Should You Need a License to Make a Difference?
Since my recent post encouraging would-be nonprofit founders to think again before converting their passion and ideas into a 501(c)3, I have been excited to see the great conversation around this issue. Thanks to everyone who has weighed in thoughtfully on entrepreneurship, innovation and replication - those who gave me an amen, gave me a strong rebuttal and, last but not least, gave me a raise. Since this issue seems to have struck such a nerve and it's not as black and white as to found or not to found, I think there's still more conversation to be had about how we can achieve a balance that benefits society.
Geoff Livingston suggests rather than discouraging entrepreneurs, who we're not going to be able to stop anyway, we should help them be successful by providing education and resources. That was my thought with suggesting people pursue incubation or fellowship programs - so that new ideas and models can flourish with help - but the existing programs obviously will not accommodate all the innovators ready to start up. I agree that smart innovation and unique entrepreneurial ways of addressing social problems makes the sector stronger and keeps established organizations on their toes by challenging the status quo. But can we encourage the social innovators we need while redirecting people who have passion and ideas, but who would be more effective as part of an existing initiative?
I will also concede Colleen Dilenschneider's point that even if the new nonprofits fail, there's nothing like hands on experience to teach leaders what it means to run an organization. She cites a 2006 Bridgespan Group study, which says the upcoming leadership deficit in the nonprofit sector will require about 640,000 new senior managers in the next 10 years. No doubt experienced young people will be in high demand. But is there another way these Millennial leaders can capture this learning experience without spending charitable dollars to no other end than knowledge of how to do it better next time?
My colleague Eric Johnson added his thoughts as well, comparing the nonprofit and for-profit sectors. He suggests that as a nonprofit startup, it can be more difficult to know if you're making progress because we don't have great established metrics for success, market valuation, and other mechanisms of the for-profit world. And while many nonprofit leaders are starting to recognize that you have to treat donors like consumers, the structure is complicated because the people who are funding your work are often different, and may have different interests than, the people you are serving.
So what are some possible solutions? As Geoff and I talked more about it, we tossed around one idea. If nonprofits are charged with looking after the social health of our communities, like doctors are charged with looking after our physical health, why shouldn't nonprofit leaders have to be certified to operate? If we require something more of doctors than just a desire to make us well, should we require something more of nonprofit executives than just a desire to make a difference? People have to get licenses to do our taxes, to drive our cabs, to cut our hair, and apparently to collect our rags (see photo), but we are going to give them our extra income without having any guarantee they know how to use it effectively to make the world a better place?
In an ideal world, we would all do thorough research to see how effective organizations are before we give our hard-earned money to them, but the reality is most of us don't. The average person does not have Guidestar bookmarked and is not motivated to break his piggybanks because he sees a tightly run NGO. We don't check nonprofits' 990s, what executive salaries are or how much goes to overhead. Research has indicated that including that financial information in an appeal actually makes donors less likely to give than if they receive an emotional appeal alone.
I know increased regulation sounds like a big Debbie Downer, but it can protect and benefit both donors and nonprofit founders. Is it better in the long run if someone spends two years in a program learning how to run a successful nonprofit than if they spend two years wasting money and time, jumping in before they're ready? If we have a nonprofit version of Bill Gates, Steve Jobs, or Mark Zuckerberg, who have all achieved amazing success and benefitted society without even a college degree, it may not serve us to delay their brilliant innovations, so exceptions would have to be made, but most people fit the rule and not the exception. Maybe a license requirement is just another roadblock, but it's helped me to trust my dentist, my accountant and my stylist as professionals. I think we should brainstorm and consider ways to help steer and encourage people with entrepreneurial passion and ideas toward the smartest choices and the greatest social good.
Comments
I think that certification for nonprofits within the executive team -- i.e. one certified exec in the 501(c)3 -- makes sense. Let's be frank, Bill Gates can afford to hire one. And, if someone doesn't want to go through the process, they should be encouraged to become a social entrepreneur with an LLC. Certainly an admirable way to affect society positively, but at the same time, this protects 501(c)3 status to some extent.
Bad management will always be bad management, but at least this could root some of this out. It's an interesting idea! I wonder if it could be implemented by state, as opposed to waiting for Congress to do it (ugh).
More government is not the answer to people making bad choices about the nonprofits they support or poor management of those nonprofits. Accreditation of the organizations through an appropriate association (such as what ASAE does for association executives) makes more sense and keeps the government out of it. This should still be optional.
Government doesn't discourage people from buying useless products and it doesn't require parents to be licensed (although there are certainly circumstances where that would be a good idea).
I think it is up to the donor to use the information available to make their own determination about the benefits of giving their money to an organization. An organization's % of fundraising cost or overhead is, alone, not enough to determine whether a contribution is indeed warranted or if the organization is well managed. A high CEO salary is often an indication that the nonprofit has a strong business leader running it. It would be wrong to use that information alone to judge their viability or the effectiveness of their product.
Someone with an idea and the heart to start a 501 (c) 3 deserves a chance to do so, at risk of failure. If they fail, then they may learn enough to start again and use their experience to strengthen and succeed the second time. I don't see anything wrong with that and I think preventing them from the opportunity might stifle some of the much -needed innovation.
I understand where you're coming from, but I have to disagree.
First, I think it's a problem that this need for certification seems to be discussed only in relation to grantseekers. Surely, by your argument, grantmaking executives should be licensed as well. They're employed by nonprofits, too. I mean, shouldn't you think twice before you start your own foundation when someone who knows better could give your money away to much greater good? And what qualifies grantmakers to be arbiters of social priorities anyway? Judging from the fact that you work for the Case Foundation and not the Case Fund at the Bill and Melinda Gates Foundation, there's a possible double standard here, which is, I think, telling. If you can't trust grantseekers with charitable dollars, you can't trust grantmakers either.
Second, nonprofits are not "charged with looking after our social health" but after some particular good that happens to be in the public interest, so the argument from analogy fails. A nonprofit executive doesn't commit to doing much more than obeying all those laws nonprofits have to obey as they advance the charitable purpose for which they received the exemption. While it's true that we require licenses to marry, fish, drive, prescribe medication, perform surgery, etc., we don't require parenting licenses. Certainly, parents have as much or more to do with social health than nonprofit institutions, so, by your logic, licenses are equally, if not more, necessary.
If there's any analogy at all, it's that the tax exemption is itself the license to do this work. It takes quite a bit actually to get and maintain your exemption. If you're able to do that, isn't that enough?
Besides, licensing doesn't necessarily make those licensed more effective. There are good and bad drivers, good and bad surgeons, and good and bad nonprofit executives. They all get the license, and, if they fail miserably or do serious harm, we take the license away. But even among the licensed, there is significant variation in performance. The question then becomes: who should get the license and for what reason?
Your argument seems to be that some additional certification should be required to get or maintain the exemption. I think we would just be erecting new and unwarranted barriers to entry, which would only reduce the presence and perspective of marginalized populations in nonprofit work, particularly, as in Geoff's suggestion, executive positions. Licensing of the kind you seem to be talking about on top of the exemption wouldn't make our sector any more effective or accountable, just more professional, which isn't always the same thing.
Thanks Geoff, Katherine and Madmunk for your comments. I'll just add that the purpose of this post not really to push a licensing requirement specifically, but to spark and promote the discussion of ideas that will make the sector stronger and use Millennial energy and ingenuity more effectively.
Based on the response to my last post about what nonprofit founders should consider before striking out on their own, I saw a strong opposition to what seems like endless nonprofit startups that duplicate existing efforts, compete for resources and do a mediocre job of serving communities. But I also heard that simply telling entrepreneurs not to start is not the answer.
To work toward a middle ground of encouraging innovation and new models without suffering an influx of redundant or weak new organizations. I began tossing around the license idea as an example, but I hope this can be more of a brainstorming discussion than a debate over whether licensing hits the nail on the head.
If you hate the licensing idea, I would love to hear other ideas to address what seems to be a problem in the nonprofit community.
The questions you pose in your first post are all very reasonable and I would encourage their use as a tool for anyone starting or going into nonprofit work. However I don't believe they should be used as prescriptive measures to determine the value or validity of someone starting their own NPO. They are sensible and they are spot on with regard to what it takes and what should be considered. But just as we cannot mandate or dictate on whether or how someone starts their own retail establishment, restaurant or artisan business, I don't believe setting mandates or restrictions on NPO start ups is healthy. Nor does it encourage innovation. It stifles the many who could possibly be the one that makes a difference. It is antithesis to what NPO's are all about.
To require a licensor however is an interesting discussion. If we look at current licensor requirements, we would find most of them are around fields that have the potential for harm: Financial services: Giving someone direct advise on how to manage Their finances, has the potential for serious harm, through fraud and poor counsel. The same holds true for Law.
Medical: Self evident
Food distribution: Potential for physical harm through lack of appropriate safety and health measures.
Of those few licenses required that do not meet the above hypothesis, rag picker among them, is the attempt to coordinate, consolidate, validate and yes, sadly, earn revenue for the government, by requiring licenses to engage in the line of work. I would presume to believe no training goes into acquiring a license for picking rags (although I may be wrong). The license is merely an attempt to enumerate the masses of rag pickers, legally control their presence in the streets and byways, and to generate a line of income for the state.
So it appears as licensing could fall into two distinct categories: Licenses for safety, health and welfare, that has as a prerequisite some training or education required.
Licenses for enumeration, validation and revenue for the state, no training presumed to be required.
Of which would the NPO license fall into, why and how?
I don't doubt that there are weak organizations out there and that we should do our best to improve performance, but I object to the privileged professional philanthropic frustration with "too many nonprofits."
You can't encourage new models without "redundant or weak organizations." How many filaments did Edison test before finding one that worked the best for the light bulb? Weak organizations that get weeded out are part of what reveals what works. It's called failure. It happens. And it's going to happen a million times because we're human. The idea that you can "work toward a middle ground of encouraging innovation and new models without suffering an influx of redundant or weak new organizations" is a search for perpetual motion.
What seems to be a problem isn't really the problem you think it is. You can't have too many nonprofits.
If there are, then why don't you start with foundations? After all, why should we tolerate foundations that, as you say of nonprofits, "duplicate existing efforts, compete for resources and do a mediocre job of serving communities?" There are some 70,000 foundations in this country. Are they all exemplars? Certainly not. But this notion of "too many nonprofits" is seldom applied to the grantmakers. Why? Because the idea that you can have too many people giving away money for good is ridiculous, and so should be the idea that you can have too many people engaged in this work.
In the book A Force More Powerful, which details nonviolent resistance in the 20th century, the authors quote an activist involved in resistance to the Nazis, who argued that, when it came to resistance, if the effect was the same, he would rather have 10,000 engaged in the work of one. Engaged in a campaign of noncooperation, what mattered wasn't delivering the deathblow to the Nazi scourge. That was either impossible or extremely unlikely for people in conquered territory. The point was to do something else, anything else, and get as many as people as possible doing it. Take the Polish resistance to the Soviets. They created "flying universities," alternative newspapers, built Solidarity. Why? Because those things were Polish things, not Russian things. Sure, one person probably could have written a better literary magazine, but it's better to get ten people doing Polish things than have nine still doing something associated with the Soviet Union. The whole point was for the opposition to wake up one morning and realize that everybody was doing for themselves and that, despite the opposition's military superiority, they were no longer in control. Granted, having 10,000 when one would do is a formula for inefficiency, but it's also a formula for democracy. An unlicensed, even illegal, "influx of redundant or weak new organizations" succeeded in defeating the Nazis in Denmark and the Soviets in Poland. What does that say about our frustration with all these new start-ups?
The point isn't always to have "impact;" the point can be building a place where individuals in the community can associate in ways that allow them to understand one another and themselves in a way not always allowed by the other sectors. That's why I've always liked the "non" in nonprofit. It's not about profit. It's not about what we do in the other sectors. It doesn't have to be incredibly efficient, or particularly effective, or win your vote. You don't have to like it. Those organizations that aren't doing great work will eventually pass on, and that's okay. It's never a complete waste.
Because, for a while, at least in principle, people were doing something that wasn't about the profit motive or political expediency. And I hope 10,000 people find something worth working for that isn't about votes or dollars every day. And I hope it galls the impatient foundations who have to sift through their requests because they should hear that people are doing something for themselves and others and could use their help, if they're willing.
Because that's democracy. It amazes me that we seem to have such a problem with it.
Madmunk~
Who is we, kemosabi?
What you have laid out is your passionate, compelling personal philosophy. Well articulated too. And I honor that in you. Namaste.
However I think the question, as all questions, remains valid. Theoretically a proliferation of nonprofits could justifiably identify the one thing, or the one person, or the one group, to make a difference, crack the wall. But this raises additional valid questions about efficiency and about expediency. About oversight and about regulations.
No one can dispute that nonprofit financial accounting is a mess. In the research delivered by the Independent Sector in 2005, and supplemented in 2006, they highlight the SOX act and its impact on NPO. They also illustrate the lack of cohesive accounting and oversight standards in the NPO sector.
Given that in 2005, nonprofits employed 12.9 million people - or approximately 9.7 percent of the U.S. workforce, we should be entertaining more of such questions. The fact that this is greater than the number of people employed by the financial services sector should cause us to pause.
We don't have to lose our ideals, philosophies, freedoms in exploring the solutions. I think the question(s) are valid and in need of further dialogue, as well as expansion.
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