“Nonprofit” or “For-Impact”?
I have been working in the “nonprofit” sector for a decade. It still doesn’t make sense to me that an entire industry is defined by what it doesn’t do, rather than what it stands for. I believe it’s time for a more public dialogue about rebranding the nonprofit sector as the “for-impact” sector. To get the discussion started, keep reading and please share your thoughts with us or contact me directly @ericfacas on Twitter if you’d like to continue the conversation.
Not-For-Profit Tax Designation
The IRS grants tax exemptions to organizations that work “for public benefit”. While the IRS doesn’t require that each organization measures their impact in order to maintain their tax free status, they do have several restrictions in place to ensure profits aren’t taken out of the business.
These organizations have always been commonly referred to as “nonprofits,” which is a bit misleading because plenty of organizations with a nonprofit tax designation make significant profits, even some in the hundreds of millions of dollars. What makes them a nonprofit is simply that they can’t take money out of the organization the same way a corporation can. There is no company stock or dividends paid to executives or shareholders. That’s because there are no shareholders. Nonprofits are technically not owned by anyone.
However, nonprofit executives can pay themselves as much as they’d like, provided that the board of directors approve their compensation and their salaries are made public in the organization’s yearly 990 tax returns. It is possible for the IRS to revoke an organization’s tax exemptions if they deem that an inappropriate amount of the organization’s funds aren’t going to their mission – but they don’t provide exact ratios, which leaves a lot of wiggle room – especially at large nonprofits.
That said, there are a lot of nonprofit executives with 7 figure yearly salaries, which comes as a surprise to some. While it’s not fair to villainize anyone for their financial success, it does seem a little out of place for someone to earn millions of dollars per year while claiming that they are dedicating their lives to helping people who are struggling to survive.
What About Charities?
Very early in my tenure in this industry, I used the words charity and nonprofit interchangeably on occasion. It wasn’t long before someone told me their organization wasn’t a charity. They were quite incensed by the idea that I had assumed they needed some sort of hand-out like the literal definition of the word charity implies. While the vast majority of the people working in this industry wouldn’t be offended by someone referring to a 501c3 nonprofit as a “charity,” it’s not worth offending the few that will take exception to the idea.
More importantly, the term charity fails to encompass the larger range of organizations that fall under the nonprofit umbrella. For example, there are nonprofit schools, hospitals, and theaters, just to name a few types of nonprofits that would be inaccurately labeled if they were referred to as a charity.
The Rise of The Social Enterprise and Corporate Social Responsibility
The not-so-new trend of social enterprises has continued to build momentum over the past decade. These are the organizations who place their mission to do good in the center of their business, like Toms Shoes with their buy-one-give-one model. It’s hard to find a large corporation that doesn’t have a Corporate Social Responsibility department, albeit sometimes they are teams of one. Some companies have their own foundations and are doing incredible work in their local communities. Chobani is a great example of this type or corporate philanthropy.
Others companies have leveraged partnerships with nonprofits as a means to highlight their compassion for giving back. Media Cause recently helped Stand Up to Cancer and Mastercard on a wonderful cause marketing campaign. Corporate philanthropy is definitely on the rise, with or without partnership from a nonprofit. Brands like Nike and Gillette have made a noble effort in the past couple of years, using their advertising prowess and media budget to educate the public on important social issues, just to name a few.
All of these efforts from a growing number of for-profit organizations are playing a big role in creating more momentum for positive social impact in the world. While there is certainly room for improvement (See Media Cause VP of Creative + Brand Strategy Amy Small’s take on the state of cause marketing for brands if you’d like to dig deeper here), they are doing important work nonetheless.
The big insight that these organizations have uncovered is that their customers, and a majority of consumers for that matter, care about the integrity of the companies that they choose to do business with — we vote with our wallets.
How companies treat their employees, how they source their materials, how they treat the environment, what they stand for and what they do with their profits all matter today more than they ever have in the past.
Whether we’re talking about social enterprises, corporate foundations, or cause marketing campaigns, these initiatives are largely being led and funded by for-profit companies. Positive impact isn’t solely the responsibility of the nonprofit industry and it’s important that we embrace the contributions coming from everywhere.
We Believe Change Belongs to Everyone
This includes nonprofits, foundations, philanthropists, educators, socially-responsible companies and anyone who is willing to support these organizations fighting for a better future. At Media Cause our roots are in “nonprofit” marketing, branding, fundraising, and advocacy but we realize that we can make a greater impact by serving a broader clientele.
We don’t use IRS tax designation as the determining factor of whether we can help a client or not. Instead, we ask “What’s your mission and can our services help create a bigger positive impact?” We work with organizations of all shapes, sizes and corporate structure to achieve their greater good. Our North Star is impact, that’s how we define our agency. But for the record, we won’t be the least bit offended if you call us a nonprofit marketing agency out of habit.
About the Author
Eric Facas, Media Cause Founder & CEO
After 10+ years as a digital marketer for tech companies and startups Eric shifted course toward social impact in 2010, founding a purpose-led marketing agency Media Cause. As CEO Eric has led the agency’s growth into a market leader with hundreds of nonprofit and mission driven clients and offices in San Francisco, Boston, Atlanta, and Washington, DC. Eric’s passion for developing scalable solutions to important global issues has continued with the creation of the advocacy platform, Rally Starter, and nonprofit incubator Social Good Labs.
Earlier in his career Eric spent five years at Google where he helped launch new programs, built teams, and ran Google’s SEM Agency Council. In 2008 Eric received an EMG/Founder’s award from Google’s Executive Management Group for his work on the creation and rollout of the multi-billion dollar AdWords API program. When not at work Eric can be found hiking, mountain biking, or at the beach in Marin Country, CA or Kauai, HI with his family.