Why might the trend of social enterprise be more effective than the non-profit organization model?

James, I just ran across your wonderful question; sorry I'm so late to join the party. I'm very interested in the social-enterprise model, and am starting to see some not-for-profit organizations pop up in our area that truly seem to get it. For one thing, the nonprofit sector is running into a number of funding challenges as a result of the weak economy; foundations, government agencies and even major donors are feeling the pinch and becoming more thoughtful about where to invest their philanthropic dollars. The trend is toward higher levels of accountability, and I think that's a good thing.

Also, although I only have anecdotal evidence for this, it seems to me that more nonprofits are being launched by younger entrepreneurs, who take the "enterprise" model as a matter of course. They also embrace contemporary methods of marketing their agencies, and cultivating corporate sponsorship right from the start.

And let's not overlook the generational shifts we're seeing in the donor community. Most major donors are early baby-boomers and late traditionals (WWII generation), but more GenX and Millenials are getting involved, and they just don't fit the older mode. For one thing, they're too young to think much about endowments and bequests, but for another, they're been raised to be proactive, make faster decisions, and get involved in a more proactive model.

In our practice, we're seeing more and more of these contemporary attitudes, and we're also seeing older, more established organizations beginning to explore social-enterprise as an additional income stream. It's going to be fascinating to watch this as it unfolds over the next few years.

The trend toward social enterprise says as much about non-profits as it says about corporations.

Speaking for GenX and Millenials, public corporations have seen a steep decline in favor since the 1980s, as quarterly earnings pressures led to short term thinking and a loss of stewardship. When you're eight years old and you learn the word "lay-off" its going to jade you.

Meanwhile, non-profits have at best stagnated. They rely on handouts, which are great in an era of lifetime employment, but less enticing when a generation feels the pressure of free agency.

Starting a social enterprise says a few things about the founder: one, they desire a non-profit that can run on its own, an entity that can generate positive cash flow. The market is the judge in their game. Second, they desire a corporation that won't be evil, a company that won't barrel toward an IPO so a few people can make billions.

The phrase "Social Enterprise" is a badge of honor that the company cares about more than profits, but they still care about profits.