10 Nonprofits That Act Like For-Profits
BOSTON (TheStreet) -- The line between for-profit companies and nonprofit charities continues to blur.
The organizational creep of nonprofits into areas that seem more in keeping with the for-profit world is nothing new. In an effort to boost their bottom line, many charities have branched out into other investments -- real estate holdings, property management, paid endorsements and retail sales among them.
Drawing executive expertise has meant having to offer private-sector-sized salaries. Money donors ponied up for a given cause is often diverted to legal fees and political lobbying.
And the organizational structure of some nonprofits has evolved in new directions.In 2007, Google (GOOG) launched Google.org, an effort defined as a for-profit charity. Seeded with 3 million shares of company stock, it has primarily funded alternative-energy projects. Other nonprofits are looking closer at "hybrid" models to combine profit-driven strategies with charity-minded outcomes. "For many years nonprofits have often used for-profit subsidiaries or a fee-for-service approach," says Ken Berger, president and CEO of Charity Navigator, a service that evaluates the financial health of more than 5,500 American charities. "In fact, the biggest piece of income for nonprofits is not individual contributions or government money -- it comes from fee-for-service income. This notion of hybrid, or the 'for-profit nonprofit,' is nothing new at all." The impact of "this notion that for-profits have a social mission, the notion of doing well while you do good," remain to be seen, he adds. Berger laments the fact that some nonprofits are formed with charity as a secondary intent. "There are occasions where businesses consciously choose to be a nonprofit because it gives them a strategic advantage over for-profit competitors," he says. "They get a tax exemption and therefore they get a leg up. We are clocking in now at about 2 million nonprofits, the largest nonprofit sector in the history of the world. For the past 20 years, we had more nonprofits formed than in the whole 200 years before that. Even in a down economy it is still explosive." As the number of nonprofits has grown, so too have the budget constraints of the government officials who oversee them. "We have nudist colonies and ghost busters that are nonprofits," Berger says. "There does need to be some greater scrutiny in terms of how we authorize these. The original intent was that the government shouldn't get involved in making that judgment [of what a worthy cause should be]. But we now seem to be at a point where we've just got so many nonprofits and the ability of governmental agencies to oversee and regulate them is becoming more difficult." Despite that critique, count Berger as unwavering in his support of the nonprofit ideal. "You are never going to have a for-profit where chronically ill, mentally ill homeless people are going to be served," he says. "There are certain people who are going to need these services, and I don't care what kind of innovations you come up with, they will only take you so far ... The whole premise of the nonprofit sector, from the beginning, was that it was meant to be for cases where the market couldn't provide adequate incentives for a for-profit model to work and therefore needed to be subsidized in some way." The following are 10 organizations that, despite their nonprofit status, have for-profit characteristics or business approaches:
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