Millionaire Out-Housing Habitat (Part 2)

Yesterday’s post focused on Tom Pirelli’s brag that he can out-house Habitat for Humanity with a new business model that will create more houses with greater quality while providing jobs for locals by eschewing volunteer labor. I don’t know any more about Tom than what I read in Forbes Small Business, and I only know Humanity from the solid reputation it has built over decades. But the FSB article does surface several approaches widely promoted by traditional philanthropists that systematically stymie social impact and illuminate why for-profit approaches are gaining so much momentum in our sector.

Collaboration at all Costs - I don’t know if Tom can pull off his brag, but even assuming he can, he isn’t likely to be welcomed with open arms even by those who share his passion for alleviating poverty. For one thing, potential funders will almost certainly demand that he approach Habitat to determine how he might collaborate. I don’t know if that has happened, but I can certainly imagine that a big dog like Habitat might be resistant to radically new approaches and leadership. In the for-profit world, if you get served a bad meal with bad service on a busy street, you don’t offer to help the owner do a better job; you launch your own restaurant and ask folks to vote with their feet. I’m not sure why we are so resistant to that notion in the non-profit world. While it is obviously important to avoid duplication of services, the traditional thirst for collaboration at all costs undermines innovation, favors “incumbents” and limits choices for consumption.

Free Labor Is Not! - You can’t pick up a newspaper or magazine these days without reading about worldwide opportunities to turn your vacation into an opportunity to make the world better. Habitat pioneered this trend years before it was the rage it has become. But let’s not kid ourselves. It costs a lot of money to manage volunteers; their inexperience undoubtedly contributes to inefficiencies and compromised quality. (On a related note, how about AIDS Rides across the country that raise millions, of which the majority goes to management companies who must provide intensive support for riders?) Kudos to Perilli for embracing the greater cost-efficiencies of paying local workers to do a job volunteers can’t do as well. And Godspeed to the social entrepreneur who can both tap the passion that Yuppies like me get when we volunteer, and channel that energy in ways that are actually cost effective.

Riding Old Favorites - Habitat has been supported by a wide array of funders who take credit for the massive achievements of that organization. It’s also a good solid brand name that upstarts who achieve what Perilli proposes might tarnish. In the for-profit market, investors are constantly on the look-out for “the next big thing” that can unseat existing champions and provide greater returns, often with lesser investment. Kudos to the Ford Foundation for enlisting a new leader in Luis A. Ubinas, who knows what that takes. Hopefully he won’t have to fire too many staffers resistant to instilling such passion at Ford.

These are my thoughts. How about yours?

Susan Herr

Posted at 8:14 AM, Aug 17, 2007 in Economic Development | High Net Worth Donors | Philanthropic Strategy | Permalink | Comments (1)


The thought that occurs to me after reading your comment is that Perilli is approaching his project with an eye toward cost and financing and then results while the other nonprofits you mention put social benefit first and then how to pay for it second. At the recent COF conference Clara Miller of the Nonprofit Finance Fund demonstrated that most nonprofits are in two business but few realize it. The first is service delivery, the second is raising the subsidy income to pay for their services. The problem is if you don't get clear on your costs and have a good, reliable plan for raising the income, it doesn't matter how good or valuable your service is.

Posted by: Bruce Trachtenberg