Nonprofits: The Backbone of America
The
nonprofit sector in America has evolved drastically throughout our nation’s
history. Today the term “nonprofit” encompasses a vast scope of diverse organizations
that are involved in a myriad of activities. In fact, with all the different
nonprofits that currently exist, one might be left wondering what is the exact
role these organizations play in our society?
Most
of us are familiar with the role of the government, or public sector as it may
be called. The government exists primarily to provide our society with law and
order, thereby maximizing social welfare. Protecting human rights, allocating
public goods, and providing safety regulations are just a few examples of the
role of our government.
In
the middle of the public and for-profit sector exist nonprofits. Unlike
for-profits, nonprofit organizations are not allowed to distribute profit to
their owners. So what do nonprofits do, and why are there so many of them?
Generally speaking, nonprofits arise to fill the gaps left in the social
welfare realm by the other two sectors. They are motivated by altruistic
reasons rather than the desire to earn money. Despite this common goal they vary
significantly in both form and function, ranging from local grassroots
organizations to massive universities and hospitals which employ thousands of
people. Currently nonprofits play a key role in providing education,
healthcare, and social support in the U.S.
Nonprofits
share characteristics with both the public and for-profit sector. Similar to
the government, nonprofits function for the good of the public. Internally,
their structure and hierarchy may bear a striking resemblance to their
for-profit counterparts. The one difference here being that nonprofits often
rely to some extent on the contribution of unpaid volunteers to forward their
mission.
Nonprofits
will often compete against for-profits in the same market. An example of this
would be seen in the provision of healthcare. Imagine both a for-profit and
nonprofit hospital in the same community. While the for-profit hospital’s
primary concern is to make money, the nonprofit hospital would focus mainly on
providing quality, low-cost care to as wide a range of the population as
possible. We would therefore expect the for-profit hospital to avoid serving
the costliest and least profitable portions of the population. Research
reflects this assumption, showing that the majority of care provided to the
low-income and uninsured population comes from for-profit hospitals.
One
may ask why not just have the government run the hospital instead? The reason
is that a nonprofit can often act much more efficiently than the government
can. As anyone who has lived in America knows, the public sector tends to move
at a very slow pace. Political processes, partisanship, and many other factors constrain
the ability on what the government can do. Nonprofits offer an advantage in
that they are not bogged down by these same constraints.
Nonprofits
are unique in that they combine various aspects of for-profit businesses with
the altruistic motives of the public sector. Their importance to today’s
society is unquestionable, and as uncertainty grows over the direction of our
nation’s government, it is no doubt that their role will only be magnified in
the future.
Sources:
Berman, Howard J. "Doing “Good” vs. Doing
“Well”: The Role of Nonprofits in Society." INQUIRY: The Journal of Health
Care Organization, Provision, and Financing 39.1 (2002): 5-11.
Garthwaite,
Craig. “Who Bears the Cost of the Uninsured? Nonprofit Hospitals.” Kellog
School of Management at Northwestern University. Evanston, IL. 2015.
Renz, David O. The Jossey-Bass handbook of
nonprofit leadership and management. John Wiley & Sons, 2016.
