Bipedal business

The world of business and its non-profit counterpart have more in common than one would suspect at first glance. Both generate ‘products’ that have to find a market, and when times get tough, both quickly scramble to stay afloat and keep their customers and shareholders (or clients and donors) happy.

We’ve seen how bad the professional money-makers have been in their supposed area of expertise and their crude excesses in flush times. Now we are going to hear a lot more about the parallel fiscal and administrative mismanagement thriving in the social services as the ebbing tide reveals who is also swimming naked along the do-gooder seashore.

I have done some work for lucre-loving capitalists and found that the underlying recognition that we’re all in it for the money provides a certain bracing clarity. There’s no hint of a suggestion that one will forgo any benefit or payment due out of ‘loyalty’ to the corporate entity as, with the possible exception of Japanese conglomerates that function as ministates, the concept is absurd. You did X, we give you Y; the moment that breaks down, we don’t know each other.

Within that paradigm decency flourishes to a surprising degree. It’s as though once the nasty, self-aggrandizing, cutthroat nature of human affairs is recognized openly or even celebrated, people can relax and conduct their business with a smile. Plus, there are no ready-made excuses along the line of, ‘We’re doing such important work for humanity, how could you be so crude as to expect a paycheck?’

It’s often satisfying and sometimes inspiring to work in the ‘soft’ businesses such as providing services or promoting human welfare, but the conservatives are onto something with their criticism of these squishy entities, which I know intimately. Whole libraries have been written about their weaknesses, and one of the biggest is the founder-leader-owner syndrome in which an ambitious and often charismatic figure puts together a unique social enterprise, then fails to rise to the evolving needs of the institution (including the giving up of his dictatorial control) and eventually presides over its collapse.

One shortcoming extremely common in the nonprofit universe is the failure to apply businesslike practices and models as the organization grows in size and complexity. When the outcome being produced is not a Barbie doll or a box of oatmeal but things like ‘behavior change among X population’ or ‘recreational programs for inner-city youth’, it is not immediately apparent that a business plan, a cash-flow analysis and precise records of performance are just as essential.

Another frequent ice floe in the path of the nonprofit oceanliners is the failure to distinguish between committed and uncommitted cash, sort of like Wachovia Bank’s failure to note that subprime mortgage bonds were actually not the same as money. In this frequently appearing La Brea Tar Pit of the 501(c)(3)s, wonderful buckets of money flow soothingly in as innovative project proposals attract foundation and donor support, and managers quickly discover many other worthy schemes that can now be financed given the comforting size of the bank account.

But without disciplined attention to the business side of things, they forget that their resources are tied directly to previously agreed-upon activities. What at first glance looks like prosperity and success can turn ever-so-rapidly into a nonprofit Ponzi scheme in which new project money is thrown at the gaping holes created by unwise use of the old. No consequences ensue while times are flush, but the tightening of criteria, a shortfall in donations or the withdrawal of government contracts, even lengthy delays in reimbursement practices, all can conspire to depants the amateur social entrepreneurs.

The denouement is invariably uglier than its counterpart in the business world because a certain percentage of businesses are expected to fail, and there is a ready-made resolution of the painful situation available in the form of bankruptcy. But nonprofit ‘bankruptcy’ implies a species of fraud because inevitably a portion of the money taken in fails to be applied to the promised ends.

It’s a pity because the sorry spectacle reinforces suspicion of the entire class of agencies created to do good, and the cynical view of humankind that they purport to belie is reinforced in exactly the wrong way. Ah, bipeds.