right now.
- Getting sucked into the NGO world of meetings and admin overload is easy. It’s easy to stop being lean and agile, especially as many funders require extensive reporting, and have heavily bureaucratic processes in place (often for good reason).
Regular reflection and self-rectification are vital, and both the Board of Directors and outsiders are a great asset in this.
- Many of society’s most debilitating problems, which NGOs aim to address, are deeply systemic. Starry-eyed idealists can be brought to tears as you realise that no, your idea and your small, passionate team alone can’t rectify these.
That said, if we don’t succeed in making South Africa a more equitable and just society (our stated vision) through our educational offerings, then we need to fail. The country can’t afford to keep supporting and endorsing NGOs that are not working. How else do we explain the continued dysfunctional education system and outputs when billions of CSR and philanthropic money has been committed to this exact problem over the past 20 years, along with a disproportionate amount of the state’s resources?
- There are great people doing great things, both non-profit and for-profit. NGOs are focusing more on monitoring and evaluation, and there are pockets of great progress all over the country. Sometimes I wish we could work together better – there’s a lot of people reinventing a lot of wheels.
I have no doubt that we could have done more, faster if we were a profit-making company with the requisite investment from the start. A hybrid model remains an option. Many profit-making enterprises are making massive impacts on society, on a greater scale, than NGOs – but also, many are doing their “social washing” effectively, using small investments and even smaller long-term benefits to deliver major marketing and PR points.