Nonprofit Organizations Use of the Hybrid

As I mentioned in my biography post here on Justmeans, my goal is to inform those who are new to the field or seeking a greater understanding of social enterprises.When I first stumbled upon this niche market I found myself having to backtrack to understand a lot of what was being written about the industry.Yes, there were several definitions of social enterprise, but much of what I read was geared to the professional already entrenched in the field.To that end, I thought I would focus on those who are seeking information, like I was. That being said- this post intends tooffer a quick lesson in what exactly a hybrid model is (just in case some of you were wondering why I was talking about a Prius).

The environment in which nonprofits are operating has drastically changed over the past few decades. Funds are drying up, services are being duplicated at rapid rates (resulting in increased competition), and the demand for services heavily outweighs the supply. With the reality of these changes many nonprofits have chosen to operate for-profit businesses thatalso cater tothe social missions of their organization. This creates what is known in the field as a hybrid business model.

Bill Strickland, a noted social entrepreneur, said in a keynote message to nonprofit leaders, that nonprofits have to "get out of the box" and not be focused only on mission and writing grant after grant. "The only way to survive in this environment is to have a social entrepreneurial mindset," he said. Most organizations do that with acombo for-profit and nonprofit business model.

What is a hybrid Organization?

Generally, it's a nonprofit organization that goes into business to provide services to the public; resulting in a revenue stream that allows the organization to advance its original mission.

How are hybrids established?

Typically,a nonprofit parent company establishes a subsidiary for-profit business which is legally separate from the nonprofit organization.

What are some benefits of a hybrid?

• Many nonprofits have found that by establishing their own revenue generating enterprises, they can befreed from having to compete for various government or foundation offered resources. This freedomalsoreleases the organization from time consuming reporting that comes along with such funding.


• With a successfulsocial enterprise, nonprofits can see an increased ability to provide services and canexpand their reach.


• Nonprofits are able to maintain a stable staff and are not relegated to time sensitive positions(e.g. once the funding is gone, so too is the position).

What are some risks of a hybrid?

• Any new start-up venture can be a risk, nonprofit subsidiary companies are no different.


• The initial start-up costs can drain the organization's resources (to include time, personnel, and money). Should the venture fail itmay also place the organization in a precarious financialsituation (an important reason to legally separate the two entities).


• Many may be put off by the organizations new profitmotivated venture; so, winning in the court of public opinion and maintaining your socially driven public image would have to be a key consideration.

In my opinion, social purpose businesses are going to be the life blood of many nonprofit organizations, at least the successful ones. We are approachinga time (or currently existing...depending on who your ask) when gone are the days of relying solely on foundation grants and donations. If an organization wants to meet its goals and fulfill its mission it will have to establish some form of ahybrid business model. Stricklandnotes that nonprofits "have to recognize they're businesses, not just causes".He says "there are ways to combine the very best of the not-for-profit, philanthropic world with the very best of the for-profit, enterprising world." "This hybrid is the wave of the future for both profit and nonprofit companies," says Strickland.

Throughout my upcoming posts, I intend to highlight existing hybrid models that are thriving as well as upcoming trends in an effort to showcase what is possible.

And, as always, let me know what you think!

Photo courtesy: Simple-Fundraising-ideas