Three Myths about the Nonprofit Sector

Three Myths about the Nonprofit Sector

When it comes to the nonprofit sector, many myths abound: about what nonprofits may or may not do, who they may and may not serve, how they may raise money – and how they may spend it, and what they may and may not say publicly.  From time to time, I hear the phrase “We’re a nonprofit, we can’t {fill in the blank}.” The truth is that in some ways, nonprofits are run just like businesses, but not in others. Knowing where the distinctions lie is important to success as a leader in the sector. Here are a few common myths:

  • Nonprofits cannot lobby government! – Some folks seem to think that the First Amendment does not apply to nonprofits, but the reverse is more the truth, though there are some limitations. While Charitable Organizations (501(c)3) are prohibited from endorsing or campaigning against political parties and candidates, a rule called the Johnson Amendment. Beyond that, nonprofits may definitely engage in nonpartisan campaigns to influence legislation. Truly, any nonprofit that wants to effect system-wide social change must.
  • Nonprofits cannot make a profit! – Yes, this is correct. What is often not correct when this is said is the definition of “profit”. Profit, in this sense, is excess revenue left over after all expenses are paid, which is then distributed to the owners, who may keep it, or put it back into the company. In a nonprofit organization, there are no owners or shareholders, so the ‘profit’ (more properly, the surplus) must stay in the organization and eventually be used for the charitable purposes of the organization. With that in mind, leaders of nonprofit organizations have an obligation, as stewards of charitable funds and missions, to ensure that the organization is financially sound, so that its mission may continue. Organizations that run repeated deficits year after year tend not to remain open.
  • Nonprofit staff are paid much less than for-profit employees. There’s no career advancement. This myth is more nuanced, because there is an echo of truth to it. Ultimately, it depends on the size of the organizations. Nonprofit staff, particularly in management positions, do tend to earn less than comparable positions in the for-profit sector, though more recent reports suggest that gap is closing, especially total compensation (benefits) is included. Further, over 10 years ago, Thomas Tierney of the Bridgespan Group wrote a paper (The Leadership Deficit) warning of an impending crisis in Nonprofit Leadership, that as Baby Boomer executives and founders retire, that there will not be enough leaders ready to step in and take their places. 11 years later, and we are beginning to see the beginnings of that prediction come true. Far from there being no room for career advancement, soon there will be too many seats left open, and it is vital to the future of society, that those seats be filled with qualified leaders.

Are you interested in a career in the nonprofit sector? Start reading up and getting in the know. The nonprofit sector is a great space for people who have graduate degrees. Start with our sector’s journals of record: The Chronicle of Philanthropy and Nonprofit Quarterly. To learn more about South Carolina’s Nonprofits, check out Together SC!

Ben Bullock, MSW, MPA is the Director of Operations for Together SC. He is a graduate of the University of South Carolina.

Questions? Comments? Ideas? Contact Dr. Heather Brandt at hbrandt@sc.edu.

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