There’s increasing evidence that the mission-driven world has focused a bit too obsessively (or myopically) on a single organizational form: the tax-exempt, 501(c)3 nonprofit corporation. It was a logical place to go, after all — if your goals are not defined by profit but by other motives, you should structure yourself as a nonprofit…right?
Problem is, the nonprofit corporation is an unusual beast to govern, to manage, to finance, and to connect with a dynamic environment. And the strings that come with that tax-exempt status can actually keep an organization from doing its best and most effective work in the world. Since it’s rather difficult to create new legal corporate forms (which are complex bundles of federal tax law, state corporate statutes, and evolving litigation), the smart folks are left to mix and mingle different forms toward a single purpose. Hence, the hybrid organizations that seem to be popping up everywhere these days.
A particularly creative case in point is Google.org, the charitable arm of the world-dominating Google. Like its corporate parent, Google.org has big ideas for changing the world in a positive way — attacking climate crisis, global public heath, and global poverty.
The issues are so big (and the money is too, about $1.15 billion) — that the organization didn’t want to be limited by tax-exempt status. Instead, as described by its honcho Larry Brilliant in this Wired interview, the initiative uses many organizational forms to advance its work. Says Brilliant:
We are not really a foundation. It’s a bit of a 501(c)3, a bit of a C corp, and a bit of an academic environment. I can play more of the keys on the keyboard. A 501(c)3 can’t lobby. A 501(c)3 can’t invest in a company or build an industry. It may be that the only way to deal with climate change is to create an industry or build companies.
While not as large in scale, there are many examples in arts and culture of hybrid organizations. I’ll touch on some soon.
As an aside, have you ever looked for the words “arts” or “culture” in the U.S. tax code? Take a look at the actual definition of a 501(c)3 under Title 26, Subtitle A, Chapter 1, Subchapter F, Part I, Section 501, Subsection (c), Paragraph 3. Amateur sports are in there, as well as children and animals, but no arts and culture. Hmmm.
I’m glad you brought this up. It is something I have been thinking about myself lately — is the non-profit the most efficient method for growing a cultural organization?
I think there are a lot of environment/sustainability businesses that provide excellent examples of mission-based organizations that are also profit-based, like Patagonia. I learned a lot from Tom Eggert about this in his Systems Thinking and Sustainable Business class in the UW Schoool of Business. However, cultural organizations sell a much different kind of product.
As a personal financial advisor to artists (several of whom run arts organizations) I find there is a pernicious downside to art being so closely associated with “non-profit”. At both the corporate and individual level, this leads to the presumption that “arts” (especially fine arts) and “profit” should not go together. Hence both arts organization and artists undervalue their services. And with that, audiences similarly undervalue the arts.
I work hard with artists so they accept that an important aspect of being a professional artist is accepting that this is what they do for a living. Individuals cannot live as a non-profit.