16th Largest Economy

Posted by Joan Ulmer on May 22nd, 2019 in Thoughts & Commentary

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The Three Estates
The Three Estates

When did the for-profit sector join the second estate? When did we decide to view the for-profit sector through highly glossed rose-colored glasses, or even blinders?  Yes, America is a capitalist society, where money is king (another nobility reference).  But the nobility have been questioned, even deposed, over the centuries. 

If you want to understand the US economy—what drives it, makes it tick—you’ll find much to read and learn about the three sectors of our economy.  The “primary sector,” is often referred to as the “extraction” sector, as it is about just that:  extracting raw materials from the earth.  Think mining, oil, gas, fishing, agriculture.  The “secondary sector” is also known as the manufacturing sector—the one that produces goods to sell.  Lastly, there is the “service sector”—the sector that produces intangible goods and services sold directly to consumers.  Where in that typology is the nonprofit sector?  It isn’t, with the exception that health care, more likely than not to be a nonprofit, is subsumed in the service sector.  And, for those who want to go beyond the classic tripartite vision of the economy, there is the knowledge industry (the fourth sector), which includes education, capturing another group of nonprofits, and, lastly, the fifth sector, which is nameless, but includes government and other big decision makers.  No nonprofits there.

It makes no sense that nonprofits are excluded from typologies of the US or global economy.  If the global nonprofit sector were a country, it would have the 16th largest economy in the world.  (The most recent count shows 195 countries in the world).

Getting back to the US, it is harder to determine the sector’s contributions to the GDP, as we don’t exist in most calculations of what goes into the GDP.  As of last May, the Bureau of Economic Analysis said that the US nonprofit sector contributed approximately $985.4 billion to the economy, comprising 5.4% of our GDP.  That puts us in the top 10 contributors to the GDP.  Ahead of us, at number five is a category labeled “Educational services, health care and social assistance,” contributing 8.7% to the GDP.  Without doubt, many of those businesses counted in that category are nonprofits, most likely along with government agencies.  The point here is that the nonprofit sector is a player when it comes to making our economy churn.  Add to this all, reports that show the growth of the sector outpacing for-profits and government, increased hiring, and you have a sector with serious heft.

And yet, we—meaning those of us inside the sector, as well as those outside our sector—continually demean and disrespect ourselves and sell ourselves so short.  Case in point:  the sector’s embrace of “skills-based volunteers”—those that bring their for-profit skills to the poor and needy nonprofits, believing that any help is better than none. 

For-profit skills are taught, developed and honed within the demands, expectations and, perhaps most importantly, the culture and core values of a for-profit.  These expert skills do not translate stroke for stroke, if at all, into the demands, expectations and culture and core values of a nonprofit.  Some survive better in that act of translation, such as key HR practices like performance management and on-boarding, while others fail, such as compensation and professional inducements. 

The skills of a 21st century marketer can easily translate from sector to sector, so long as adjustments can be made to scale and budgets, and an acceptance of the fact that something that is “too glossy” seems negatively slick in the nonprofit sector and raises the suspicions of too many supporters as to just how money is being used in that poor nonprofit and that whatever is designed must be able to be done by .25 FTE. 

There is nothing in the world of for-profits that equates to governance in the nonprofit sector, to fundraising and volunteer management.  Strategic planning in the for-profit sector is top sort of down, while in the nonprofit sector it is absolutely bottom up.  You cannot, and should not want, to force a square peg into a round hole.   If by some chance you succeed and the square peg passes through that round hole, there will be undeniable damage done in the process.

We make this mistake every time we bring unaware, skills-based volunteers into our sector, every time skills-based volunteers come into our sector unquestionably believing (as they so often do) that for-profits do it all right and nonprofits do it wrong.  Every time a foundation endorses skills-based volunteers, those who do their volunteer work to feel good about themselves and about the for-profit company for which they work, they are valuing the volunteers above that of the nonprofit. 

They are disrespecting the nonprofits and the ever growing cadre of nonprofit business experts who have the skills, experience and understanding of what makes a nonprofit different from a for-profit, what makes our culture and work so special that one in every 10 employees in the US economy prefers to work in our sector.  Every time a nonprofit board provides a former for-profit executive an encore career opportunity by hiring that person as an executive director because s/he ran a business, they are dissing the thousands of alumni of the more than 100 graduate programs in nonprofit leadership/nonprofit management who have not only put in their time working in the trenches of mission-driven businesses, but have carved out the time to learn the theory, science and tactics needed to run that mission-driven business.

If we want the best results—(not just ok) — we don’t hire MBAs to do surgery, surgeons to run restaurants, restaurateurs to design skyscrapers.  Why, then, do we allow and encourage those who know nothing about our business to tell us what to do?

*The nobility, dating from pre-revolutionary France.

The opinions expressed in Nonprofit University Blog are those of writer and do not necessarily reflect the opinion of La Salle University or any other institution or individual.

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