Mike Brown, a venture capitalist, moderating an Economic Sustainability track at the NetSquared Conference:
Some nonprofits just suck!
He got some hesitant applause and a few nervous laughs. But why is that such a shocking statement? Doesn’t everyone agree that some for-profit companies “just suck”? Why should nonprofits be any different? In a world with limited resources, we need to get comfortable with the idea that nonprofits that are trying hard and have lots of passion — but aren’t cutting it — don’t need a pat on the back. They need to be ignored and we need to let them go out of business.
(Sorry. My next comment will be useful. Promise.)
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Am I missing something here? Or maybe I’ve been in this business too long. Either way, I don’t see anything earth-shattering, even noteworthy about the statement that some non-profits suck. Is there a strong feeling otherwise–ie that a nonprofit automatically deserves to be put on an a pedestal? If so, then I understand the comment but am sorry to know that such sentiment might exist. Also, I’m not sure just ignoring a nonprofit is much of a solution. Maybe we need to find out if it’s fixable first. If not, then go ahead and ignore.
I think the sentiment exists that if a business is structured as a nonprofit then even if they aren’t any good “at least they’re trying”. Whereas people get outraged at for-profits (think of the airlines) that don’t perform well.
I guess I’m just one of the cold-hearted ones who never bought into that myth. Too many big problems out there that need more than good intentions. They need workable solutions. And to determine whether they are working, nonprofits need good systems for tracking their work, analyzing their performance, and making corrections as needed. Just “trying to be good” isn’t good enough. I run a modest nonprofit and I know I’m not guaranteed a thing if I don’t perform and my organization doesn’t produce. And I wouldn’t have it any other way. Otherwise, where’s the incentive?
Mike is my good friend and our Board member at CompuMentor/TechSoup, but I think this remark is unfortunate and I likewise disagree with your gloss on it, Sean.
I think it’s essentially a matter of distinguishing between content and context. The content here is self-evidently true, in the sense that more or less ipso facto a subsection of every group is the least qualified in that overall group (whether “least qualified” equals “sucks” is another discussion; I know the phrase is in very common currency, but I still find it linguistically lazy, the negative equivalent of “nice”; it’s always seemed to me that if you’re going to express a criticism you should take the trouble to specify it, but I digress…).
The context is another matter. If you’re standing in front of the NRA and want to say “Gunowners suck,” than I say, “more power to you and excuse me while I get out of range.” Truthiness to power; good for you. But if you stand up, from a position of authority, and tell a group of people who have in many cases worked for nothing or very little to try to accomplish something beneficial that some of them “suck”, I am not very impressed. It feels like piling on. Is it possibly true that anyone n the nonprofit world doesn’t already know that some nonprofits do a poor job in some (or many) areas? I don’t think so.
I think Mike’s real point is that some nonprofits really have no claim to be taken seriously as business models. And I think that’s actually a pretty interesting point and more nuanced than it might appear. The historical reality is that for many decades there was no expectation that nonprofits woiuld behave like businesses in any way. The social contract was quite simple. Government , Philanthropy and individual charity supported organizations that did the necessary social work that no one had any interest in making money out of. The trend toward a more business oriented approach to social maintenance and improvement is a relatively recent development. I won’t take the space here to describe it, but will just note that one of the unintended consequences of this trend is that nonprofits that can’t spell bizness modl now feel obliged to claim that they have one. That doesn’t mean they suck! It means they are confused about where they fit into the present funding climate and are climbing on the latest buzzword (not all that different from much of philanthropy, eh?) I think Mike is right (if I’m interpreting him correctly) that we need to dismantle the shibboleth that all nonprofits ought to be real businesses and should only apply business parameters to organizations that can stand the scrutiny and respond effectively.
Knowing Mike and what a warm, fuzzy and empathic individual he is (most of the time), I believe he misread the room. Obviously he struck a chord with you, Sean, and I’m sure some others, but for many of the people there (based on the feedback I’ve heard; I wasn’t present myself) it felt like a person in a position of power, a VC, an “Expert Reviewer”, a board member of the host organization, taking the opportunity to state the obvious in an unnecessarily belittling way.
Hey Guys! So glad my comments incited some discourse and shook things up just a bit! I’ll add my two cents. One of the major challenges in the non-profit sector is that the efficient markets principle we hold dear in the private sector doesn’t hold as well in the NPO world. In the for-profit world we value the fact that resources tend to accrue to the organizations that generate superior returns. Additionally, organizations sometimes merge or cede control in exchange for financial compensation.
In the non-profit sector, many organizations often serve to solve the same problem in the same way. We heard this yesterday from both panelists and the audience at the NetSquared conference when attendees asked several organizations if they would consider merging with other organizations trying to achieve a similar outcome. Unlike in other realms where competition channels resources to the most efficient or effective consumer of resources, in the non-profit sector resource allocation and efficiency/effectiveness are not always or easily correlated. Efficient /effective NPO’s don’t always thrive and inefficient or mismanaged NPO’s sometimes consume resources better allocated elsewhere. Unlike in the private sector where organizations frequently merge or acquire to achieve scale or become more efficient, this happens much less frequently in the NPO world because there is no readily-exchangeable compensation available to the stakeholders of the organization that cedes control to another.
Yesterday, I made the point that any organization (foundation, NPO, or for-profit) must set some criteria or filter for its resource allocation to ensure that the resources are deployed as effectively as possible. I provided the example that if my goal is to provide housing for people and my resource is hammers, I should offer the hammers to the builders that can build more housing than the builders who are slower or lazier (all else equal). I also *implied* that NPO’s that are providing the same service to the same (or similar) constituency should consider joining forces to achieve greater outcomes through scale and resource allocation optimization. Most people understood that I was making this point clearly yesterday when I said, “Some non-profits suck; just like some for-profit businesses suck” as I then spent the next five minutes explaining exactly what I meant. The people who understood this point told me so directly after the NetSquared panel I moderated. Apparently, some took offense to my “inflammatory” remark. Those who took offense felt that I was undermining the hard work of good people in all NPO’s who have dedicated their careers to helping others. To them I say, learn the meaning of the term “hyperbole” and stop being so sensitive. Obviously I care deeply about the sector and appreciate the great work effective NPO’s are doing. Why else would I spend the time that I do supporting NPO’s with my time and resources?
I hope my comments will breed some dialogue about how to identify the highest performing NPO’s and how to help organizations filter efficient/effective NPO’s so that they can capture more resources and achieve even greater impact. I don’t claim to have the answer but I’d love to be part of the discussion.
I was there and frankly, I thought it the use of the word “suck” was a refreshing wake-up call to everyone who’d been coddled over the course of the conference. Non-profit entrepreneurs are just as accountable as their for-profit peers in that thier ideas need to be sound and supported by a/n (economically) sustainable plan. It’s erroneous to assume that “vision”, altruism or a not-for-profit mission equals absolution from accountability.
I don’t feel sorry for people who work hard with good intentions and then get insulted. That’s evidence for self-assessment; that’s how you improve; and that should be considered part of what you sign up for when you ask people to give you money.
I feel much sorrier for the people in real need, who would be better served if we were tougher on their servers’ egos.
A business fails if its market vanishes. A nonprofit succeeds when its “market” vanishes…i.e. when there is no longer a need for its services. This is known as “systemic change”.
“I think the sentiment exists that if a business is structured as a nonprofit…”
This is the problem. A nonprofit is *not* a “business structured as a nonprofit”. A nonprofit is an organization driven by a mission instead of a profit margin. Many nonprofit organizations are working to reduce the “market” that needs their services…the very opposite of a “sustainable” business, which often actively works to ensure there remains a market for their goods or services.
If you do not understand that a nonprofit’s goals are mission-driven and not income-driven, you cannot judge a nonprofit’s success or failure.
This idea that a nonprofit needs to “make” enough money from its constituents to cover its costs is fundamentally flawed; how do you feed the poor on this model? Is it not sustainable to feed the poor?
Maybe systemic change results in the poor no longer needing to be fed after a certain period, which is a movement towards sustainable development but *not* sustainable if we think of the organization doing the feeding as a business, with that narrow definition of “sustainability”. But the ecology is sustainable.
My response to your comment during the session was that you asked the wrong question; the question is not why we should give resources to the organizations that suck, but rather would those organizations suck if they had the right tools and training.
Lastly, how would you know if an organization “sucked”? There is a monolithic NTAP in Chicago that provides subpar technology assistance at ridiculously inflated prices while *still* rolling in grant funding because they are “sustainable” from a corporate angle. They are a business wrapped in a nonprofit banner. There is a local worker-owned cooperative that provides much better service at literally half the rate; is this less sustainable? Does it do less good? Why is the former seen by some to actively damage the NTAP ecology?
How do you explain the volunteer techie who helps at the local computer recycling operation? How is volunteering “sustainable”? Are volunteers all idealists with no business sense?
Lastly, there was an observation that organizations providing free services should charge. As one such organization, we hear this thought once in a while. However, as I tried to explain during the session, charging even $100 would shift our “market” from those who cannot pay $100 to those who can.
To a businessman, this makes sense…you find the market that can afford your services at a profitable price. You are not loyal to your market. To a nonprofit with a mission to serve precisely those who cannot afford $100, this is problematic. We are loyal to our markets. We exist to shrink them.
I wasn’t offended by your statement, and I agree that we must develop a yardstick for measuring the effectiveness of a nonprofit, but attempting to apply business metrics is misguided.
The metric is the same – results. Well intentioned people with well intended motives that don’t achieve results (working towards a solution rather than a self perpetuating service regime)draw focus and funds away from Results Oriented NonProfits (RONP). If a for profit company can achieve profit while providing community benefit, I say bravo (think R&D in pharmaceuticals and health research). One of the most successful employment programs that I have seen was created and operated by Encana who created meaningful training, jobs and solved their labour shortage in the same program.
Mission driven, profit driven, public service … these are merely delivery models and neither deserves the halo or pitchfork that are attributed to them
Bob: Yes! No organizational model makes something praise worthy. It is all about impact.
Your comments are right on the mark. You don’t provide a URL link for your name, would you share your background/affiliation with us?
I moved two years ago from the largest humanitarian organization in the world to this small service organization (<400K budget with 3.5 FTE)because I couldn't make an impact. I am currently writing and speaking on a return to durable community-based solutions rather than macro-systemic attempts.
Don’t throw around terms like “efficient markets” unless you can defend them. Market efficiency is a hypothetical of theory that is rarely seen in the real world. What if I claim that the most profitable companies are exactly the ones that “suck” the most because they extract the most resources from the productive economy in the form of rents and usury? I doubt you can refute this claim in any sensible way.
That is not to say that there are not problems in the non-profit world, but the for-profit world is hardly in a position to criticize. I see no theory of leadership being advanced here. I see no theory of excellence. Just warn out propertarian rhetoric.
I currently work for a sucky nonprofit. Alot of monetary and resource waste,horrific management, and unmotivated and clueless board members. If the NPO were a for profit, the doors would have been closed years ago. NPO need to run like a for profit period (in goals and resource and personnel management).
Some nonprofits do suck. There is more waste, inefficiency, and political bullshit than you can shake a stick at. You give them the money, and then the money goes into the CEO’s pocket. It’s really sad, but true, that the world would not change at all if over half the nonprofits in America disappeared tomorrow.
Some Nonprofits aren’t trying to put themselves out of business. On the contrary. They are trying to stay in business, while working just a little on the problem, just enough to say they’re doing something about it.
The biggest issue is that nonprofit compensation for leadership and board is in no way tied to salary. If nonprofits were actually going to accomplish something, you’d think that they would get a raise if they helped 100,000,000 people, or raised $500,000. No, all they get is a pat on the head, and some nitpicking about what they could have done better.
Some Nonprofits are horrible. Good work is always punished.
Passion? There is no passion in non-profit whatsoever… From all of the non-profit jobs I’ve had any interaction with, the people that work there are self-absorbed and don’t truly care about the “goal”. There is no reason for employees to work hard in the organization, where there is no room for improvement. You could be the hardest working employee, or you could be the least professional employee, and be treated exactly the same. Everyone is in it for themselves, and everybody is comfortable to do what they please because the upper management doesn’t want come down on anyone and look like the bad guy or fire someone for being incompetent, they’d rather ride it out than have to sit through resumes and interviews. Non-profit is among one of the worst places you could work if you care at all for your health or sanity. Find a job where you are promised a good wage, profit-sharing, and stock options, then tell me how much more motivated you are to work your butt off.
The problem in having motivated and competent employees in the non-profits has something to do with the intrinsic value of the work that they do. If people are trained, essentially from birth-in a system based on punishment and reward-they loose their sense of desire for the intrinsic reward of doing the work. Think of a child building something with a set of tinker toys who has their own goal in mind-one that they discover along the way or perhaps even change as they are creating something and learning. If you put that child in a classroom where their performance is measured, they are given a specific goal, rewards or punishments in the form of awards or low grades-their whole experience with this tinker toys shifts.
In a non-profit people are subject to the same wants, needs, desires, and conditioning as in a for profit. I agree with the sentiment that there are many unmotivated, dysfunctional board members and employees at npos because many of them don’t necessarily come to the npo brimming and overflowing with motivation, altruism, and the desire to make the biggest impact. Some people end up there because they got fed up with their job at the bank or because they want to floss their ego’s a little bit in a different way. Npos also associate with and are sometimes in relationships with and have to deal with structures and government programs (welfare etc) that are incredibly
inefficient, dysfunctional, poorly trained and are emotionally draining to deal with.
There are very few incentives and promise of rewards, which people are trained from birth to work towards in npos and so people do exactly what they are trained to do. If there is nothing to work towards they dont have much motivation. While I think in the short term, having npos operate more like for profits might help alleviate some of the problems and there’s great benefit to have more accountability and business structure, the greater issue is one more deeply rooted in people and their relationships with meaningful work and their own desire to put the group conscience and the mission ahead of their personal drives and personal drama, personal issues, politics and what have you. When people really have a strong desire to do something and share a common bind with those they are working with-the synergy is much greater, and the willingness and openness that people have when there is more trust perpetuates people to learn, grow and in the end perpetuate and cooperate building a more efficient structure. They don’t fear accountability because they are not stuck in fear about getting punished. So they hold each other and themselves accountable. The issues that people have in working together is also much more complex, issues that there is no room for in the corporate world, because the end is different. You can make an npo a little bit more like a forprofit but it’s bait counterintuitive
Reese, I agree that high performing employees are generally motivated by something larger than simple, short term rewards and punishment. But I don’t think that this is just a nonprofit issue.
When you say of nonprofit employees “many of them don’t necessarily come to the npo brimming and overflowing with motivation, altruism, and the desire to make the biggest impact.”, I would say that the same is true in the for-profit space.
The problem is that in the for-profit space we don’t have a cultural conditioning to think that simply being in business is commendable. But in the nonprofit space, people tend to feel that even underperforming organizations deserve support and appreciation simple because their mission is a positive one.
Sean- right, and cultural conditioning is much more difficult to change than it is to create better business parameters. Nonetheless it’s a good starting point.