While most of us are interested in contributing to the greater good, it can be daunting to figure out just where to start, and how to make the most impact.
In this podcast, we talk with Megan Kashner,a clinical assistant professor and director of social impact at Kellogg, about how companies and their employees can offer their expertise to nonprofit organizations. Then we discuss with Kara Palamountain, a research associate professor at Kellogg, how social-impact entrepreneurs have some tough decisions to make when they are deciding whether to go the nonprofit or for-profit route.
Jessica LOVE: Many of us, when it comes down to it, want to make a difference. Whether it’s by donating time or money, there are a lot of ways for individuals to contribute to the greater good.
And from an employer’s standpoint, encouraging employees and teams to get involved can make a lot of sense. Here’s Kellogg’s Megan Kashner.
Megan KASHNER: Overall, most people give a hoot, right? Most people are excited by things that help. You're doing a project for a children's organization, for a children's hospital, for an adult literacy program. You kind of would have to be Scrooge to be uninspired, or uninterested, in your employee getting involved in something like this.
LOVE: But simply wanting to do good isn’t always enough. Individuals—and companies—need to think strategically in order to turn good intentions into real social impact.
Welcome to the Kellogg Insight podcast. I’m your host, Jessica Love. Today, we’re going to hear about two very different ways companies and individuals can make a difference. First, producer Fred Schmalz talks to Megan Kashner about a growing trend where entire companies decide to “adopt” social-impact organizations.
Then, we hear from Kellogg’s Kara Palamountain about one of the most difficult decisions social-impact entrepreneurs have to make.
Stay with us.
Fred SCHMALZ: Some of us who want to make an impact donate to charitable organizations. Others volunteer time.
If we’re a little bit financially savvy, we can even take up impact investing. That’s where we put our money in companies or funds with the expectation that they won’t just give financial returns—they’ll also make a positive impact on society.
For a lot of professionals, there’s a specific way we can get involved that too few of us consider even when we’re aching to make a difference.
To explain, here’s Megan Kashner, a clinical assistant professor and director of social impact at Kellogg.
KASHNER: When I think about a professional—Jan in accounting or Chris in marketing—and I think about that person wondering, "What can I do?" The very first thing I think is, "Well, you're an accountant. You're a marketer." The nonprofit sector and startup social entrepreneurs are hungry for help, for pro-bono support, for project work, for skills-based volunteering from people who have hard skills that they're willing to bring over and help a nonprofit by using.
SCHMALZ: Kashner points to the Taproot Foundation. It’s an organization that connects skilled volunteers to a variety of nonprofit organizations that are looking for help with their fundraising, HR, or strategy.
And really ambitious professionals can do more than offer up their own skills. They can try to get their entire company on board. If your boss is game, why not “adopt” a nonprofit?
KASHNER: What does your company do, what does your company produce, what is their service, and who out there could benefit from having access to that service to improve their impact on the world?
So, if the team is an accounting team, that team could choose to adopt a nonprofit. Which sounds boring, but I’ve got to tell you: if I threw out a social media post and said, “Hey, I’ve got a group of accounting folks who are eager to help a nonprofit reformulate their chart of accounts,” I promise you I would get over a dozen responses. Right? It doesn’t sound sexy, but if it’s what you’re good at, and it’s what your team is good at, there’s no reason not to come together and use that as a rallying point.
SCHMALZ: Kashner can attest first hand to just how useful this kind of pro-bono assistance can be for its beneficiary. She founded and directs the nonprofit organization Benevolent, which crowdsources small donations to individuals who need help raise money for a specific purpose, such as a car repair or a laptop for school.
KASHNER: We needed to do a great deal of social-media outreach. We were approached by a digital communications firm who were looking for a pro-bono opportunity, and they adopted us. They remade our Facebook, and LinkedIn and Twitter profiles. They built us back-end data-analysis dashboards, so that we could understand how our posts were performing. They brought this higher level engagement, because that's what they did for a living. And it cost them almost nothing, because it was what they did all the time.
SCHMALZ: This all sounds great.
But for companies and organizations on both sides of this arrangement, making sure everyone involved understands expectations is critical to the partnership’s success.
For nonprofits especially, offers of pro-bono assistance provide an opportunity, but they also require a bit of foresight.
KASHNER: Not all pro bono is the pro bono you need. Just because someone's offering it, you don't have to say yes.
The first question really is getting the scoping and understanding right up front.
What's in this project; what's not in this project? What is the time table for this project? What are the key deliverables? How often will we communicate?
Once you've got that figured out, you still have to make sure that the pro-bono engagement is not, what we used to call, "the gift that keeps on taking." There have been instances of pro-bono teams breaking a nonprofit's website instead of fixing it, of them completely screwing up the marketing and messages for an event in a way that felt completely off brand, if not off-putting.
SCHMALZ: The key to making sure this arrangement works is to make sure the nonprofit or social enterprise stays in control throughout—after all, it’s their organization that is shouldering the risk. That means recognizing that the nonprofit can at any time intervene with the work that is being done on its behalf. It may even mean being comfortable calling the relationship off.
KASHNER: These are outside consultants; they're not team members. So, they should not have the power to break your stuff, or to deploy technology changes, program changes, marketing messaging, without you. At any point.
Any nonprofit social entrepreneur, their number one interest is their organization. And so, worrying about hurt feelings has to come second.
SCHMALZ: It’s easy to see how such an arrangement can help a scrappy nonprofit or social entrepreneur when done right. But there are also long-lasting advantages for the professionals who are offering these services and for their companies.
Companies often want to highlight and celebrate what their employees are passionate about.
KASHNER: Many companies today are actually encouraging employee engagement in nonprofits, in the community, in outside endeavors, for exactly those reasons. Right? It increases employee engagement, and employee retention, and leadership development and productivity, all of these different things.
SCHMALZ: The great thing is that often companies provide employees with time to participate in these kinds of projects. And if a group of colleagues is working on the same project, the experience can be a good team-building exercise as well.
KASHNER: So, any manager, whether that manager is the top dog or not the top dog, any manager has the opportunity to use a sense of purpose and impact to help gel their team.
LOVE: But some professionals aren’t interested in just volunteering some of their time to a cause. They want to immerse themselves in it. Perhaps even start their own organizations as social-impact entrepreneurs.
Like Kara Palamountain. Here’s Schmalz again with her story.
SCHMALZ: Kara Palamountain’s sister worked as a pediatrician in Sub-Saharan Africa. After hearing about the challenges her sister faced practicing medicine in the region, Kara decided to devote her career to healthcare. At first she wanted to become a doctor. But her sister told her that she could make a greater impact if she went to business school and developed products that could function in the challenging environmental conditions of rural medical clinics.
She decided to make it her mission to develop products that could lower infant mortality.
Over the course of a career spent tackling this issue, Palamountain has faced a dilemma common to social entrepreneurs—would starting a for-profit company or a nonprofit organization better serve her mission?
Palamountain, now a research associate professor at Kellogg, has chosen both paths at different points. She says it is important to understand how they differ.
Kara PALAMOUNTAIN: I think there are four key things that make them different, at least from my experience. The first is mission, the second is revenue, the third is an exit strategy, and the fourth is scaling and growth.
SCHMALZ: In Kara’s mind, the first of these—mission—offers one of the biggest benefits of forming a nonprofit organization. Specifically, for nonprofits, this mission is explicit.
PALAMOUNTAIN: It's understood that the mission is your top priority and that's why the IRS gave you permission to be a not-for-profit. With a for-profit, mission can still be a top priority, but it’s not automatically assumed to be so by everyone else.
SCHMALZ: Revenue source offers another important distinction. Nonprofits can earn some revenues—think museum admission or copays at a nonprofit hospital. But they often rely on donations for much of their income. And while working with donors can be great, being at their mercy is complicated.
Donors can have very precise ideas about how their money should be spent. Strict spending restrictions can make it hard for a nonprofit to act nimbly in response to an unforeseen challenge.
Take, for example, the challenge Palamountain faced when her for-profit needed to reinvent itself. It would have been impossible to accomplish this pivot as a nonprofit.
PALAMOUNTAIN: So we had been working to make diagnostics for the low-income and middle-income markets for a couple of decades. Like, one product at a time, if you will, and really focusing on those markets first. And I think what we found is that that's really hard to do one product at a time. So the other approach now we're taking is let's do something for high-income markets and see if we can use the profits to make products for low-income markets.
SCHMALZ: Because it isn’t beholden to donors, the company could shift its entire revenue model in a way it believes will ultimately help it fulfill its mission.
For-profits can also avail themselves of the growing pool of impact investors who want to make sure their money is put to good use.
Impact investors can offer equity investment, debt, and other creative capital inflows. And in the process of wooing them, a for-profit is likely to dot all of its i’s and cross its t’s, resulting in (one would hope) a pretty sound strategy for achieving the mission.
PALAMOUNTAIN: I think what impact investors are bringing to the way that mission is expressed is in specific metrics. So, prove to me that you're not only mission driven in how you give money away, but also show me the impact that that money has on the population that you intend to serve. It's cost per life saved or number of babies that receive X treatment in XYZ countries. Really bringing more rigor to the way that you express how you accomplish your mission.
SCHMALZ: Which brings us to a third difference raised by Palamountain: scaling. For for-profit companies, taking on impact investors can be an effective way of scaling your efforts to achieve your mission. But non-profits don’t have any equity to give away.
PALAMOUNTAIN: In a not-for-profit, you can use profits to grow your business, you can use debt to grow your business, but you can't sell off equity.
SCHMALZ: That inability to sell equity can act as an inhibitor to growth. But then again, it also protects your nonprofit. Because giving up equity can also put your mission at risk.
PALAMOUNTAIN: I think the dilemma you run into as an entrepreneur is, "Well, what happens if I give up my mission at some point when I'm trying to raise the next round," or "I give up equity and I get this part of what I care about shut down?" So, you know, I think that's what you should consider when you're seeking investment.
SCHMALZ: If you’re thinking about starting an organization, Palamountain says you should definitely ask yourself questions about the long term—both the organization’s future and your own.
Which brings us to that final big difference: your exit strategy. Because maybe, as much as you care about your mission, you don’t want to devote your life to it forever.
PALAMOUNTAIN: So, if you are a for-profit founder, and it's been about five or six years and you're to the point where you want to move on to your next venture, or you think that the business is grown and had a lot of success, but some other entity would add more value to it. Let's say you wanted a big med device company to buy your small social-entrepreneur startup. With a for-profit, you can have your company bought or acquired and you would, as a founder, likely benefit from that sale personally, and your mission can also be expanded because you're selling it to a company that can scale your idea.
As a nonprofit founder, five years goes down the road and you've reached some milestones and the organization still has a lot of assets in the bank or on the balance sheet. You can't sell yourself to a large med-device company. Rather, if you want to shut down your not-for-profit, you would have to take the remaining assets and find another nonprofit that would take on those assets and nurture those assets in the way that donors for those assets intended.
SCHMALZ: With so many pros and cons to both for-profit and not-for-profit organizations, which does Palamountain ultimately recommend? Unfortunately, there’s no one-size-fits-all solution.
But there may be some creative ways to get the best of both worlds. Such as by forming for-profit subsidiaries within a larger nonprofit organization.
PALAMOUNTAIN: There's a nonprofit in Kenya, the Kenyan equivalent of a nonprofit called the Center for Public Health and Development, CPHD.org, and CPHD.org has two subsidiary companies, one is a for-profit distributor called MedEQUIP and they basically provide a variety of medical-equipment solutions in Kenya. The second for-profit company that CPHD has as a subsidiary is called Hewatele, and they are set up as an oxygen manufacturer and distributor in Kenya. So these two entities are underneath the nonprofit umbrella. The structure is brilliant, but it does require some leg work to set something like that up.
LOVE: This program was produced by Jessica Love, Fred Schmalz, Emily Stone, and Michael Spikes.
Special thanks to our guests, Megan Kashner and Kara Palamountain.
You can stream or download our monthly podcast from iTunes, Google Play, or our website, where you can read more about social impact. Visit us at insight.kellogg.northwestern.edu. We’ll be back next month with another episode of the Kellogg Insight podcast.