Years later, after having countless conversations with Board members, Executive Directors and even funders during which they express the belief that a ‘nonprofit’ is legally and morally obligated to refrain from making a profit, it’s a lot less funny.
The language we use to talk about our work sabotages our ability to create change and have impact.
To be clear: 501(c)3 organizations, commonly known as ‘nonprofits,’ are legally permitted to rack up as much profit as they’d like. The principle difference, legally, is that they must fulfill a mission that benefits the community and do not pay out investors or board members from their profits.
And yet the belief that nonprofits should aim for break-even budgets and refrain from generating surpluses or profits persists to the detriment of the entire sector.
It shows up in foundations refusing to fund organizations that have more than six months of cash reserves in the bank.
It shows up in the epidemic of burnout spreading like wildfire through the sector as well-meaning teams stretch themselves beyond capacity to meet unrealistic goals and expectations with substandard pay.
The idea of ‘nonprofits’ not making a profit is, of course, embedded in the word ‘nonprofit’ itself at a surface level. It’s confusing, but does not really account for the depth at which the belief is embedded. Even when people at all levels of an organization rationally understand the error of their belief, it often does not budge.
If we delve into the history of the term, the challenge we’re facing becomes more clear.
In 1831, Alexis de Toqueville, author of On Democracy visited the still-young United States. As he traveled through the country, the spirit of volunteerism and collaboration he observed among the people struck him:
“Americans of all ages, conditions, and dispositions constantly unite together. Not only do they have commercial and industrial associations to which all belong but also a thousand other kinds, religious, moral, serious, futile…Americans group together to hold fetes, found seminaries, build inns, construct churches, distribute books…They establish prisons, schools by the same method…I have frequently admired the endless skill with which the inhabitants of the United States manage to set a common aim to the efforts of a great number of men and to persuade them to pursue it voluntarily.”
These voluntary efforts, people coming together for the benefit of the broader community, form the foundation of what eventually became the Nonprofit Sector. ‘Voluntary’ is a key term.
As time went on, these voluntary organizations needed money to cover the costs of their operations. So the government stepped in to help. Between 1894 and 1969, a series of Revenue Acts put the defining principles of the 501(c)3 designation into place. To paraphrase the convoluted legal language:
- Federal income tax exemption for organizations operated for charitable purposes;
- These organizations had to be free of private inurement. In other words, the income could not be used to benefit an individual related to the organization;
- Contributions to these organizations were tax deductible.
These regulations were put into place to preserve the spirit of volunteerism and community spirit that so impressed de Toqueville.
Over the years, nonprofit organizations, and the sector has a whole, has evolved as the demands placed on the sector have increased. Where nonprofits once held ‘fetes’ and built schools, now they are responsible for everything from providing healthcare to working to end homelessness to protecting the global environment. Meeting these needs much more than a can-do spirit of community and volunteerism.
Our organizations require professional staff, well-run organizations, and the ability to scale operations to expand impact.
There is palpable tension between where the impact sector needs to go in order to meet society’s needs and the entrenched culture.
This tension is no secret. People who work in the sector feel it every day. Dan Palotta’s TED talk, The Way We Think About Charity Is Dead Wrong, explores it through his own experiences and observations. The entire talk is well worth watching, but the call to action is particularly stirring: he asks that we take responsibility for the thinking that has been handed down to us, revise it, and reinvent the way that humanity thinks about changing the world.
It’s a big ask. And its lack of specificity dooms it to failure.
What concrete steps can we take to reshape the culture of our organizations?
Here are some ideas:
- Pay attention to the language you use to describe your work and your organization. What are the assumptions underlying commonly used terms. For example: almost all organizations use the term ‘donor’ to refer to those who offer financial support. The word comes from the Latin root ‘donare,’ meaning ‘to give as a gift.’ In English, came into common usage in the early 20th Century in reference to blood or organ donation.
The word ‘donor’ implies a one time, one way transaction.
The word ‘contributor,’ used much less frequently, comes from the root ‘contribuere,’ meaning ‘to bring together or add.’ The implication is that of community coming together on an ongoing basis to co-create.
Would you rather be a ‘donor’ or a ‘contributor?’ How might it change your conversations with supporters to think of them as ‘contributors’ instead of ‘donors?’
The single word choice completely changes the dynamic of relationship. It’s a simple change you can make today.
- Have tough, honest conversations both internally and with funders. Years ago, when I was a Director of Development, a foundation’s program officer called me to say that her foundation couldn’t support us because we had too many months of cash in the bank. To their Board, this indicated an irresponsible use (or non-use) of funds.
I pushed back, explaining that we had consciously cultivated that reserve as an internal line of credit to cover projected lean months and invest in our infrastructure. She took our conversation back to her Board and they ended up awarding us the grant. More importantly, they changed their policy going forward.
That one conversation that, frankly, I’d been terrified to have, helped changed the culture of the foundation and, potentially, benefitted many other organizations. Courage, transparency, and advocacy are all necessary to shift culture and beliefs.
- Stop using the term ‘nonprofit.’ Fresno State University offers a program called ‘Humanics.’ For all intents and purposes, Humanics is a nonprofit leadership development program. It covers all of the usual suspects: grantwriting, evaluation, leadership strategies, and so on. But if you look at their webpage or talk to anyone associated with the program, you’ll never hear them utter the word ‘nonprofit.’
Instead, they refer to 501(c)3 organizations as ‘Community Benefit Organizations’ or CBOs.
The students who graduate from the program bring a new language, story, and culture into the organizations they join. But you don’t have to wait for them.
Use 501(c)3. Or ‘Community Benefit Organization.’ Or ‘Social Impact Organization.’ Whatever works for you. The more quickly we phase out the outdated language and the core beliefs embedded within, the more quickly we can build a culture that supports the deep, far-reaching, and transformative work that the world needs.
Ultimately, we cannot ‘reinvent’ the culture of nonprofits while still retaining the existing language and cultural narrative. Every time we use the term ‘nonprofit,’ we invoke its history and origins. We reinforce old narratives. We keep the culture locked in tension with itself.
Changing the culture will take nothing less than a revolution. And that revolution starts at the most basic level. It happens one word, and one story, at a time.