By Sapna Sopori, CEO of Sapna Strategies, LLC and career NPO professional

How would you feel if I told you that Jeff Bezos got his groceries for free from a food bank?

If he did, it would probably shock and anger you, right? These feelings come up because we as a society assume that nonprofits exist to support those who are unable to access the services they need, and in our country, one of the biggest barriers to access is wealth. So, it is safe to assume that NPOs do not exist to help people like Jeff Bezos.

But this assumption is not always the reality.

… many of our country’s economic elite directly and regularly use nonprofit services at a discount or for free.

Outside of frontline nonprofits (those that offer immediate services for those in crisis, such as disaster relief, food banks, housing shelters, etc.), many of our country’s economic elite directly and regularly use nonprofit services at a discount or for free. From Mercer Island to Aspen Valley, affluent folks access subsidized activities from nonprofits, such as guided nature walks at ski resorts, science camps at aquariums, art activities in high-end museums, and more. They enjoy all of these activities for free or at very low-cost.

Sounds unbelievable, right? Does it make you wonder why nonprofit organizations (NPOs) would financially subsidize their services for the wealthy?

It’s a good question, and one we are going to examine here.

To start with, we must first understand how these services are tied to donations.

Here is what most of us assume:

FIRST: A specific societal inequity is identified, one that most greatly impacts those who cannot afford to offset the impact on their own.

IN RESPONSE: An NPO is created to address said inequity and support those who cannot afford these services otherwise.

TO PROVIDE SERVICES: The NPO solicits donations to make its services accessible.

IN RESPONSE TO SOLICITATIONS: Wealthy donors give funds to NPO to discount the service.

ONCE FUNDED: The NPO uses donations to provide accessible services to those most impacted by the inequity.

Seems logical, right? And it can work this way, like with frontline NPOs. But when we zoom out to the broader nonprofit sector, we will see there’s more to the story, especially when we consider how we use our services to secure funding.

What often happens instead is something like this:

FIRST: A specific societal inequity is identified, one that most greatly impacts those who cannot afford to offset the impact on their own.

IN RESPONSE: An NPO is created to address said inequity and support those who cannot afford these services otherwise.

TO PROVIDE SERVICES: The NPO uses its services to engage wealthy donors in order to solicit donations to make the service accessible for all patrons.

IN RESPONSE TO SOLICITATIONS: Wealthy donors give funds to the NPO to discount the service.

ONCE FUNDED: NPO uses donations to provide free or discounted services for ALL patrons, including those who can afford to pay more and/or are not impacted by the identified inequity.

To illustrate how this works, let me give an example from my own life.

If a majority of the folks served by these classes were affluent and could easily afford the “full price” tuition and beyond — why were they only paying $10/kid?

I used to work at an environmental education nonprofit located in an extremely wealthy community, one in which a vast majority of residents were well-beyond comfortable — they were affluent. These folks were the primary users of this nonprofit’s services because it was located smack dab in the middle of this affluence.

Just like with many other nonprofits, the services offered were designed to be extremely affordable. For example, a 2-hour kids art class was priced at only $10/child. There were scholarships available for folks who needed additional support, but to take advantage of this, lower-income folks would have to spend money and time to travel to this nonprofit’s campus (#HousingSegregationInEverything).

If a majority of the folks served by these classes were affluent and could easily afford the “full price” tuition and beyond — why were they only paying $10/kid?

Based on countless conversations over the years with NPO professionals, the theory goes like this: NPO engines run off donations, and we often use discounted or free services to engage wealthy people and then cultivate them over time to donate. Potential large donors send their kids to a summer camp or they take a nature walk at a ski resort, they get on a mailing list, and hopefully down the road, they give a large donation.

So, why is that a problem? It seems to work, right? Even though this can work, I believe it does so with many harmful effects.

5 harmful effects that result when we subsidize our programs for rich people

1. It lowers service-providers wages

One of the most harmful ways NPOs keep prices down is by underpaying staff.

At the aforementioned NPO, I was a college graduate in a job that was nationally considered highly competitive, and my “compensation” was a stipend of $25/day (I worked 40 hours a week) and a shared room in a dormitory with utilities.

Here’s what my compensation didn’t include: health insurance, retirement benefits, student loan deferment, food, and more. It also did not take into account the high cost of living in the surrounding affluent community. In short, if you wanted to work at this organization, you had to be able to afford to work there. The low-cost classes provided by me for the affluent clients was made possible because I wasn’t paid well.

2. It limits staff diversity

Statistically, white people are better able to afford working for lower pay (like $25/day). BIPOCs in our country by and large have less accumulated wealth than white people. So it’s not surprising that when an NPOs offers low wages in a geographical area that has low racial diversity and high cost of living, we end up with lower racial diversity of staff in these NPOs. To further compound the issue, if these NPOs promote from within like so many do, you get a homogenous staff pipeline at all levels.

3. It further devalues our services

An argument I’ve heard in favor of keeping NPO service costs low for affluent clients is that these folks are “shopping the market as savvy consumers.” This brings a for-profit perspective into the nonprofit sector, and pits NPOs against each other, so that rather than working together to complement each other’s services, NPOs try to outcompete each other to provide the “best deal” and entice potential wealthy donors. But, many of our NPOs exist because the service they provide is already undervalued and underfunded by society. So, it is counterintuitive to further decrease our pricing because it reinforces the idea that our service is “low-value.”

To illustrate this, let’s go back to my experience with the NPO above: I would often hear complaints from wealthy parents, like “the NPO down the road only charges $8/child so why are you charging $10?” or even arguments to not pay at all because “I donate to here so this should be included.” These were the same parents who would casually share, “We just sent little Johnny heli-skiing for his 10th birthday,” an experience which costs probably about $2,000 , while I was earning $25/day to teach little Johnny and 15 of his friends.

Using free or discounted services may bring potential wealthy donors in the door, but it does not increase their perception of the value of our services; instead, it reinforces the perception that our services are not worth much. And this perception by those in power is part of the reason why our services are needed to begin with.

4. It promotes inter-team disparities

I have often found that the staff providing the services of the NPO are typically paid less than their philanthropy team counterparts. This is often justified by how much each team “brings in” financially.

For example, at the organization I previously worked at, I only “brought in” $10/child whereas a gift officer might bring in a $500K donation. And, in contrast to me, the gift officers were paid a livable wage for their work. And all staff knew of the pay difference between the teams … which created a lot of disharmony between two teams that needed to work together.

As mentioned above, the services provided by an NPO are already undervalued by society, so if we keep justifying paying service-staff less because of how much they “bring in,” we end up perpetuating the very inequities our NPOs were created to uproot. And, if we don’t address internal pay equity, there is the added negative impact to critical inter-team relationships.

5. It incentivizes NPOs to modify services for the wealthy

When programs, especially education programs, are used to entice wealthy people in ways that secure a donation, the program content tends to change from what is needed to really achieve our missions (such as systems-change education) to what the potential donors in the audience will be more comfortable learning (such as systems-reinforcement education).

As an environmental educator in front of a group of potential donors, I am far less encouraged to talk about the history and impacts of inequitable wealth distribution and how this contributes to environmental harm. I’m instead encouraged to talk about resource distributions for squirrels and flowers and worms. The content ultimately becomes “safer” for a potential donor in the audience so that we are more likely to get the gift. But the service is then less impactful for making the real change our missions require.

So, what can we do about this?

The practice of subsidizing affluence is deeply embedded in our culture, but changing our fee-for-service model is a big way NPOs can stop it. But it requires fundamentally changing how we think and act about money — and talking about money, especially with those in high-powered positions can be uncomfortable. So, if you do tackle it, expect waves — big ones.

But! Just because something is hard doesn’t mean we shouldn’t do it, right? So, here is a very simplified four-step plan that will at least spark good conversation at your organization.

The four-step plan

Step 1: Analyze what your service programs actually cost

Many NPOs have a hard time distilling the actual cost to provide services, but it is critical to revising a fee-for-service structure, so take the time to do it. And when you do, be sure to include equitable compensation for staff who are providing the service. This one will be a hard conversation, especially if pay-transparency is not part of your organization’s culture. But, this is absolutely fundamental if we want to be a part of the solution, not part of the problem. Have the hard conversations.

Step 2: Establish the actual “full price” for the service and build the analysis into philanthropy communications.

This is key because we can’t just raise fees out of nowhere. We need to explain the process above and how doing this will help us better achieve our mission. We need to clearly state how the previous structure was part of the system we are trying to change, and by redesigning our fees-for-service we will center the needs of those most-impacted rather than the expectations of those least-impacted.

Step 3: Offer a sliding scale for clients based on their self-determined needs.

Bluntly sharing the “full price” can jar affluent clientele used to getting a bargain for your services. By offering an opt-in sliding scale, we can communicate the real cost of making equitable change while allowing folks to self-determine how much they can afford.

This self-determination is regularly used in frontline NPOs. For example, I could use a food bank to get my groceries for free, but I won’t unless I financially need to. We have a societal understanding that if I take free food from a bank when I could afford to pay for it, I would be taking it away from someone who really needs the service . We need to cultivate that sensibility among affluent patrons of all NPO, not just frontline NPOs.

(FYI, I am not advocating to increase prices for low-income clients. I do not want anyone to unintentionally shame low-income clients for accepting support. While prices for affluent clients will increase as a result of this analysis, prices for low-income clients should at least stay the same if not decrease as they will be better supported by this new pricing structure.)

Step 4: Lastly, keep asking for the donation.

After the “full price” is shared with the clear rationale, ask the affluent clients to make tax-deductible donations for any contributed funds beyond the price. We have to be confident in our communication and believe that once we are clear and honest with our donors, they will donate, not because they got a discount for a class but because they believe in our work and see that we are living the change the world needs. And they are playing an active role in this, both in their donation and their payment for our services.

We don’t tend to think about how fees-for-service in NPOs can either support or undermine our equity intentions, but doing this hard work will take us one step closer to building a world in which everyone can survive and thrive, one where we feel proud of both the work we do and how we do it.

And, for some extra motivation, keep reminding yourself that you don’t want to be the NPO that gave Jeff Bezos a handout!