The Destructive Search for Purity over Results

Punishing Profit and the Pointless Pursuit of Purity

Recently ClearlySo, the business of which I am CEO, hosted an event. One of the speakers was the Chief Executive of Justgiving (I was once its Chair), the leader in charitable giving over the internet.

At the end of the presentation a questioner rose. “How can you sleep at night earning all those profits from the charity sector?” he asked.

Justgiving charges charities 4-5% of donations received and a small monthly fee (£15). The story of the business and its beginnings can be seen here. Since inception it has raised over $1 billion from 12 million people, making it the largest player—in fact, larger than all its competitors combined (that includes Kiva at $100+ million, Global Giving at $38 million and many more).

It is true that Justgiving charges, but this compares with the 10-20% charities spend on fundraising—quite a cost savings! Moreover, Justgiving estimates that perhaps 30% of what passes through its site is new money, in other words cash that would not have gone to the charities. For this amount, at over $300 million, there is much more than a 5-15% savings.

Yet folks would prefer to focus on the reports that the company earned £2-3 million of profits. This followed many early years of losses, supported only by repeated capital injections by angel investors. The fact that the questioner made millions as a hedge fund manager, an industry which has generated arguably zero or negative value to society makes the whole situation rather bizarre.

Somehow we allow those who pursue profit maximisation at all costs free rein, but those social businesses who seek balance, but perhaps make some profit or return to shareholders, we subject to scorn.

I think it is actually the profit motive which has helped Justgiving remain focused and become successful, which I argued in an Alliance Magazine piece in 2006.

· Is it possible that sometimes the social business model, which allows for profits, yields both better social AND financial impact?

· Why do we insist on the sector’s self-flagellation? What does that say about us?

· Is this stubborn insistence on purity, a theme which I also challenged Muhammad Yunus about in his book on social business in a previous Social Edge post, doing real damage to our sector by making some afraid to take the plunge for fear of the criticism they will face should they try to take something out of it?

· Does this insistence also mean that social enterprise remains an exclusive club of the exceptionally pure or those rich enough (or have rich enough spouses) not to care about financial reward?

· What on earth do we do about sickeningly sanctimonious hedge fund managers?

Join Rod Schwartz, CEO of ClearlySo, in this very important conversation.