Monthly Archives: February 2014

For-Profit: the Better Nonprofit

After doing some research, my wife decided to donate her hair to Pantene Beautiful Lengths rather than the well established nonprofit Locks of Love. The primary and obvious attraction to Pantene (a Proctor and Gamble company) is the shorter length requirement of 8 inches versus 10 for Locks of Love. Also, although the two have different target recipients of wigs, many are attracted to the fact that Pantene donates its wigs, while Locks of Love (the nonprofit option, ironically) sells theirs. Dig just a little deeper and you’ll find that Locks of Love not only makes far fewer wigs, they’re not very accountable either. According to an investigation by Nonprofit Investor Pantene is able to make a wig for every 19 hair donations it receives; Locks of Love makes a wig for every 328 donations it receives.

My point is not to give Locks of Love a hard time; they probably receive, on average, far fewer usable hair donations than Pantene. Also, perhaps it’s what we should expect when comparing a standalone not-for-profit organization with an organization that has the resources of P&G at its fingertips.

But to be pragmatic, that doesn’t make it OK. In an earlier post, I concluded that an individual is incented to be more productive if his inputs (like income) are relative to and dependent upon his output (labor and work exerted), because if his inputs are fixed (if he receives the same income and material things no matter how productive his work is), then he has no reason to exert himself. An organization is no different. A for-profit entity must always stay on its toes if it wants to stay ahead of the competition and maintain a stream of revenue. A poorly run nonprofit could eventually lose donors and grants, but it generally lacks the consequential relationship between work and reward that any for-profit entity has. In other words, we can expect that a for-profit will, in theory, out perform a nonprofit.

Though the cause and effect relationship is complex, companies who give more, make more. Not surprisingly, the biggest givers are big companies with lots of assets like Wal-Mart and Wells Fargo, but I doubt I’m alone in thinking that Tom’s Shoes and VisionSpring (the nonprofit working with funds from Warby Parker) are the real heroes.

A study by Nielsen concludes that exactly half of consumers worldwide are willing to pay more for products from socially responsible companies. This 50% captures only the consumers who are willing to pay a premium to help save the world; it doesn’t account for the additional consumers who might buy the socially responsible product because they perceive a higher quality among products whose manufacturers can manage to afford altruism. The 50% figure was up from 45% in 2011. Let’s call it a trend: not only is consumer demand for social responsibility up, but even social responsibility itself is up, even during the recession. Maybe it’s because the millennials, also known as the “civic generation,” are making a dent now as workers and consumers.

So I say that it’s time that we, as companies, stop channeling our marketing efforts into cute packaging and product names that are intended to confuse customers into perceiving a product as more valuable than it actually is. Let’s instead do something to improve the world, and do it in the name of our brand.