Sacrifice Notion Sabotages Nonprofits

My most recent column in the Financial Times. You can find an archive of past columns here.

Sacrifice notion sabotages our non-profits
By Sean Stannard-Stockton
December 30, 2008| Link to Original FT.com column

As we finish 2008 amid the worst recession in decades, many Americans are sacrificing some degree of personal comfort to support a charitable cause. But while sacrifice may be a noble personal virtue, the concept of sacrifice is sabotaging the non-profit sector.

When Americans give to charity, they want their donation to go directly to “the cause”. The non-profit organization, it seems, is viewed as nothing more than a bureaucratic entity whose cost of existing should be minimized as much as possible. Non-profits are expected to be run on a shoestring, their employees are supposed to live on modest wages, and all costs are expected to be kept to a bare minimum. The grandest claim that most non-profits can make in a fundraising pitch is the declaration that 100 per cent of donations go to the program. At the root of this mentality is the idea that doing good is best executed by those willing to sacrifice.

This mentality hurts the very causes that donors seek to help.

The fact is, great organizations are run by talented people, powered by cutting-edge technology and based on the best research. All of these cost money. Rather than asking non-profits to starve themselves of resources, donors should look to invest in the best non-profits and give them license to use the money to build outstanding organizations.

Together with sacrifice is the fixation on giving to non-profits in “need”.

Donors give to non-profits in response to expressions of need. Even large, sophisticated foundations will often stop funding a non-profit when they feel the organization no longer needs their money. In many ways, this is the same as a doctor who discharges a patient just as the person recovers enough to no longer need life support, instead of providing the care and nourishment that the patient requires in order to thrive. For the same reason that such a patient will end up returning time and again to the hospital, many non-profits find themselves back on life support every time they hit a bump in the road. We do not want a non-profit sector that is simply stable; for the sake of the very causes we seek to support, we want non-profits that thrive.

Many donors who seek out “efficient” charities that keep expenses low do so out of a desire to give in a more businesslike way. However, no less an authority on business thinking than the Harvard Business Review argues in its December 2008 issue that demanding non-profits cut expenses to the bone is counterproductive. In the article Delivering on the Promise of Nonprofits, consultants Jeffrey Bradach, Thomas Tierney and Nan Stone of The Bridgespan Group argue that donors should “invest in good overhead.”

“B-level leadership teams will not deliver A-level results. Yet donors are inclined to fund programs while minimizing overhead, including essential expenses such as basic infrastructure and leadership development,” the authors of the article write. “Donors must be willing to invest in capacity building for the organizations they support and hold them clearly accountable for generating results.”

It is in the last line that the link between robust organizations and the ability to affect a cause is made clear. Today donors to non-profits are demanding more and more evidence of results. Accountability is a good thing, but if donors want to demand results they must also deliver the resources required to build strong, healthy organizations.

Is it possible that individual donors will begin to embrace the idea of helping build great non-profits?

Or will they remain stuck on demanding that non-profits keep expenses low?

One reason for hope is the recent announcement from Charity Navigator, the charity evaluation website that launched in 2001, of its push to move past a rating system that rewards non-profits for keeping organizational expenses low and begin to incorporate measures of the actual results that non-profits achieve.

Having hired Ken Berger as its new chief executive over the summer, Charity Navigator is preparing to start educating its 5m annual visitors that there is more to a great organization than low expenses.

Charity Navigator might be the big gorilla in terms of the number of donors it reaches, but until it rolls out new evaluation criteria, donors who want to embrace personal sacrifice but support great non-profits might want to consult the websites of GiveWell.net, SmartLink.org, PhilanthropyCapital.org and GreatNonprofits.org before they make their next donation.