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Tuesday, March 8, 2011

Do Market-Based Practices Loosen Organizations’ Ties to Their Communities?

Prior to reading Eikenberry’s (2009) article “Refusing the Market: A Democratic Discourse for Voluntary and Nonprofit Organizations,” I was convinced that market-based practices are good and oftentimes essential ways for nonprofit organizations to increase their impact; however, while reading the article, I thought more about the potential negative effects of nonprofits using market-based practices. One of the points that Eikenberry made that I thought was especially interesting was the idea that nonprofits that receive a large percentage of their revenue from “commercialization” (p. 589) will not be able to maintain the same level of ties to their communities as they would without this practice. Eikenberry explains this idea in the following sentences with the use of sources that support their idea:

When nonprofit and voluntary organizations rely on commercial revenue and entrepreneurial strategies, they have less need to build networks among constituencies and encourage civic participation (The Aspen Institute, 2001). Backman and Smith (2000) argued that commercialization can strengthen nonprofits in the shorter term, making them less reliant on the whims of donors and social networks but that this can be at a longer-term cost to community building. (p. 589)

I agree with the above statements. Although I think it is good for nonprofits to have diversified revenue streams (including revenue from “commercial” activities) so that they can stay afloat when one of those streams (i.e. donations) dries up, I think that relying too heavily on commercial revenue may have a negative effect on nonprofits’ ties to their communities. The main reason I think this is the case is that it seems as though if nonprofits rely very little on donors, they may have less of an incentive to please and/or gain support from the donors that they do have, because the donations that those donors make are not as important, at least in a financial sense, as they would be if their main source of revenue came from donations. While a “good” nonprofit would be sure to keep the interests of its donors in mind, no matter how few donors it has or how little the donations that its donors make contribute to the financial stability of the organization, it seems likely that a nonprofit would inevitably focus less of its energy on gaining support from and pleasing community members and more of its energy on its commercial activities.

In many cases, I think that a nonprofit’s efforts to gain donations from community members are directly related to community building. For example, the Mohawk Valley Resource Center for Refugees in Utica, NY, holds an annual “Passport to the World” fundraising event to support its programs and services for refugees. This event features performances by international groups. If the Resource Center didn’t have a need to hold this event, due to receiving revenue from some other source (potentially a market-based one), the community would lose a valuable event that helps to build community support for refugees and the work that the Center does.

If a nonprofit organization transitions from relying mostly on donations from community members to relying mostly on revenue from market-based activities, do you think that it will be less tied to its community?

1 comment:

  1. I don't think that nonprofits should transition to rely on any one source over another. I agree that it may be easy to lose sight of the community with commercialization of nonprofits, but if organizations can find a balance they should took take advantage of both revenue sources. In Forces For Good, the authors talk about knowing when to walk away from a business deal that does not relate to the mission of the organization. As long as organizations have the mission in view, I think it is possible to keep this balance.

    Also, I actually think that organizations may be able to have greater ties with the community if they are looking to them for help with needs that aren't about draining them for money. I think community members often don't get involved with an organization because they forget that that helping doesn't necessarily mean empty their pockets. If organizations were less desperate to get community funds, they may have more time to connect to them in other ways to build greater connections/better relationships.

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