What’s So Wrong with Nonprofits Playing by Market Rules?

Here’s the thing about markets – they have this uncanny way of being candid, sending demand signals that companies need to pay attention and adapt to in order to thrive, if not survive.

So why is it that the nonprofit sector is uncomfortable with embracing more market-based approaches to its work? This week’s feeding frenzy of articles criticizing the Council on Foundations for its experiment to host a $40,000 pitch competition to identify new organizations and approaches to drive social change is an example of this discomfort. In fact, the frenzy was so severe, that the Council decided to cancel the pitch competition and instead host a discussion on the merits and drawbacks of new approaches to grantmaking.

One of the pillars of our work at the Case Foundation is “revolutionizing philanthropy.” We believe that the practice of mobilizing private capital for public good is in need of a major reboot. In order to keep up with the pace and scope of major social challenges, the resources and tactics going into addressing these challenges and the organizations managing those resources need to be more efficient and effective. And as a sector, we need more catalytic, collaborative and creative solutions.

That’s why we’ve tested programs like the Make It Your Own Awards, the first campaign to open up a part of the grantmaking process to an online public vote. Or the America’s Giving Challenges (in 2007 and 2009), which mobilized over 150,000 donors to give $3.8M to over 14,000 causes, most of which were small and scrappy. That’s why we created the Be Fearless campaign – because we believe that in order to create more innovation in our approaches to social change, we must all take risks, embrace and learn from failure and make big bets. And that’s why we consistently provide catalytic funding to partners that are experimenting with new approaches and hoping to find breakthrough solutions and collaborations.

We’ve long championed the potential for prize and challenge programs – including initiatives like pitch competitions – to discover breakthrough innovations. We know that sometimes the people with the most innovative solutions to big problems will be found in unlikely places – just take the wedding dress designer who played a critical role in helping to dramatically improve the design of the Ebola Protective Suit worn by health care workers treating the disease, thanks to a challenge hosted by USAID’s Global Development Lab. The U.S. government has broadly embraced the use of prizes and challenges, which kicked off with the Summit on Innovation that we co-hosted with the White House in 2010, leading to the creation of Challenge.gov, which hosts hundreds of prize and challenge competitions across 50 federal agencies. And we were proud to join some of the philanthropic sector’s leading innovators – Bloomberg Philanthropies, the Joyce Foundation, the Knight Foundation, the Kresge Foundation and the Rockefeller Foundation – in publishing a 2014 report on the ways in which incentive prizes are transforming the innovation landscape.

We love to see new practices for crowdsourcing ideas, pooling resources, disrupting old ways of doing business, testing new approaches and massively publicizing – if not competing – new programs. Why? Because, quite frankly, despite a massive amount of good accomplished with billions of nonprofit dollars, the evidence base for impact remains unsatisfying. We’re not saying that we should swing the pendulum completely toward prizes, challenges and other experimental approaches – but deploying tactics that can help us discover new ideas from unlikely places is desperately needed.

We have a saying at the Case Foundation based on an old African proverb – if you want to go fast, go alone; if you want to go far, go together. What if, instead of trashing the Council on Foundations for trying something new, we embraced it as a fearless attempt to disrupt the status quo with the hope of finding a better way? Sure, we might each have our tweaks on how to make it better (e.g., having a panel of judges, not the audience, vote on the winner). But as a tactic, it brings a fresh market-based approach and has the potential to expose innovative people and ideas to a broad community of funders, who just might decide it’s worth pooling their resources for greater and faster impact.

We look forward to the discussion on the merits of new grantmaking approaches at the Council’s conference, but we’ll wistfully be wondering what it would be like with the pitch competition in full swing, tapping into the “wisdom of the crowd” and fully embracing of the idea of democratizing philanthropy, making it easier for anyone to participate in the efforts to solve big, hairy problems.

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