> From the Economist > > The non-profit sector - LOVE OR MONEY > > FOR economists, the non-profit organisation is something of an > evolutionary oddity. Without the forces that drive conventional > firms-shareholders, stock options and, of course, profits-it has still > managed to thrive in the market economy. Indeed, a pioneering > international study*, published this week, shows that the non-profit > sector now accounts for an average of one in every 20 jobs in the 22 > developed and developing countries it examined. > > In the nine countries for which the change between 1990 and 1995 could be > measured, non-profit jobs grew by 23%, compared with 6.2% for the whole > economy. In some countries, they grew faster still: by 30% in Britain, > according to Jeremy Kendall of the London School of Economics, who carried > out the British end of the study. Why this remarkable expansion? > > Non-profits span a vast range. Some sell goods and services (such as > American hospitals) and compete head-on with profit-making firms; others > are religious bodies and campaigning groups, supported largely by > donations. In between, in Europe, are the Catholic and Protestant > non-profits, such as Germany's Caritas, which provide many social > services, and are financed by the state, but independent of it. Because > the Netherlands has many such bodies, it tops the list for non-profit > employment (see chart). To find a definition that fitted all 22 countries > meant including institutions such as universities, trade unions and > business associations. > > Graph - Non profit share of total employment 1995 - Source John Hopkins > University > > A clue to the success of non-profits is that their growth seems to have > been fastest in countries where government social-welfare spending is > high. That suggests they complement government provision, rather than > substituting for it. Indeed, public money partly finances many > non-profits-such as Britain's housing associations, which rely on a mix of > state cash and rents to house the poor. They are, in a sense, an > off-balance-sheet arm of government. > > At their best they are flexible and innovative. However, as non-profits > become more important, so do their shortcomings. One is what Mr Kendall > delicately terms "accountability lapses": non-profits tend to reflect the > interests of many different groups, but those of the consumer often come > low on the list. Boards of directors of non-profits are typically much > larger than those of firms, but they serve a different function. As > Rosabeth Moss Kanter, a management guru at Harvard Business School, puts > it, they "are often treated like cheerleaders who have to be given good > news so they'll go out and raise funds." > > Another problem, says Lester Salamon, one of the study's main authors, is > finding competent line managers. Moreover, management may be more complex > than in a conventional company. Because a firm typically makes money > directly from its customers, it has an incentive to provide what they > want. In a non-profit, the money may come not from the clients-the > homeless, say, or the elderly-but from a mixture of grants, donations and > charges. > > Training for running non-profits is still scarce. Michael O'Neill, of the > Institute for Nonprofit Organisation Management at the University of San > Francisco, reckons that 10m people and 100m volunteers work for > non-profits in America; but no more than 1,000 students a year pass > through management courses such as the ones he runs. Across the country, > at the Harvard Business School, the social-enterprise programme that James > Austin directs aims to ensure that MBAs who go into mainstream business > know something of running non-profits. Mr Austin recently surveyed 10,000 > HBS graduates and found that about 80% were involved in non-profits in > some way; 57% sat on the board of a non-profit. > > In fact, points out Ms Moss Kanter, the largest non-profits can attract > professionals to the top jobs. John Sawhill, a former McKinsey partner, > heads America's Nature Conservancy; Frances Hesselbein ran the Girl Scouts > of the USA and graced the cover of Business Week. "Among certain groups of > people I know," she says, "it now has a certain social cachet to say that > you are starting a non-profit organisation." Ditching the profit motive > may become the career opportunity of the future. > > * "The Emerging Sector Revisited" by Lester M Salamon, Helmut K Anheier > and Associates. Johns Hopkins University Institute for Policy Studies. > > Copyright 1998 The Economist Newspaper Ltd. All Rights Reserved. > > http://www.economist.co.uk/editorial/freeforall/current/wb9691.html > >
