Over the past two decades, many for-profit and medium to larger not-for-profits have moved away from the philanthropic model to more of a transaction model of interaction.

For Profit and Not-for-Profit Nexus – Models of Connection

In the 70’s and 80’s the gap between for-profit and not-for-profit organisations was fairly clearly determined and articulated. For-profits existed to provide profit to shareholders or in the absence of shareholders, profit to the owners of the business.  Not-for-profits existed to provide philanthropic and charitable assistance to those who, for whatever reason had fallen through the safety net of society. 

However, over the past two decades shifts have occurred between both sectors. For-profits have had to balance the drive for profit with the need to demonstrate they are good corporate citizens, while not-for-profits have had to balance their philanthropic work with the need to return a profit to remain sustainable and continue to provide services when there is increasing demand for services and tighter regulatory and financial requirements. For-profit organisations know the reputational damage and financial costs of litigation that can quickly arise when profit and expediency is placed above the environment or ethical behaviour towards customers and clients. The growth in the number of not-for-profits, (56,000 charities in Australia in 2019 and growing at 4%) and the increase in regulatory requirements and difficulty in accessing funding, not-for-profits need to be much smarter in ensuring their sustainability.

Both sectors have moved towards a middle ground and recognised the benefits that arise from connections and the nexus between each other.

In the 70’s and 80’s the nexus between for-profits and not-for-profits was a philanthropic model. This was based on not-for-profits receiving donations from for-profits that allowed the not-for-profits to deliver services while providing the for-profit organisation with an enhanced reputation as community minded.

Over the past two decades, many for-profit and medium to larger not-for-profits have moved away from the philanthropic model to more of a transaction model of interaction.

A transactional or partnership model allows both the for-profit and not-for-profit organisations to begin sharing resources for specific events or occasions. For example, the for-profit organisation may provide staff as volunteers for an event being run by the not-for-profit. Or a for-profit organisation may meet the marketing costs for the not-for-profit organisation as long as its brand is recognised on the marketing material.

A transactional or partnership model has very real advantages for both organisations. It provides greater brand recognition for both organisations. For many not-for-profit organisations, being able to optimise brand recognition is an invaluable but often difficult to executute advantage.  The real advantage of strong brand recognition for not-for-profit organisations comes when submitting grant applications.

The last type of connection between for-profit and not-for-profit organisations is an integrative model where both organisations collaborate and utilise joint resources to create new services or resources to meet community needs. The advantage of this approach is that the unique strengths of both sectors (for-profit & not-for-profit) are utilised to meet specific community needs.  

Such an approach is not without its challenges, trust, confidence, and open communication are essential, yet these qualities can be learnt and built through first exploring and engaging in a partnership model of connection.

As not-for-profits are increasingly having to compete with other not-for-profit for funding, the opportunities for not-for-profits and for-profits to build strong connections and partnerships to the mutual benefit of each, continue to grow and develop.