A grant contest based on brief venture-capital style pitches planned for the Council on Foundations annual meeting provoked lively debate. Colloquy published largely in the Chronicle of Philanthropy explored the value or harm of bringing certain market practices into nonprofit funding. Alex Daniels expressed a popular concern that “the session will be a humiliating exercise that resembles a reality television show rather than a thoughtful approach to improving the world.” Maria Mottola, Gail Nayowith, and Jon Pratt worried about the power imbalances and potential perverse incentives of “amped-up competitions that offer paltry prizes to cash-strapped nonprofits”:
It’s appealing to suggest contests and other gimmicks that give charities an incentive to promote new ideas, but what about the organizations that pursue time-tested efforts that are already producing results? Where’s their prize for being adaptive and resilient?…
Maybe it’s time to stop expecting nonprofits to bow and scrape (and now provide entertainment value) and instead respect them and the important work they do. Grant makers should put nonprofits in a position to let their work be judged on the merits, not the optics, rather than force them to pander to investors in ways that epitomize the power imbalance everyone would like to see eradicated.
Others took a more measured approach, such as Allyson Burns and Sheila Herrling, who argued that “deploying tactics that can help us discover new ideas from unlikely places is desperately needed.” NYU’s Paul Light responded that available research suggests “most competitions fail well before producing anything approaching a groundbreaking innovation,” and many factors are involved in success or failure:
A $40,000 prize might be huge to one competitor but produce a negative rate of return for another… [Innovative nonprofits have] skilled market managers who know the difference between fashion and fad. Many have already won prizes for their work and know how to give a winning pitch, set a stretch goal, manage long, and ethical supply chains and are comfortable talking about all kinds of for-profit approaches…
At the same time, many are keeping track of the rule breakers who created so much economic inequality. They are especially wary of the investment banks that gamed the debt market, bet against the financial innovations that continued to sell, accepted the federal government’s market-distorting bailouts, and are now driving the social-impact bond market. The best way to kill the movement is to bond with the banks that nurtured the 2008 crisis.
Cynthia Gibson pointed out that the real cause of the debate is deeper than the competition itself:
Just below the surface is concern that the nonprofit sector, established to be a counterpart to and check on market forces, is now at risk of being subsumed by those forces. …As evidence, they point to a technocratic bent that’s permeated the nonprofit world’s infrastructure, with more and more people championing stringent measurement, social innovation and entrepreneurship, branding, and other market-based concepts as integral to a revamped and more effective sector. Lost in the shift has been the recognition that innovation isn’t solely the purview of the private sector.
The Council ultimately decided to replace the event with a discussion on “the value of competitions in philanthropy”, according to Gibson.
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