Much of the controversy in the US in the 1980s and early 1990s, surrounding enterprising behaviour of non-profit organisations, focused on the concern that non-profits may sometimes compete unfairly with small businesses. On the other hand, non-profits have lost market share to the for-profit sector in several fields. While this debate has been largely unresolved and seems to have ebbed in recent years, the gradual integration of non-profits into the marketplace is reflected in growing competition between non-profits and business.
Non-profit organisations operate in a variety of “mixed industries” in which both non-profits and for-profits, and sometimes government agencies, participate. In a number of those industries, non-profits have lost market share, mostly from incursions by the for-profit sector. Based on data from 1982 to 1992, these industries include individual and family services, job training, child day care, museums, radio and television broadcasting, and botanical gardens and zoos (Tuckman, 1998). On the other hand, non-profits gained relative market share in the nursing home field, and in elementary and secondary schools (presumably at public sector expense) during that period.
The competition between non-profits and for-profits ebbs and flows over time.
In the 1960s and 1970s non-profit nursing homes lost ground to for-profit homes, and in the 1990s for-profit hospitals and health maintenance organisations appear to have grown at the expense of non-profits. In other service areas, such as the arts, education and urban development, non-profits have gained relative market shares at the expense of for-profits since the end of World War II (Hall, 1998).
It is unclear whether for-profit/non-profit competition has become more intense in recent years. The debates over UBIT seem to have eased after the 1980s, for example. On the other hand, new areas, such as counselling, job training and placement services in connection with welfare reform, have opened up to for-profit participation in traditionally non-profit markets. In the field of charitable giving, financial services firms such as Fidelity and Merrill Lynch are now offering donor services similar to those originally developed by community foundations (Reis and Clohesy, 2000). Large corporations such a Lockheed Martin IMS have entered the social services market (Light, 2000) and other large corporations have become active in education, community development, and health care (Tuckman, 1998). In particular, the market for government contracts in a variety of public service areas is now more open to for-profit participation than ever before (Halpern, 1998).
Yet with all of the competition between non-profits and business, the forces of collaboration appear to be gaining strength. Non-profits and corporate businesses are working more closely together now than ever before.
This relationship takes a variety of forms including corporate gifts and grants to non-profits, employee volunteer programs, event sponsorships, cause-related marketing, royalty and licensing arrangements, joint ventures and other initiatives (Austin, 2000). Over the last decade, the old stereotypes of corporate altruism on the one hand, and non-profit aloofness from business on the other, have all but evaporated (Burlingame and Young, 1996). It seems that the mutual benefits of co-operation h ave been ackn owledged.
Corporations have discovered the strategic value of working with non-profits, while non-profits have found ways to make their relationships with corporate business helpful to them both financially and programmatically. James Austin (2000) argues that the idea of “strategic fit” drives the formation of particular non-profit-business partnerships. Some of Austin’s examples illustrate how this fit can manifest itself in a wide variety of ways:
● The Merck Corporation provides scholarship funds to The College Fund (UNCF) and mentors and internships to recipients of these scholarships. In return, Merck gains access to bright minority students with an interest in science.
● Ralston Purina provides support to the American Humane Association for the Pets for People programme whose purpose is to encourage adoptions of pets. In addition to gaining reputation within its industry, the corporation helps increase the market for its pet foods through this arrangement.
● Starbucks Corporation provides substantial financial support to CARE. The partnership assists the corporation in its expanding business relationships around the world, especially in coffee-growing countries.
● MCI WorldCom partners with the National Geographic Society to support the Marco Polo geography website, which promotes Internet content integration in the K-12 curriculum.4 Both organisations stand to benefit from expanded use of the Internet in education.
● The Nature Conservancy works closely with Georgia Pacific to jointly manage wetlands owned by the corporation. Through this arrangement, the Conservancy is able to advance its mission of helping to protect large and important environmental resources while the corporation gains access to the Conservancy’s expertise and improves its relationship with the consuming public.
The potential benefits to business corporations of collaborating with appropriate non-profit partners fall along several possible lines. Corporations polish their public images, gain access to special expertise or future talent, help expand demand for their products, and motivate their employees by providing opportunities for volunteering and community service. In turn, their non-profit partners gain access to substantial financial, personnel and other corporate resources, obtain wider forums in which to broadcast their messages and appeals, and in some cases influence consumers in ways that directly support the non-profit’s mission. For example, when the American Cancer Society associates itself with the Florida citrus industry and offers the use of its name and logo on citrus products and commercials, it helps increase citrus fruit consumption, a contributor to cancer prevention. Similarly, the affiliations between the American Lung Association and the American Cancer Society with manufacturers of anti-smoking patches, and the affiliation between Prevent Blindness and makers of protective eye wear, directly contribute to the health-related missions of those organisations by influencing consumer behaviour (Young, 1998a).
In these latter arrangements, the exclusiveness with which non-profits associate themselves with particular products can become a difficult issue.
Most of these arrangements involve financial transactions. The more closely a reputable non-profit is willing to identify itself with a particular product or company, the more it will be worth to that company and the more that company will be willing to remunerate the non-profit. The American Cancer Society receives substantial grants from the Florida citrus growers and from Smith-Kline Beecham in exchange for understandings that ACS will not identify itself with other producers of citrus fruit or anti-smoking patches. By comparison, the American Heart Association receives much more modest fees for attaching its “heart-healthy” seal to various food products that meet its nutritional standards.
These examples illustrate that the growing closeness of non-profits and corporations, while creating many benefits, is risky for participating
non-profits. Non-profits must hence be cautious before entering partnerships with the private sector. In particular, a non-profit may be perceived as neglecting or harming its mission if it identifies itself with questionable products, with organisations that are disreputable, or exclusively with products that may not be the very best for its intended beneficiaries. In the recent case of the American Medical Association (AMA) and the Sunbeam Corporation, leaders of the AMA lost their jobs for entering an exclusive relationship that appeared to offer advanced endorsements of yet-to-be-tested medical devices.
Similarly, AARP5 has been questioned for entering special relationships with health insurers that may not always be able to assure the best coverage for older people. Along the same lines, the American Association of Museums recently found it necessary to issue a code of ethical standards for museums entering arrangements with owners and dealers of art collections, to protect against situations where private parties would stand to benefit financially from display of their art in a museum and where they might use financial incentives to inappropriately influence the museum’s artistic decisions to exhibit their art.
In su m m ar y, wh il e th e p h en o me n on o f n on -p ro f it- c o rp o rat e partnerships has expanded from a trickle ten years ago to a virtual tidal wave today, the arrangements conceal a range of serious risks to non-profit organisations. Many non-profits, particularly smaller ones, remain wary of such involvement because they do not have the expertise or sophistication to avoid the pitfalls. Other non-profits have yet to identify corporations that provide the appropriate “strategic fit” with their own particular causes. For example, the National Kidney Foundation might consider makers of cranberry juice to be appropriate partners since cranberry juice is thought to benefit kidney function. However, those benefits are not proven and such a partnership would put the non-profit out on a limb if they turn out to be illusory. Finally, issues of organisational size influence the propensity to partner on both sides of the market. Smaller non-profits are wary because of their lack of sophistication in entering corporate agreements. Moreover, smaller non-profits may not be well enough known or may not represent large enough constituencies to be attractive to corporate sponsors. Non-profits with unpopular constituencies such as ex-offenders or people with mental illness might be similarly unattractive to corporations.
The uncertainties surrounding the benefits of non-profit-corporate p artn er sh ips c onstitute th e prin ci pal reason why non - profits an d corporations are often wary about them, and the reason why these parties are advised to think in terms of long-term relationships rather than one-shot deals. Austin (2000) describes a progressive process through which non-profits and corporate partners can move from arm’s length charitable giving relationships, to contractual arrangements for particular programs, to an
ongoing partnership in which both parties continue to explore multiple ways in which the corporation and the non-profit can work together. The latter may be the face of the future in business-non-profit collaboration, as such long-term relationships permit a building of mutual trust, reduction of risk, and a full exploration of the possible ways in which non-profits and corporate businesses can benefit one another.