Thursday, May 10, 2007

How to stay small?

I like the Stanford Social Innovation Review, and so I eagerly picked up a recent issue to read about "How Non-Profits Get Really Big."

But this paper could also have been titled "Why Do So Few Non-Profits Get Really Big?"

The paper notes that, since 1970, about 144 non-profits in the US have grown to exceed $50 million in revenue, with the largest now having about $650 million in revenue.

This sounded impressive to me at first glance. Then I happened to pick up the latest issue of Fortune Magazine, which listed the top one thousand US companies. All of these companies are bigger than $50 million- MUCH bigger. Even the smallest company among the top one thousand posted $1.5 billion in revenue in 2006. The biggest company among the top thousand posted $350 billion in revenue.

The non-profit sector faces a number of challenges that both inhibit growth and impede allocation of resources to their best use. Consider the following. Of the Fortune 500 companies that started among the top ten in 1990, only three remained in the top ten by the end of the decade. Open competition meant that successful newcomers displaced the rest.

But in the non-profit sector, the picture was reversed. Seven out of the top ten non-profits not only stayed in the top ten but increased their share of the market during the decade. So much for competition! And according to Jed Emerson and Paul Carrtar, only 6% of non-profits accounted for four fifths of all revenues in the sector.

GlobalGiving exists to create a marketplace for good. The objective of our marketplace is to create a level and transparent playing field, where the activities with the highest impact will get the most resources.

As we develop this market over the coming years, there will be lots of competition among newcomers and established organizations alike. And that competition is a good thing. It will drive innovation and efficiency in the sector at a far faster pace - something that is critical if we are to successfully tackle the challenges facing the world today.