Leading by (Wrong) Example

Dusk on the Playa
Dusk on the Playa
The White House recently launched a new initiative called The Social Innovation Fund (SIF). The aim of the Fund is to identify the highest performing, most impactful, nonprofits around the country, and provide the capital needed to facilitate the replication of their work. The model for the program relies on first selecting successful “grant-making institutions”, and then allows these organizations to chose promising nonprofits whose work should be scaled.  (For a more eloquent explanation of the fund, I recommend Sean Stannard-Stockton’s description.)

On its surface, this all sounds great, right? At the very least we have to admit that the whole idea is extremely well intentioned. SIF represents a significant acknowledgment from the Obama administration about the power and potential of innovation, social entrepreneurship, and the idea that community-driven solutions can affect significant, far-reaching progress. No doubt that it’s necessary to have a government that’s on board with this kind of thinking if we really expect social progress.

But there’s something about SIF that smells of exclusivity – which isn’t very democratic.

This may seem like an odd claim. What’s exclusive about promoting social innovation? Moreover, how can a $50+ million fund charged with supporting and advancing successful nonprofits, possibly be considered exclusive?

There are two reasons.

1. The kind of capital support that is being offered doesn’t address the capacity needs of nonprofit (arguably the most important piece of support they’re missing). The emphasis placed on measurable results automatically disqualifies scores of high-potential nonprofits because they don’t have the means to report in this way (yet). I will defer to Nell Edgington’s post on Change.org to explain this idea, while I dive deeper into reason 2 for the exclusivity claim.

2. The fact that SIF is designed strictly for nonprofits – those organizations with the infamous 501(c)3 appendage hanging off their names – is exclusive in and of itself. This framework continues to uphold the idea that we need to segregate organizations that make a profit from those that can make progress. If Empax hasn’t been clear enough about where we stand on this issue to date, let me polish the crystal: Profit and Progress are not mutually exclusive Ps.

Some of the brightest, most innovative, most socially-conscious minds of our time reside in the for-profit sector. And can we blame them? With all the limitations and caps placed on the nonprofit sector, it’s not news that we’re losing out on young talent. That said, it doesn’t quite seem fair (dare I say democratic) to prevent a new social venture that provides mentorship to low income students so that they can attend 4-year colleges – but is making a profit on their unique technology in the process – from being a recipient of some of this Social Innovation Fund capital.

I understand how this might come across, and wouldn’t be surprised if I’m starting to paint myself as a big, fat an anti-nonprofiteer. So let me explain further. I have no problem with the government setting up an initiative that supports all the amazing – and underfunded – work that the nonprofit sector is engaged in. On the contrary, I’m quite happy. The sector needs it – deserves it – and I’m glad to see some official, federal recognition going to the most innovative organizations out there. However, for the sake of equality, I would much sooner have called this new program “The Nonprofit Advancement Fund”. Because if you call it “Social Innovation” and then place parameters around who is and isn’t eligible based on a tax status, it seems a bit contradictory.
I know that the private sector isn’t in nearly as much need as the nonprofit when it comes to securing capital. And I’m not suggesting that the government start cutting (more) breaks for commercial companies. All I’m saying is that if this country truly wants to foster social progress – the lasting, sustainable kind – we must accept the inevitable integration of for-profit and nonprofit minds and methodologies. You’ve heard the argument for the breaking down of silos, for establishing new partnerships, over and over. And you’ve seen the trends for hybrid tax statuses: B Corp, CIC, L3C – seriously, how many new incorporations need to be established before everyone gets the memo? The two traditionally opposing sectors are – slowly but surely – finding their way to a more common, middle ground. And this spirit of collaboration is a good thing, as far as we’re concerned.

While the government hasn’t always been known for spearheading revolutionary movements (thank you engaged citizenry) they can at least support and promote the right ones. So if the Obama administration really wants to do something progressive, to show its commitment to change, it will establish a fund that doesn’t have a tax status prejudice. It will take the bold step and grant capital to the most innovative and promising ideas regardless of business model. It will allow nonprofits and for-profits to compete in the same contest (so long as the playing field is appropriately leveled) and trust that the innovations that hold the most promise for moving our world to a better place will rise to the top. Who knows, maybe a nonprofit could actually one-up a for-profit venture. And then what?…

Image Credit: jurveston

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