Nokia CEO Stephen Elop wrote an internal memo recently that’s been making the rounds. In a nutshell, he writes that Nokia — the long-time market leader in mobile — is in danger of losing its position, and that it needs to change or die.
His memo is remarkable for its urgency and candor. It reminded me of a pivot I got to witness first-hand in 1995, when Microsoft admitted that it had missed the boat on the Internet. In the ensuing six months, it ended up dominating a market that it had been completely ignoring.
Reading the Nokia memo got me wondering about nonprofits and foundations. Has there ever been a similar pivot by a philanthropic foundation or a large, well-established nonprofit? Will we ever see one?
My guess is that the answer is no, although I’m anxious to hear stories to the contrary. There are no widely agreed upon ways of measuring accountability in the social sector, and thus, there is no accountability. The platform is burning, but everyone is on the same platform.
In contrast, in the for-profit world, winning and losing is defined by market share. Revenue may be problematic as a proxy for value, but it keep the whole system moving. Companies are accountable for what they’re doing now, and those that get complacent eventually lose.
In the absence of structural incentives for change, leadership becomes even more critical. Institutional philanthropy is in a wonderful position to be these leaders, and, by and large, they’re taking a pass. Foundations are wonderful at thinking deeply about very hard problems, but they are very poor at modeling change. (Last year, Monitor Institute published a great report suggesting how foundations can start doing this.) This is a sector that badly needs it.
I had an interesting Twitter exchange on this topic with Jeff Lindsay and Philip Neustrom, which motivated me to flesh out my thoughts here. Philip pointed me to Van Jones’s 2007 keynote speech at the Craigslist Foundation’s Nonprofit Boot Camp, where he talked about the importance of brutal honesty in the nonprofit sector. Read the whole speech; it’s wonderful.
Also, Sean Stannard-Stockton and Lucy Bernholz recently had a fascinating exchange on ways to introduce more accountability into the nonprofit sector.
"There are no widely agreed upon ways of measuring accountability in the social sector, and thus, there is no accountability."
I'd say accountability is the wrong word to use here. From John Carver's _Boards that make a difference_ (page 6-7):
Without a market to summarize consumer judgement, an organization literally does notknow what the product costs to make and what the satff thinks about product quality. It may know that consumers are raving with delight. It may even know precisely how effective the product is. But the organization still deos not know wht its product is worth.
From a governance perspective, then, the relevant factor that sets most nonprofit and public organizations apart from profit organizations is not in the essence of managing, for the principles of management are the same in each setting. The difference is not in the distribution of earnings, for this is a matter of accounting rather than substance. What is different — with profound effects — is that most nonprofit and public organizations lack a behavioral process to aggregate the many individual evaluations of product andcost. The organization is missing the foundation that would enable it to define success and failure, to know what is worth doing, and, in the largest sense, even to recognize good performance.
So the typical public or nonprofit board is faced with a challenge business boards never have to confront. "In the nonprofit organization," observed Anthony (177), "the objectives are difficult ot define and there is no automatic danger signal comparable to profit measure." In the absence of a market test, /the board must perform that function/. The most must bear this peculiar, additional burden if it is to act responsibly. It is not enough to be efficient, nor is it enough to even produce fine products. Any reasonable definition of productive excellence must relate chiefly to whether a good or service is worth the full economic cost of its production.
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If you're into this you should definitely pick up Carver's book. It's great!
Love this excerpt, Philip. I'll pick up a copy of Carver's book. Thanks for sharing!