Shariq Siddiqui: Not-for-profits need to maintain innovation

As governments reduce their funding of social services, they are looking increasingly to philanthropy—including the not-for-profit sector—to fill the gap. The problem, of course, is that the not-for-profit sector lacks the resources to fulfill the growing social needs in our society.

The not-for-profit sector can do important work more efficiently and can innovate in a way that government cannot. However, increased government funding for specific not-for-profit programs can crowd out more flexible funding that a not-for-profit receives from private donors. The result is not-for-profits that become like quasi-government agencies.

Foundations and corporations seem to follow suit, providing fewer general-operating dollars for not-for-profits and moving instead toward programs that support very specific outcomes. Some of those funders—frustrated by what they perceive as a lack of progress—push not-for-profits to mimic business.

This worldview reflects a lack of understanding of the role and nature of the not-for-profit sector. It is a worldview that fails to understand that not-for-profits are far more complex than business, in part because they are not just focused on the bottom line.

In some measure, this challenge comes from the definition of philanthropy, which means the love of human kind. Robert Payton offered us a revised modern version: voluntary action for public good. Dwight Burlingame refines this further as voluntary action intended for public good. All of these definitions are valuable frameworks for thinking about making the world a better place.

However, philanthropy at its inception comes from the story of Prometheus stealing fire from Zeus (God) and giving to proto-humans in the hope that they can develop. For this, he was punished for eternity. While the story of hope, innovation and problem solving is inspiring, it is disturbing that this definition seeks to suggest that we can have better outcomes if we move from faith and toward science, as if they are mutually incompatible.

This paradigm fails to embrace a worldview that is more consistent with the traditional role of philanthropy. Muslim philosopher Muhammad Iqbal argues that the Alchemist is a better allegory for our purpose. The alchemist, while visiting God, spots scientific formulas. He copies them down and then, with God’s permission, shares these with humanity. This paradigm embraces science but understands the importance of a leap in faith.

Why should we care about these age old definitional struggles of philanthropy? Because understanding the importance of a leap of faith in making the world a better place is being replaced by those seeking outcomes that we can see, which limits innovation. Innovators and entrepreneurs (business and philanthropic) sometimes have to go beyond that which we know is achievable.

Philanthropy’s most important role is to innovate solutions for the world’s problems. Looking at the philanthropic and not-for-profit sector as a way to bring private resources to public problems or as contractors limits the amazing impact philanthropy can have in our society.

Government, foundations, corporations and major donors should be focused on the broader health of the not-for-profit organization through greater general operating (and discretionary) funding. They should ask the not-for-profit to suggest evaluation and accountability mechanisms that will provide the donor with important reporting, while helping the not-for-profit become better.

This approach does not create sound bites for public consumption but develops a meaningful ecosystem in which the three sectors (government, business and philanthropy) come together in making the world a better place.•

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Siddiqui is an attorney, has a doctorate from the Lilly Family School of Philanthropy at IU and leads the Association for Research on Nonprofit Organizations and Voluntary Action. Send comments to ibjedit@ibj.com.