The Future of For-Profit and Nonprofit Organizations

There is a strong current trend within the business community toward social entrepreneurship — where people are combining their business acumen with a drive for social justice to develop businesses that benefit the greater good. Whether incorporating charitable or cooperative features into a for-profit business or integrating solid entrepreneurial principles into developing a nonprofit, social entrepreneurship is driving a much-needed change in the way we do business.

For-profit business owners are becoming more conscientious of their responsibilities to the community and the world, and are seeking out ways to incorporate those concerns into their business models. Going Green is more commonplace, where the internal systems of a business are designed with the environmental impact in mind. From reducing paper use and other waste to designing office space with green materials, there are a million options for preserving the environment, and the innovation of entrepreneurs is turning out new ideas every day.

Conversations and advice on for-profit exit strategies now often include ESOP opportunities. An ESOP (employee stock ownership plan) essentially turns over the ownership of a well-developed company to the workers. ESOPs can be implemented in whole or in part, where the rest of the company is owned by regular stockholders or the founders themselves. History has shown employee ownership to be very effective — often both productivity and profitability results are significantly higher in these companies. And, obviously, the employees themselves are more dedicated…they not only feel more ownership, as corporate trainers try so hard to instill, they actually have ownership over the job they do every day. Age-old ideas like cooperative ownership, where the business itself is owned by the workers or the consumers, should see a reemergence through this current economic debacle. However these businesses are technically organized, the end result is a venture with a social conscience (they exist to benefit the members) and an inherent need to survive economically (thus must be managed with solid business fundamentals).

On the nonprofit side, incorporating entrepreneurial ideas and sound business practices can make all the difference in the success of a charitable organization. The classic idea of scraping together pennies and underpaying staff as a badge of honor doesn’t have to be. People working for the betterment of the world shouldn’t be relegated to Top Ramen and 20-year-old cars because they elect to work for the public good. By applying solid business fundamentals (and a little entrepreneurial creativity) to just about any nonprofit organization, there are ways to sufficiently fund the overhead while still reaching the vision of the project.

Some poverty-focused nonprofits are finding great success in establishing the nonprofit as the owner of one or more for-profit corporations. Here, the for-profit business retains the flexibility and motivation of a profit-driven company, while those profits flow directly to the nonprofit coffers to finance the stated purpose of the organization. In some cases, these for-profit businesses are developed with the intention of turning ownership over to locals once the business is stabilized. This sort of program meets the “teach a man to fish” proverb — by establishing the business with knowledgeable professionals overseeing the operations, the locals are provided an unmatched opportunity to learn the elusive entrepreneurial skills so important in recovering an economy on any scale.

Ultimately and ideally, the bulk of new business will lead the charge to incorporate social justice with profitability. At some point, the line between for-profit and nonprofits will be so blurred as to exist in name only, and eventually be fundamentally extinct. That isn’t to say there won’t be opportunities for individuals to build personal wealth, but hopefully it won’t come with the same predilection to rip off everyone else in the process — as we’ve seen revealed so blatantly through this recession!

Pungky Dwiasmoro Hiswardhani

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