There are a number of tools that exist in the for-profit sector that lead to greater efficiencies. Some are about raising capital – for example, the more successful a for-profit business gets, the easier it gets to raise capital. The opposite can be true in the nonprofit sector – where early donors can feel left behind as an organization starts to grow.
Another missing tool is buyouts. When you buy a for-profit company, you buy their staff, assets, and revenue stream. On the nonprofit side, when funders are dedicated to a particular organization or its leader, the revenue stream may disappear as a result of the acquisition.
I’m not sure this is the only reason we don’t see buyouts in the nonprofit sector, but it might be part of the reason.
Laura Otten, director of The Nonprofit Center at La Salle University, has also written about nonprofit buy-outs on her blog, “Nonprofit University.” Check it out at http://www.nonprofituniversityblog.org
I read this post with interest and continued on to read the piece Joan recommended by Laura Otten. While the obvious consensus is that there is no bail-outs-for-non-profits.org happening anytime soon; it does beg the question of whether the not too distant cousin of buy-outs, Mergers and Acquisitions could serve to improve efficiency within the not for profit sector.
The list of top 100 non-profits in the US (based on revenue size alone) has remained more or less stagnant for the past 20 years. However real estate on the Fortune 500 list is constantly being upgraded to reveal the most effective revenue generating companies. While we all know that the larger the revenue the more effective the institution is definitively not the case in the social sector, perhaps the threat of a bigger, better, richer older sibling swooping in to take over operational headquarters and cut or outsource less efficient functions would serve well to increase accountability and transparency with charitable dollars. Guess that threat didn’t serve Wall Street to well but at least the option was available for the failing ones and their employees.