by Nanette Fridman
Please indulge the lawyer in me while we talk a little corporate law. Over the last few years, some states have begun to offer what is called the Benefit Corporation or B-Corp. Originating in Maryland in 2010, the idea is that some companies are becoming a hybrid of for profit entities that offer some tangible public benefit. B-Corps define success as doing well and doing good.
While relatively immature in terms of case law, B-Corps are increasing in popularity and include many well-known businesses such as Patagonia, Method Products and Warby Parker. These organizations bridge the gap between for profit companies that may sometimes be forced to refrain from certain social initiatives in favor of the bottom line and nonprofit companies which are often restricted in their ability to raise capital to grow.
Statues authorizing B-corps differ by state. Generally speaking, the three common features of the B-Corp include the desire to (1) create a material public benefit (2) expand the company’s fiduciary duty to require consideration of non-financial societal and environmental interests and (3) publish an annual benefit report on its overall societal and environmental impact using third-party standards.
Why am I writing about this for eJewishPhilanthropy? I am not advocating for Jewish organizations or other nonprofit en masse to become B-Corps. I strongly believe in the purpose and importance of nonprofit organizations and see their contribution and role growing in our society. I want our organizations to behave like ideal B-Orgs.
The B-Corp strives to allow traditional businesses to also pursue a social mission. In the same vain, it is time for nonprofits to incorporate more traditional business behaviors while pursuing their social missions. Increasing competition and sophistication, shifts in the economy, and demographic changes require that our communal organizations evolve and adopt some business best-practices if they want to survive and thrive.
What are the characteristics of a fictional ideal B-Org?
- Product Definition: A B-Org clearly identifies, describes and markets its products.
- Market Research: Clients and markets are researched to understand their demographics, preferences and behaviors. Clients’ purchases or use of various products and feedback are tracked.
- Customer Service: A B-Org understands that customer service is paramount and trains its employees to provide the best customer service to all of its current and prospective customers and volunteers.
- Quality Control: The B-Org strives to provide consistent product quality.
- Feedback: Everyone is asked for feedback on all programs and products in the B-Org and feedback is used for continual improvement and innovation.
- Continuous Improvement and Innovation: The B-Org is perpetually seeking to improve and purposely innovating.
- Ardent Fiduciary Responsibility: The B-Org’s board of directors takes their fiduciary duties seriously. They are actively responsible for both managing expenses and raising revenue, and the board engages in long-term financial planning.
- Entrepreneurial Spirit: Channeling their entrepreneurial spirit, B-Orgs seek to innovate and create. Risk taking is encouraged. B-Orgs approach donors like investors, raising the capital they need to grow by showing plans, projections and impact. B-Orgs evaluate and consider raising revenue in ways beyond traditional philanthropy.
- Measurement: A B-Org uses qualitative and quantitative data to measure its performance and its impact. Key performance indicators are closely monitored. Findings regarding impact are regularly reported to their investors (donors) and shareholders (stakeholders). Decision-making is data-driven across the organization.
- Professional Staff: B-Orgs hire professionals with skill sets that meet their current needs. Job descriptions, expectations and goals are clear and staff is regularly evaluated. They train, regularly review and remove staff whose are not performing.
- Culture: The organizational culture of B-Orgs is professional, positive and clearly articulated. Dysfunction is called out and not tolerated in the B-Org. Transparency is valued in the B-Org.
- Leadership: Director and leadership positions in B-Orgs are coveted and given to people who can articulate a compelling vision and deliver value to the community stakeholders. Succession is planned.
- Organizational Chart and Internal Communication: Reporting lines in the B-Org are clear and communication is free-flowing. The B-Org operates transparently.
- Marketing: B-Orgs actively outreach and market their products.
Each one of these characteristics is surely worthy of its own article. To be sure, there are some organizations in the Jewish communal orbit already exhibiting some, maybe even all, B-Org behavior; I applaud them. There are significant implications of adopting the B-Org for existing communities, employees, board members and not to mention, for the schools that educate and train our clergy and communal professionals. A new mindset and operational framework is required, and new training and skills are necessary. The transition will take time.
There are more organizations though who have not thought about or embraced the B-Org mentality or begun the hard work to shift mindsets and approaches. Clearly this transformation is easier said than done. Even small changes are difficult to make. Someone in the organization – the Executive Director, Board Chair, President or Clergy, if applicable – have to start and gradually and bravely be the change agent. There will be pain. Not every organization will succeed. For those who do, additive change is the name of the game. The status quo of having a separate standard for nonprofit organizations in these areas and for-profit businesses makes less and less sense.
Organizational leaders will need financial and technical help with implementation. There is opportunity for strategic philanthropic leaders and central community organizations to have a tremendous impact if they can provide assistance to organizations embarking on changes to become more like a B-Org.
The for-profit world is increasingly recognizing that there are social considerations at play for organizations in addition to profits. In parallel, nonprofit organizations, including religious and community organizations, need to behave more like successful businesses. Sustainability is the buzz word du jour in the Jewish community. Nonprofits that behave like B-Orgs will have a better chance of survival in an increasingly crowded and competitive marketplace for social (and spiritual) good.
Nanette Fridman, MPP, JD, is founder and principal of Fridman Strategies, a consulting firm specializing in strategic planning, financial resource development and governance for nonprofits. Nanette can be reached at [email protected]