When it comes to doing social good, for- and non-profits have historically had an arm’s length relationship with each other. But some of the savviest non-profits and funders today are bringing the two closer together by drawing on principles we’re more used to seeing in the business world. Here are four:
- A/B testing: Whether testing new products or perfecting established ones, companies rely increasingly on a rigorous, continuous process of A/B testing to make decisions. In it, they introduce two versions of a program, message, registration webpage, (anything, really) and carefully track which version performs better. Whichever performs better according to the data becomes the standard until a new idea comes along. Smart charities have baked self-assessment into their operations so they can make iterative improvements based on data rather than intuition.
- Revenue diversification: For most non-profits, diversification means having more than one donor writing checks to the organization. That’s important, but some of the savviest are looking beyond the generosity of donors and developing their own sources of earned revenue. Whether collecting partial reimbursements from insurance companies, cutting merchandising deals, or selling their services to wealthier populations at a premium, these non-profits are finding ways to defray their costs while accomplishing their mission.
- Investment in infrastructure: Most non-profit funding should rightly be dedicated to delivering products or services that better the world, but there is an important role for organizational resources and technology that get lumped together as “overhead.” It can be easy for donors to focus solely on minimizing this category as waste, but businesses invest heavily in making sure they have enough servers to handle traffic, customer relationship management tools to ensure no one falls through the cracks, data analytics to help optimize their program dollars, and the list goes on.
- Patient capital: Many organizations struggle with one-year grant cycles that hamstring their ability to make long-term plans. Because they cannot predict their funding, they are unable to invest in growth. Investors, on the other hand, often have seven to ten year time horizons, before which they are unable to recoup their funding. Smart donors recognize that there is a place for multi-year grants that may not deliver outcomes in the first twelve months.
By Thomas Meyer
Director, Veterans Services
The Philanthropy Roundtable