The business of the business of good


Lucy Bernholz

Lucy Bernholz

Lucy Bernholz

Michael Porter, the Harvard business school guru, defined how industries work in his book on competitive strategy. He drew out the relationships between competitive enterprises and their supply chains, infrastructure, distribution channels, and advocacy organizations. He noted how industries develop secondary support firms – such as specialized consulting services geared toward the needs of the enterprises in that industry.

By this standard, philanthropy and nonprofits have solidly achieved the industrial state. Three recent pieces on the consulting businesses that serve philanthropy and nonprofits caught my attention. The Chronicle of Philanthropy ran this piece, noting some of the bigger name firms. It also noted that the services these organizations provide used to be offered up pro bono. Now they are lines of business or entire firms unto themselves.

Blue Avocado, an online newsletter targeting nonprofit professionals, recently ran this piece on the ‘philanthropic industrial consulting complex‘. The title gives you a sense of the piece’s position on the growth in consulting firms serving nonprofits and foundations. One insight worth considering is the degree to which young professionals may be more attracted to the consulting firms than to the nonprofits themselves. If true, this detracts talent from the sector and devalues the role of direct experience over academic degrees. The article offers no data to back the claim, but it is an intriguing concern. The third piece was a Washington Post story on the use of funds at the Newark Public Schools foundation funded by Mark Zuckerberg and others. At the time, the Newark Star Ledger was reporting that 1/3 of the funds from the Foundation for Newark’s Future had gone to consultants linked to the Mayor’s office.

As the founder of a consulting firm that served foundations, and now a managing director at another such firm, I’ve lived through the decade and a half of consulting firm growth. I founded my firm in 1997 in my living room. Within a few years we were competing with the spin offs from the big consulting firms or consulting firms with ties to major universities. To the degree that these firms add rigour, analytic capacity, talent and research to the world of social good they are probably a net positive. Those that run as commercial firms inhabit the social enterprise space – serving the social sector without tax subsidy and paying for it with earned revenue. Those that run as nonprofits work hard to justify that tax exemption by sharing otherwise proprietary insights with the broader sector. However, to the degree that competition between these firms results in the service sector equivalent of planned obsolescence, or the kind of tail fin embellishment of 1950s auto makers, we might take a second look at our utility.

The consulting world has considered professional credentials, social impact advisors’ networks, professional alliances, and so on. These efforts are nascent and no better or worse than any other industry’s unforced efforts at self-regulation. As consultants to the social sector, I believe it behooves us to take seriously the potential and limitations of our aggregated selves.

Lucy Bernholz is the author of the blog philanthropy2173, where this article first appeared.

Tagged in: Foundations Philanthropy consultants social enterprise

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