Traditional nonprofits are dependent on money or goods contributed by people who give only after their own needs and wants have been met, which in turn put them in lack of finance, training, and resources, needed to reach their full potential. In addition, charities are facing increased competition from other charities and form private sector, which develop their own welfare programs, together with waning donors. The concept of social entrepreneurship combines the best methods from “hard-headed fiscal conservatism, and soft-hearted liberalism” to combat the problems encountered by nonprofits. The difference in the new breed of philanthropists is that they are as entrepreneurial in their charities as they are in their business. They consider grants as investment and invest precious philanthropic resources in helping to build the capacity of the nonprofit sector. Thus, an analysis of different issues and their ramifications in nonprofit sector require urgent attention.
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It is opined that “philanthropy is not just about money or volunteer, but about giving the skill sets that businesses use.” (Deutch). GE Finance’s experiment to share some of its management practices with its paying customers is a successful example to this approach. It is blamed that in many voluntary charitable organizations money is fritted away by inefficiency. By transferring management and human relations skills in a “sustainable” manner the problems of non-profit organizations shall be solved. Programs designed to help teach younger generation that by applying resources and making good choices they can make a difference to the community will also assist in nonprofit management. To facilitate better understanding of the issue analysis of examples in present approaches to nonprofit organizations and different hurdles encountered by them are necessary.
Roberts Lee (2006) sites the example of Megan Hoot, 23-year old, who considers contributing to charities is the most valuable way to help improve the world, and she thinks “for students, time is much easier to come by than money”. Augmentation by students in charity work will inspire people to pursue volunteer work throughout their lives, and “with students, you pull people in with a smaller commitment. It is viewed that there is difference in perception and priorities of charity and voluntary work among generations of those born in the 1960s and 70s (Generation X), and those born in the late 1970s through the 90s (Generation Y). Younger generations are more likely to engage in volunteer work and donate money for the cause they believe in and that shows tangible results. A 2001 study by the United Way of America found that older generation demand more information before making gifts, tend to distrust large organizations, and refrain from challenging volunteer activities with social connections.
Another study in 2003 by the Center on Philanthropy at Indiana University in Indianapolis showed that “just 53 percent of Generation X households made donations of $25 in 2000, compared with 75 percent of baby boomer households and 80 percent of prewar households”. In addition, Generation X is dedicated to specific projects that are impact-focused” and look for “ways to integrate volunteerism into their career, leveraging their professional skill”. Whereas, Generation Y follows positive signs of volunteerism, as it is evidenced from recent study by the University of California at Los Angeles that 90 per cent of college-bound high school seniors devote their time for voluntary work. According to Prof. Leslie Lenkowsky, who teaches public affairs and philanthropic studies at the Centre of Philanthropy, “collective experience do mobilize civic engagement,” and younger generation is more vibrant in giving their valuable time and money for charity. (Roberts).
From the example of Baylor College of Medicine in Houston, that received $100 million gift in January for its cancer centre, and Children’s Hospital and Health Centre in San Diego receiving $60 million in June, it becomes clear that hospitals have no difficulty in raising money. According to the Association for Healthcare Philanthropy, 60 percent of donations are raised from individuals—grateful patients, their families, doctors, and others, and promoting and recognizing donors assist such campaigns. However, programs without the popular appeal of cancer or pediatrics get fewer donations, and the area with limited donor support is mental-health. In the words of Robert G. Kiely, Middlesex Hospital, a community hospital in Middletown, the hospital raised $416,000 for its hospice program, compared with just $9,000 for its mental health services.
It shows that areas that need unlimited funding, like psychiatric care and substance-abuse, receive less attention from donors. Community hospitals receive less attention from potential donors, and other sources of philanthropy like foundations and corporations fall back from giving money to essentially mediocre services. There is diminishing trend among foundations and corporations to donate money to support hospitals, because they are not ‘in the business of charity’ and there is increased interest for gaining clear advantage for their philanthropy. Without special events or adopting creative methods to increase popularity it is difficult to raise funds, as the donors are biased with potential stigma attached to certain services as well as the social standing of an institution. There is an alarming trend among corporations to donate money to entities where their headquarters are based than supporting local initiatives. But, “the smaller manufacturing companies and privately held business are being receptive,” and hence, concentrating on potential donors need to be refined. (Abelson).
There is a large increase in new wealth, driven by the changing role of the state and the emergence of private equity and hedge fund donors to participate in philanthropy. In the U.K, being a comprehensive welfare state that influences decision of individual and government share in each activity, the attitude of people towards charity is influenced by their personal and social view. Children’s Investment Fund Foundation, known as TCI, is a large Hedge fund in the UK, having offices in New York and London, is keen to support international health and development causes. In an e-mail message former President Bill Clinton wrote “The marriage of business and philanthropy that is at the heart of the Children’s Investment Fund and the Children’s Investment Foundation provides a great tool to effect serious change in the developing world.” (Anderson). The TCI’s managers use a portion of the fees generated by the hedge fund to finance foundation and thus donate to charity. In another example, Blue Orchid Capital 1 percent as a management fee and a 5 to 7 percent incentive fee, of which half the incentive fee goes to foundation. The consistent theme across both is they are in the business of investing in people, and there is marriage between the theme of business and philanthropy in charitable circles of America, which is anew concept in Britain. (Anderson).
However, one challenge that foundations face in distributing large amounts of money is finding organizations well equipped to handle it. The approach of Target group has to be considered as a successful example in tackling this issue. There are certain retail chains committed to giving back part of their earnings for charity, and the Minneapolis based discount retailer, Target’s point is that its customers become philanthropists, simply by shopping there as part of their income is distributed to support arts, education, and social services. Their first program, “Take Charge of Education,” involves giving 1 percent of any purchase to the school of the shopper’s choice (Vogel, Carol. Attention Shoppers: Philanthropy in Aisle 5. New York Times. November 12, 2007). Thus, through successful engagement of professional management ethics nonprofit organizations may be converted into profit making enterprises.
Abelson, Reed. Hunting for Dollars: Without Popular Appeal, a Hospital Program Can Suffer. New York Times. 2006. Web.
Anderson, Jenny. A Hedge Fund With High Returns and High-Reaching Goals. New York Times. 2006. Web.
Deutsch, Claudia H. Lessons in Management From the For Profit World. New York Times. 2006. Web.
Roberts, Lee. Younger Generation Lend a Hand in Their Own Way. New York Times, 2006. Web.
Vogel, Carol. Attention Shoppers: Philanthropy in Aisle 5. New York Times, 2007.