The basic situation is this: For-profit companies go away if they don’t make money (their stated goal). Non-profit organizations can labor on indefinitely even if they don’t make progress on fulfilling their mission statement (their stated goal).

There are lots of directions to go from here. First, a little clarification. While you’ll frequently see for-profit companies running a loss (i.e. supported by venture capital until they become profitable) those companies do eventually disappear if the market doesn’t support them. Consider Pets.com for an example (described by Wikipedia as “a leading icon of the dot-com bubble”). Contrast this with the (at the time) scathing rebuke of non-profit successes from “Death of Environmentalism“.

Over the last 15 years environmental foundations and organizations have invested hundreds of millions of dollars into combating global warming. We have strikingly little to show for it.

Fifteen years of not running a profit is relatively unheard of in the for-profit world. After a few quarters, their shareholders are up-in-arms demanding more responsible management. This often means tightening business focus (often accompanied with closing plants and laying off workers), which gets to a fundamental difference between nons and fors. Closing offices and laying off non-profit workers does not help them achieve their mission, in fact it makes it harder. The equivalent in the non-profit world is to “liquidate” their mission, by making it less aggressive and thus easier to achieve. Ta-da, we’re “profitable” again!

The question of “How can non-profits be more like for-profits?” comes up all the time (and the various pros and cons are well-summarized by this article over at N-TEN). Honestly, some afflictions attributed solely to non-profits (like “Founders Syndrome“) can be seen in the for-profit world, as well.

What doesn’t get asked as often is, “How can for-profits be more like non-profits?” Namely, what if the mission of a company shifted from “Make money by producing Product X.” to “Make the best Product X possible.”? I’m not claiming that this isn’t the goal of 90% of the employees of any company, but it’s still not the stated goal. There are obviously financial considerations that make this an unapologetically idealistic and not realistic suggestion, but it’s a worthy thought exercise. How would business practices change?

The specific discussion last night (and I should mention that the representatives for the for-profit-but-not-evil company and non-profit-but-often-frustrating organization tended to agree on a lot) mostly circled around how non-profits keep growing without a way to hold ineffective ones accountable. I would say that, like for-profits, non-profits are providing a product/service/utility that, if the public values, will get funded by donations. It might not be a thing you can hold in your hands (like a Coke can), it may just be a feeling that you’re part of the solution—which many people value even more. This is the beauty behind social entrepreneurship.