Interview about fundraising and cause-marketing

I was recently interviewed by the U of I news bureau about fundraising, giving, and cause-marketing. You can read this interview here.

Understanding NGO-corporate relationships

A recent translation of some of my work with Amy O'Connor has been published in Communication Currents (see the article Doing Good by Communicating Well). Please give it a read and let me know what you think.

The problem with a nonprofit response to AIDS in Africa

I have been studying the role of nonprofit organizations in the international HIV/AIDS crisis for about 10 years. During that time, I have had waves of both encouragement and doubt. Encouragement, because HIV/AIDS NGOs are among the most cooperative and during the 2000s the funding for AIDS was increasing year over year. However, doubts arose about a largely non-profit centered solution with largely Western dollars. I wondered how long this system could continue. Long-term, non-wavering problems are not suited for voluntary, charity-based solutions.  According to Donald McNeil of NYT, my doubts may be well founded. The donor dependence problems that vexed work in the infrastructure development space has extended to AIDS. Donors have tired of funding the same problem with no solution (there is no cure for AIDS, just nonstop treatment) or have come up short in their budgets due to "the current economy." Donor-drift is a particular problem with current AIDS medications, since one cannot stop taking them. To go off these medications, in addition to return of the progress of the disease, creates the opportunity for virus to mutate and become resistant to the current drugs.

This leads me to the sector blender topic: can a nonprofit, western donor-driven system be the sustainable source of healthcare for AIDS? If not, is there a mixed model that should be applied here (for example, pharmaceutical companies offering an affordable drug that either local governments or patients could afford and a group like Riders for Health could deliver)? And if we enacted changes to improve the condition of Africa's poorest countries, would government be able to partner more effectively with businesses, nonprofits, and UN organizations?

I don't have a great answers, but I do have the words from Nelson Mandela's 2005 speech at the Live 8 concert that still ring true (or perhaps more so) in the face of donor-drift.

"We live in a world where the Aids pandemic threatens the very fabric of our lives. Yet we spend more money on weapons than on ensuring treatment and support for the millions infected by HIV.

It is a world of great promise and hope. It is also a world of despair, disease and hunger.

Overcoming poverty is not a gesture of charity. It is an act of justice. It is the protection of a fundamental human right, the right to dignity and a decent life.

While poverty persists, there is no true freedom. The steps that are needed from the developed nations are clear.

The first is ensuring trade justice. I have said before that trade justice is a truly meaningful way for the developed countries to show commitment to bringing about an end to global poverty. The second is an end to the debt crisis for the poor countries.The third is to deliver much more aid and make sure it is of the highest quality."

KFC's Buckets for the Cure

For those unaware, KFC has recently launched a cause-marketing initiative with Susan G. Komen- to read more see here and here. My frequent co-author and friend, Amy O'Connor, and I have been tracking Susan G. Komen's activities for awhile for a forthcoming case study. We were attracted to SGK because of their large investment in their brand and their exclusivity agreements with companies in particular industries (SGK agrees to only do cause-marketing with a single company in several industries).

So, Amy called me happily on Friday night about her newest addition to our pink collection- a KFC bucket (our students have been bringing us things and pictures of items that are pink and for the cure for a couple of years now). Immediately I was speechless. Amy is an expert in corporate advocacy while I have specialized in nonprofits for about a decade. She thought this was a brilliant move and I saw trouble.

About a year ago we began to see pinkwashing backlash, so care was needed from SGK in choosing this partnership. Additionally, from most consumers' viewpoints, there is little difference between cause-marketing and nonprofit certification programs. In short, co-branding is seen as endorsement from both sides. While this could be GREAT for KFC, for SGK, the choice is puzzling. SGK notes on their website the link between the consumption of high caloric, fatty foods and breast cancer. Those who were already primed to lash out against SGK jumped on the opportunity to respond. SGK served it up, literally in a bucket. There are numerous news stories about the curious partnership, including ABC, PRWatch, and the NYDaily, not to mention the more direct blog criticism.

Our research suggests that the risks of such partnerships are due to various stakeholders not believing the implicit message that the combination of this nonprofit and business are better than their separate aims. Instead, stakeholders of the nonprofit may view them as opportunistic (see the critique by Breast Cancer Action). Activist groups already targeting a corporation may expand their criticism to the nonprofit, as vegan/animal rights groups have done. Stakeholders of the corporation may react negatively to nonprofits message (like health information at their favorite fast food restaurant).

So, what's KFC and SGK to do? Well, the franchisees have already purchased all of these pink buckets and the 50 cents a bucket is actually donated by them (read the fine print). They can't pull the promotion without angering their franchisees twice in a year (once already with the Oprah's free dinner at KFC coupon debacle). The only way out of this is to change the product offered in the bucket -- make it exclusively their grilled chicken. The message might be "This mother's day, KFC's largest day of the year, KFC and SGK want to help women eat healthier and continue the fight against breast cancer."  Then, consumers might see the alignment of the product and the cause -- which our focus groups suggest they truly want from such partnerships.

Thinking about social entrepreneurship

While I have been away from my blog for the last month, I have done a good deal of thinking about two topics, nonprofit capacity building and social entrepreneurship. While I am doing research on both topics for an academic audience, some of what I am thinking about has some wider importance.

In interviewing nonprofit founders and social entrepreneurs, one of the common strategies they identified for starting their organizations was to use a business model that they had seen work before, often copying directly from a similar organization in another location. While this is not necessarily a bad strategy, many times it shortcuts an important set of questions that need to be addressed. These include:

1. What are my short term and long term goals?
While this makes common sense, asking this question before choosing a business model may help entrepreneurs make better informed decisions. Both sets of goals ultimately should be measurable, meaning that you will know if you achieved them.


2. What are the business model choices I could make?
Before identifying what other programs are doing, get informed about the difference between a 501c3 and 501c6, learn about whether your state has a low-profit corporation option, and learn about various for-profit business models and social entrepreneurship models. Many organizations jump into a 501c3 status before thinking about the other options, simply because it is what others have done. While copying other organizations can reduce the time spent researching and keep your organization from making unnecessary mistakes, it can also lead you to make choices that are ill timed in the current market. What was right for their organization 20 years ago may not be right for your organization now. Some legal statuses, like the low-profit corporation, are only recently available.

3. Try out different business model statements.
What would your proposed business model statement look like under two or three different business models? Which business model would help you to meet your short term goals? Which ones would hinder or enable your long term goals?

4. Finally, consider the costs associated with each business model.
If your project is going to require significant general operating costs, consider if the 501c3 status is right. Many foundations and donors seem to prefer to fund program costs. If you offer a valuable service, maybe you could charge for it. If your project could use a social enterprise model, what sources of revenue are you rejecting? If you are in the health or education or environmental space, there are several partnerships with businesses that your organization could form as long as it has a nonprofit status.

Much of the research on starting small businesses suggest that successful ventures spend more time planning before they launch than ventures that end before the 2 year mark. While using other organizations' templates and plans may seem like a good way to save time, entrepreneurs should take the time to do scenario and strategic planning before launching their venture.

Cause marketing is one of the new hot topics in the nonprofit literature. However, many are beginning to question if the nonprofit benefits enough from these arrangements or if the direct donations of consumers are being redirected to corporations, with little going to the nonprofit. Amy O'Connor and I have been doing some work on collaborative relationships between corporations and nonprofits. This is a 30-40 minute presentation I made recently about our work. I would love to hear from you with questions or comments. Please excuse the watermark. I have not yet invested in trial software.

For profits making a difference: The for profit social enterprise

Another example of the blending of the traditional nonprofit sector and the for-profit sector is the emergence of the social enterprise. Social enterprises are organizations that have a social mission, but that operate on market-based principles. Let me provide three examples of such enterprises:

• Living Christmas rents live trees as Christmas trees. Their mission is "to change the way California celebrates Christmas." The founder was saddened by the number of trees discarded at the end of every holiday season, especially because of the negative environmental impact. The business has a social mission, the environment. Eco-businesses, or businesses whose mission is to protect the environment through selling/renting a product, are a new class of social enterprises.

• A second, more innovative type of social enterprise is Living Goods.  While still maintaining a 501c3 nonprofit status, making them eligible for tax-deductible donations, Living Goods uses "Avon-like network of door-to-door Health Promoters who make a modest income selling essential health products at prices affordable to the poor. The model combines the latest and best practices from the worlds of micro enterprise and public health to create a truly sustainable system for defeating diseases of poverty." Instead of relying on volunteers to distribute good, independent business agents grow their own businesses and through doing so, benefit the community. To hear more, listen to this podcast by the Stanford Center for Social Innovation.
  

• Of course, the greatest success story of the for-profit social enterprise is the Grameen Bank. Through micro-loans, the Grameen Bank makes a significant difference in the lives of the poor in rural Bangladesh. It is a self-sufficient banks owned by the borrowers that no longer accepts donations. Every year it has made a profit. When in conversations with those supporting social enterprise, micro-financing is among the most frequently cited examples of why the nonprofit sector should change its assumptions about how organizations should operate.
  

While I will take up a few key critical questions that these enterprises raise in a future post, I would like to point out the two most commonly cited benefits of these enterprises.
1. Scale - One of the biggest problems in the nonprofit sector is scaling-up. USAID and OXFAM capacity building efforts, for example, have directed significant resources to help the nonprofit sector, particularly in developing countries, achieve this goal. Many social ventures, especially like Living Goods and the Grameen Bank, have turned this issue on its proverbial head, viewing the size of the problem as market opportunity.
2. The ethics of dependency- Nonprofit organizations that require little of their recipients, such as direct-service agencies, have been criticized for creating a culture of dependency. This has been especially true in Africa and Latin America. A recent rise in the number of international volunteers has raised questions about the degree to which volunteers take away lower skill jobs. Social enterprises, because they do not rely on volunteers and they require something from recipients (e.g., repaying micro-loans, payment for health products), may create less dependency.

Next sector blending post: Cause-marketing