When I was in college, there always seemed to be a select group of people who eschewed finance and tech positions to work for non-profits. In fact, any sort of "non-profit" work was seen as a badge of honor -- indeed, the very designation that an organization is a "non-profit" is popular among 20-somethings.
But Purpose, a B-corporation -- the designation for a for-profit company that carries out a social agenda -- brings forth the question of whether the non-profit model is really the most effective tool for eliciting social change.
I initially learned of Purpose while flipping through last week's issue of The Economist. You can find their article about Purpose here.
I was immediately attracted to the idea of "profit with purpose", as The Economist calls it, because of the somewhat politicized nature of the for-profit vs. non-profit designations. Indeed, it seems to be becoming more and more popular to view for-profit organizations as run by evil people who seek only to lace their pockets, while non-profits are absolved of any possible wrongdoing -- in spite of the obvious fact that accountability in the eyes of shareholders or investors is often a good thing for an organization, generally forcing greater efficiency and productivity (or at least greater transparency). In any case, in this day and age, starting a social activist organization as a for-profit seems almost oxymoronic, and I applaud Mr. Heimans' vision (and cajones).
But what does it actually do? Two main things.
For one, Purpose, like similar organizations, raises money to promote activism around the globe -- you can read about some of their movements here. Secondly, it offers a smorgasbord of services -- yes, ones that are again linked to activism -- to companies like Google and charitable foundations like the ACLU...for a price. This for-profit wing of Purpose allows it to have a theoretically larger reserve of cash to finance its movements and activities, while concurrently creating a leaner, meaner organization that can mobilize quickly and raise money in a short amount of time. A set of goals that your typically over-bureaucratic, bloated, and paper-pushing non-profit can often struggle with, at least in the short-term.
I think this is an extremely savvy and innovative business model, and I believe that Mr. Heimans has found an effective way to bridge the gap between two seemingly clashing (and somewhat meaningless) organizational designations while ultimately benefitting the greater good. I'll be keeping an eye on Purpose from here on out.
What do you guys make of this business model? The non-profit vs. for-profit debate? Is this going to become a new mode of social activism, or a clever one-hit-wonder? Can't wait to hear your thoughts.
Thanks for reading.
Hitler was in favor of social change, too. This even sounds very "third way"-ish.
It sounds like another way for liberals to be smug. "Mmmmyessss... My investment choics are just a little bit more oriented toward making the world a better place than the average person's".
Not to mention that it's a stupid idea. Why start a company with conflicting investment mandates? Why expose your not-for-profit to business risk? Why not just create a portfolio that invests in other (probably far more effective) companies and use the proceeds to advance your draconian social agenda?
Muhammad Yunus who developed the Grameen Bank, has written quite a few books on this very topic, though he calls it a Social Business, and I believe this is the term used in the economic development sector. The model is different from a strict for-profit business in the manner that instead of profits being distributed to share-holders it is reinvested into the social model designed by the company. The businesses are not changing behavior, but instead feeding the most people, generating the greatest amount of micro-credit loans to women in rural Afghanistan etc... Shareholders do not invest their money to earn money but to instead make a difference. Their initial investment is repaid but profits are never seen. It is a way for business to be self-sufficient without having to worry about grant writing, government aid etc... In the end if your intention is to get rich and benefit those less fortunate in third world countries, this line of work is probably not for you.
Tom's Shoes is probably one of the most successful philanthropic companies in the world and it is organized as a for-profit corporation.
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