Let’s start with the brutal truth. The way we fund social change is horribly broken. Knowingly or not, we have built a dysfunctional structure of restrictive norms, demoralizing messages, limiting beliefs, and unfair regulations that impede the work of those who philanthropy claims to be investing in – our social change leaders. These are the people working on the front lines to bridge our political divides, lessen wealth inequality, create more equitable systems, heal our sick planet.
The dysfunctional structure that I’m referring to includes:
• Legal regulations that limit nonprofit political activity much more than that of business.
• Restrictive norms that say nonprofits should keep their overall costs (and overhead costs especially) much lower than businesses do, while nonprofits should also hold fewer reserves than businesses.
• Demoralizing messages that permeate our society, like “Nonprofits aren’t as financially savvy, competent or worthy of attention as businesses.”
• Structural limits that impose a de-facto ceiling on the level of investment nonprofits receive (in 2019 only 10 nonprofits received gifts of over $100 million, while in the technology space alone, 500 for-profit startups each received $100 million or more).
These kinds of restrictive regulations, norms, messages and limits aren’t nearly as present in the for-profit sector. In fact, the for-profit sector and its leaders are often heralded as “innovative,” “disruptive,” “game-changing”, and are thus afforded a runway of capital and patience that nonprofits rarely receive. The bottom line is that we, as a society, believe that nonprofits should be managed, regulated, and funded in much more restrictive ways than businesses.
These unnecessary limits make our social change leaders question their own value and worthiness (and often their own sanity) and minimize their social change efforts while ensuring that our current inequitable, broken systems stay in place.
Is that really what we want?
It’s time for philanthropists – and certainly those philanthropists who are committed to creating a healthier and more equitable world – to take a hard look at how the social change leaders they invest in are being held back.
In order to solve the mess in which we as a human race now find ourselves, we must create a truly valued, effective and abundant social change sector, like this:
Eschew scarcity thinking
The belief that there isn’t enough money permeates both sides of the aisle – the nonprofit and philanthropic sectors. But it simply isn’t true.
There is more than enough money to solve what ails us. For example, billionaires have grown richer over the course of the pandemic, and the U.S. government has added trillions of dollars to the economy over the same period.
So there is plenty of money. It’s just not reaching the social change sector.
We can fix that. But only if both those with money and those requiring investment stop believing that money is scarce.
Create equality between funders and social changemakers
The normal operating procedure in the social change sector is for those who provide solutions to feel beholden to and hamstrung by those who provide funding for those solutions.
We no longer have the luxury of playing by those Downton Abbey rules. What we need right now (yesterday, actually) is money and solutions, in equal measure. And that requires that the possessors of each realize the tremendous value and necessity of the other.
Employ social change money in much bigger ways
We need to start thinking about money for social change – that powerful tool any philanthropist enjoys – in much bigger ways. Social (or impact) investing – investing in things that have both a financial and social return – has grown over the past decade.
However, it is far from the norm in the philanthropic community, let alone the finance sector.
The idea of a foundation pointing ALL money at its disposal to its social change mission appears to be incredibly radical, since only 3% of foundations in the U.S. currently do it. The worry is that social investments will yield a lower return, but the reverse is often true.
What if philanthropists not only pursued mission-related investing in big ways, but also helped our financial markets (in which, again, philanthropy is deeply embedded) reinvent itself to be more socially directed? For example, there is already a growing movement (interestingly enough among women investors, see here, here and here) for moving financial markets to balance both profit and social good. Who better to help lead a great migration of money from the ivory towers of the privileged few to the starving coffers of social changemakers than the philanthropists who straddle both worlds?
I believe the time is right for a complete reinvention of so many of the systems that hold us back. Chief among them is how money flows to social change. If you consider yourself a proponent of a healthier and more equitable world, take a hard look at how you are encouraging or impeding the flow of money to solutions. Because when we start to build a more abundant social change sector, we move closer to the healthier and more equitable world we all deeply want.
Nell Edgington is President of Social Velocity, where she helps create more strategic, financially savvy, and confident nonprofit and philanthropic leaders. She is author of the new book Reinventing Social Change: Embrace Abundance to Create a Healthier and More Equitable World.