 What Constitutes a Nonprofit Business?
Some People Really Do Think that Money Isn’t Everything
By Jack Etzel
Pittsburgh has its share of nonprofit organizations (NPOs), but for
this North Hills Monthly magazine perspective, we sought the wisdom of
the chief executive officer of one of the newest such businesses,
which was created in the spring of 2005. That CEO is Mitch Swain, head
of the Greater Pittsburgh Arts Council. Swain was previously the
director of Shared Services for the Pittsburgh Cultural Trust. He
earned his Bachelor of Science in Organizational Communications from
Ohio University and completed a Harvard Business School executive
education course in Performance Measurement for Effective Management
of Nonprofit Organizations. He, his wife and three children reside
in Allison Park. North Hills Monthly Magazine: Before we get to what
constitutes a nonprofit, fill us in on the creation of the Greater
Pittsburgh Arts Council. How did it come to be and what does it have
to offer the arts community? Mitch Swain: The Greater Pittsburgh
Arts Council is the result of a successful merger of Pro Arts, which
was an arts service organization best known for being a provider of
ticket services, and the Greater Pittsburgh Arts Alliance, which was
primarily an advocacy organization. The two organizations worked
together on any number of occasions, but there was a need to have one
organization that brought all of those things together and would
create a single entity. The Council now better serves foundations,
arts administrators, cultural institutions and federal, state, and
local organizations which can more easily find who they need to speak
to, because we represent the entire arts community. NHMM: It appears
that this is a nonprofit working with many other nonprofits. Swain:
Yes. We have a membership now of more than 160 organizations, more
than doubling the number in the old Greater Pittsburgh Arts Alliance.
That includes the smallest theater company that might have only one
performance a year, up to the Pittsburgh Symphony, the Pittsburgh
Cultural Trust, the Carnegie Museums and individual artists. NHMM:
Legally, financially, however you want to address it, what constitutes
a nonprofit? Swain: The biggest distinction is that nonprofits do
not return financial value to a board of directors or stockholders.
They exist for the betterment of the community. You have to go through
a process with the Internal Revenue Service, and typically file a
so-called 501c3 form. That’s . . . NHMM: Excuse me, but to some of
us that means that what we donate will be tax-deductible, right?
Swain: That’s correct, which is a nice benefit. I should mention that
the Greater Pittsburgh Arts Council, among other services that we
offer, holds classes for people that focus on whether it makes sense
for them to go with a 501c3 or not, because they are very difficult to
run.
NHMM: Where does funding come from for an NPO? Swain: Typically,
nonprofits are funded by government funds, by significant foundation
support, with help from corporations as well as from generous
individuals. We have a lower degree of earned income and a higher
degree of contributed income. These things are indicative of all
nonprofits. NHMM: Occasionally there have been news stories about an
executive with a nonprofit who is making a fortune and riding in
limousines. How do you stay on the straight and narrow? Swain: There
are principles of good governance. If you follow the principle of good
governance and you have an organization that is run in a transparent
fashion, and you have a board of directors that is engaged in your
organization and adheres to the responsibility to make certain that
the organization is run well, then those kinds of things should never
happen. When you read about things having run amok, there haven’t been
proper checks and balances—and not just at the top. Is there a finance
committee that’s getting down to the nitty-gritty? Is the CEO coming
to the board and giving the members proper information? NHMM: Doing
a little homework for this, I read where the Harvard Business Review
stated that the running or management of a nonprofit is “…a rare and
unnatural act.” Does it feel like that to you? Swain: (laughing)
Well, I happen to have my own copy right here and I’ve read that. But
it really is difficult. You give up things. When you run a nonprofit
organization, you don’t have the value of ownership that you would in
a for-profit business. You can’t sell it someday to another
businessperson or leave it to family members. You are, typically, not
paid as much. There are high positions in some nonprofits that pay
well, but they are very few.
NHMM: Then why do you do it? Swain: Perhaps the best way to
answer that is to point out that you have to have great passion for
what you’re doing. In fact, that passion is part of the paycheck. You
have to gain some really great feeling when the curtain opens, or the
gallery or exhibition opens that you’ve helped create by the artwork
of your own hands, or the hands of others. There has to be value in
the kinds of experiences that you bring to others that makes you feel
really great. Note: For more information, call (412) 391-2060 or
visit www.pittsburghartscouncil.org. |
