Giving Compass' Take:

• Millennial business executives and MBA students call into question five for-profit practices that philanthropy could adopt, but may be ineffective. 

• How can donors strike a balance of for-profit practices and socially-oriented principles to guide their philanthropy? 

• Read about this new model for business and philanthropy. 

When we interviewed a young tech executive in San Francisco about how she picked nonprofits to receive some of her newfound wealth, she said she wanted to maximize return on investment. The phrase “return on investment,” or ROI, gave us pause. While it was very familiar to us as Stanford MBA graduates, the term was typically used in the context of our finance and investing classes, not philanthropy. Yet we heard it mentioned a number of times by the millennial, affluent donors in Silicon Valley—typically leaders of successful startups—we interviewed for our research on why, how, and where they give.

It's perhaps unsurprising that someone would use a familiar framework to make sense of an unfamiliar situation, but we were taken aback by how common it was for young donors in Silicon Valley to apply their for-profit startup principles to their philanthropy.

Our worry is not that these approaches are wholly ineffective. For-profit principles have benefitted philanthropy in many ways. However, our interviews with millennial business executives and conversations with MBA classmates have made us wonder whether some young donors have gone too far in applying certain for-profit principles from the Silicon Valley startup world to doing good. Here are five of those practices that we're calling into question:

  1. Taking a Portfolio Approach That Emphasizes Breadth Over Depth
  2. Evaluating Nonprofits Like For-Profit Investments
  3. Giving Preference to Organizations That Produce Short-Term Results and Tight Feedback Loops
  4. Searching for Clear Measurement or Return on Investment
  5. Leading With Speaking Rather Than Listening

Read the full article about why nonprofits should avoid for-profit principles by Judy Park & Kavya Shankar at Stanford Social Innovation Review.