March 14, 2013

We Need Them to Build That!

Are advocates defending the nonprofit sector against the spread of market values overlooking ways in which business serves the public good? Bridgespan partner Daniel Stid says we need them to build that!

By: Daniel Stid

Should the social sector work more like a market? Should nonprofits operate like profit-seeking businesses? These questions have spurred a spirited debate in recent years. While Matthew Bishop hails philanthrocapitalism, Michael Edwards critiques it. Dan Pallotta indicts the nonprofit ethic, but Phil Buchanan rallies to its defense.

Taking these exchanges in, I find myself siding with those resisting the encroachment of market values into the work of philanthropies and charities. But this resistance need not turn into a counter-attack on the idea of free enterprise. Let's allow the punch-drunk strawmen of Enron and Lehman Brothers to stay in their corners instead of trotting them out to take yet another round of blows standing in for business as a whole. To use the shorthand of the 2012 campaign, we need business owners, especially small business owners, to build that.

I say this not because of the obvious but often unappreciated fact that much of the philanthropy fueling nonprofits today stems from the vision and ambition of one-time small business owners like Henry Ford or Bill Gates. Rather, the social sector needs business to flourish here and now because of what it provides to people in need: jobs and the possibility of self-sufficiency.

In many respects, a job is the ultimate social service, and small businesses are the most apt to provide jobs for those who are harder to employ. Data from the Small Business Administration, the Census Bureau and the Bureau of Labor Statistics shows for example that while small businesses provide one half of all private sector jobs, they employ 62-percent of workers lacking any post-secondary education, 60-percent of employees with disabilities, and 65-percent of immigrants who are working.

I was a first-hand witness to this phenomenon growing up on the family farm that my father and uncle operated in Ingham County, Michigan. Before my brothers, my cousin and I were old enough to work in earnest on the farm, and then after we started to leave home, my father and uncle hired men to help out. The work didn't pay that much, was relentless, and not especially pastoral—baling straw, castrating hogs, pitching manure. The men we hired to do this were brawlers and dropouts without much in the way of other options. So each day they'd rumble out to our farm on their motorcycles and muscle cars, park under the oak tree beside our house, and go to work.

My father and uncle didn't seem to care much about what these men had done or not done before they were hired on. In fact, the Stid brothers had a soft spot for the biggest rowdies, recognizing that they were more likely to figure out what needed to be done next and do it without having to be asked. The typical pattern was for these men to work for us for a few years and then move on with a solid reference to better paying work on the assembly line at the GM plant, with a construction outfit, or as a plumber's apprentice.

There wasn't always a happy ending. One of these men has fought a long and losing battle with alcohol. Another, a quiet and impeccably neat man who stayed at the homeless mission up in Lansing, stopped showing up for work one day, and we never heard from him again. But talking with a few of the hired men when they turned up at my uncle's funeral a few years back, decades after they had worked for us, I sensed their ongoing appreciation for the leg up that they had gotten on our farm all those years ago.

My father and uncle would be the first to acknowledge that they didn't build that business on their own. They learned animal husbandry and agricultural economics at a land-grant university. They took advantage of the crop subsidies and tax breaks available to them. And of course, they trucked their hogs, corn and soybeans to market on county roads and state highways.

Yet ultimately their business was propelled by their entrepreneurial drive and determination to provide for their families, which kept them going through five decades of early mornings and late nights. Their enterprise required a series of farm hands to help get the work done; in turn, it positioned these hands to grab hold of and begin climbing up the economic ladder.

The same holds true for small business owners all over the country who are putting people to work this very morning—on roofing and gardening crews, waiting and bussing tables, sweeping floors and stocking shelves. These aren't fancy jobs, and they don't mean complete relief from economic hardship, but they sure beat the alternatives for the people doing them and the society that would otherwise have to provide for them.

I am not suggesting that defenders of the nonprofit ethic should let down their guard. As the political philosopher Michael Sandel recently observed, "a debate about the moral limits of markets would enable us to decide, as a society, where markets serve the public good and where they do not belong. Thinking through the appropriate place of markets requires that we reason together, in public, about the right way to value the social goods we prize." We absolutely need to argue our side of this debate. However, as we do so, let's remember that, when kept in their place, markets can also serve the public good.

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