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Posted May 6, 2008 8:41 AM by Ted Jackson

In the April 2008 issue of Alliance magazine, a journal dedicated to philanthropy and social investments, Michael Edwards wrote an article about myths and realities of philanthrocapitalism. The title caught my attention, and when I read ahead, Mr. Edwards wrote about his real concern about the amount of money in the philanthropic world that was being dedicated to solving charitable issues with a capitalistic approach. I wrote about a good example of philanthrocapitalism in an earlier blog about Smile Train.

I was unaware of the term philanthrocapitalism when I wrote the earlier blog. I wrote with enthusiasm how you could address strategic issues by taking a step back and potentially taking a new approach to your issue. Mr. Edwards argues that capitalism cannot solve issues like civil rights and racism. I think he is right on that issue, but I would hate to see the baby get thrown out with the bathwater.

I think all charities can use business techniques to manage better. This does not mean they should change the way they address issues by migrating to economic models, but it does mean that they should consider proven management techniques and adopt them to the social sector. This is where a concept like the Balanced Scorecard comes into play. The Balanced Scorecard has been widely accepted in the business sector (over 50% of companies use some version of the BSC). This framework has been modified to work in the social sector. Thus, the framework is not the same, but there are still great benefits to be had by nonprofits.

Nonprofits do not have financials at the top of their strategy map, they have their mission. But they still implement a management framework to be more effective at implementing their strategy. I'd be interested in hearing your thoughts on Philanthrocapitalism and business management techniques in the nonprofit sector.