March 9, 2006 | Read Time: 2 minutes
Encouraging charities to adopt business principles is gaining popularity as more wealthy donors around the world look for ways to maximize the benefits of their philanthropy, according to a 14-page special report in The Economist (February 25-March 3).
“Many of the new philanthropists are well aware that traditional philanthropy is not sufficiently businesslike,” the magazine writes. “They want to bring about a productivity revolution in the industry by applying the best elements of the for-profit business world they know.”
Among the tactics:
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Creating business analysis for the charity world. New Philanthropy Capital, in London, was founded by former Goldman Sachs officials to conduct research on nonprofit groups and share the information with the public. Geneva Global, in Wayne, Pa., offers donors research into small charities abroad and provides them with a monthly list of its evaluations of particular projects.
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Arranging loans for nonprofit groups. To expand, charities often need resources beyond what they can immediately raise. Venturesome, a program of England’s Charities Aid Foundation, arranges loans for charities, often to cover the gap before an expected grant arrives.
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Finding ways to better recruit and retain top talent. The article cites Wendy Kopp, founder of Teach For America, in New York, as a model of nonprofit success. From the start of her organization, which places recent college graduates in schools attended largely by needy students, Ms. Kopp made it clear that only top graduates would be accepted into the program. Last year the group received nearly 100,000 applications for 14,000 spots.
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Sharing lessons learned. “Smart nonprofits are realizing that they can do well by being more transparent, and talking about their successes and failures,” says Tony Knerr, a philanthropy consultant.
The “new philanthropists” who hope to use business tools to banish waste in charities need to pursue several avenues, including greater transparency and acknowledgment of failures, to accomplish their goals and set them on par with past philanthropic giants such as John D. Rockefeller.
“If the new generation of philanthropists get it right, they too can make a real difference in the world,” the magazine says. “But for that to happen, philanthropy will have to shed the amateurism that still pervades much of it and become a modern, efficient, global industry.”
The article is available online at http://www.economist.com.
