Friday, July 16, 2010

Schumpeter: Profiting from non-profits | The Economist

THE members of the Village People, a pop group founded in the 1970s, are dismayed that the organisation that inspired their greatest hit is to change its name after 166 years. The American branch of the Young Men’s Christian Association, known to arm-waving disco mavens as the YMCA, announced on July 12th that it would become plain “The Y”. This is part of what the outfit describes as a “major brand revitalisation” intended to make it seem warmer and more welcoming. It may turn out to be a misguided rebranding exercise on a par with Coca-Cola’s launch of New Coke and British Airways dropping the Union Jack from the tails of its aircraft.

Non-profit organisations such as the one formerly known as the YMCA are commonly advised to become more like for-profit businesses. Management experts and consultants view them as horribly inefficient due to the absence of the concentrating power of the profit motive. The negative reaction to the Y’s rebranding suggests that non-profit outfits are not all that good at emulating business even when they try. There has been barely any reciprocal pressure on for-profit firms to learn from the non-profits. Yet this is what Nancy Lublin, one of America’s most successful non-profit leaders, proposes in a new book, “Zilch: The Power of Zero in Business.”

Ms Lublin dismisses the common charge that non-profits are inefficient. Some are, but many of them are not. She also dislikes the use of “non-profit” to describe the sort of organisation that she once founded (Dress For Success, which gives smart suits to poor women to wear in job interviews) and that she now runs (, which encourages social activism by young people). “Non-profits include loss-making companies like General Motors,” she explains. “We’re a not-for-profit, as we’re not even trying to make a profit.”

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Schumpeter: Profiting from non-profits | The Economist

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