Why is profit important for social organizations?


Imagine the following dialog:

- Good morning, what's your name?
– I'm not-Marcelo, nice to meet you.

There is clearly something wrong with this conversation: people identify themselves by who they are (eg Maria Clara), not by who they ?aren't? (Marcelo, in the previous example). The same thing goes for organizations: Vale is a mining company and not a non-bank. Therefore, why do we find it normal when people refer to ?non-profit organizations? rather than ?organizations for social impact? or, simply, ?social organizations??

Legally speaking, not even the negative definition is correct: social organizations are ?without distribution of results? and not ?no profits?. The problem is that this language has relevant impacts on the way we see the social sector; we hope he doesn't make a ?profit?, that he spends all the resources at his disposal and doesn't save or invest anything for the future.

But, as in any undertaking, the surplus between income and expenses for the period (the ?profit?, in a traditional company) is important to finance the activities of the following period, to allow investments in new ways of generating resources or experimenting with new ones. social impact programs. Without accepting this surplus, or ideally, encouraging the surplus, we are implicitly admitting that what we want is for social organizations to constantly live in a situation of financial stress.

At the end of the day, if we implicitly or explicitly charge organizations not to have surplus, but at the same time expect them to be solid, innovative and well managed, we are asking the impossible of them. We shouldn't blame them if they fail to meet that expectation.

*Leonardo Letelier has a degree in production engineering from USP (University of São Paulo), with an MBA from Harvard Business School (USA). In addition to being a founder, he is the CEO of Sitawi-capital, discipline and advice for social impact. With more than ten years of experience in strategic and social consulting, he was also a consultant for Mckinsey & Company.


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