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Daily Buzz: How For-profit Principles Can Cloud Donor Decisions

Some donors may overemphasize these principles when being philanthropic

Young donors can bring energy to nonprofits along with their financial support. But they may bring something else too: a for-profit ethos that doesn’t always translate to nonprofit organizations.

Judy Park and Kavya Shankar interviewed millennial business executives and talked with their classmates from the Stanford MBA program. Writing for the Stanford Social Innovation Review, they found that young donors were prone to applying principles to giving that they learned from business, using phrases like “return on investment” and “risk analysis.”

“Our worry is not that these approaches are wholly ineffective,” Park and Shankar write. “For-profit principles have benefited philanthropy in many ways.” The question is whether those principles have gone too far.

Among the practices that Park and Shankar single out is taking a portfolio diversification approach to investing in nonprofits, which can lead donors to spread themselves too thin. Another is applying a short-term Silicon Valley startup slant to investing, which ultimately leaves organizations with long-term goals like systemic change scrambling to prove their worth.

Park and Shankar also caution against evaluating nonprofits like one would evaluate a for-profit investment, searching for clear metrics that quantify their progress.

“We found that many of our donor interviewees seeking clear measurement tended to favor established, large organizations over newer, innovative ones,” they write.

Please select this link to read the original article from Associations Now.

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