My friend Daniel Ben-Horin, founder of CompuMentor/TechSoup (the nonprofit behind NetSquared), took issue with the “Some nonprofits just suck” comment of CompuMentor board member Mike Brown and my subsequent post on the subject.
Daniel (this is an excerpt of his comment, read the whole thing here):
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…
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 in 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 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…
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.
Mike Brown responds (again, this is an excerpt, you can read his whole comment here):
…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…
…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…
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)… 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?
My take on Mike’s comment at the conference was:
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.
Personally, I do not buy into the hype that nonprofits should behave more like for-profit businesses. At least not in the sense that they must create business models based on earned income strategies or that being dependent on philanthropic funding is somehow a deficiency. But I do feel strongly that there is only a limited sense in our culture that nonprofits can and should be expected to be highly effective organizations. Certainly many people in philanthropy establishment get this, but it is not a widely held concept.
In the investment management industry that I work in and the venture capital industry that Mike works in, success is defined by the results of how we allocate capital. No one cares about how slick of a concept a company has, or how big they are. The metric is “what was your return?”. Measuring the “return” on money invested in a nonprofit is a very difficult concept. But at the least, we need to have a framework where pointing out that some nonprofits aren’t any good at what they do and resources allocated to them is a waste, doesn’t inspired a debate or hurt people’s feelings.
Here’s the thing about Mike’s comment, it wasn’t directed at nonprofits. Nonprofits know that some of them are effective and some aren’t. His comment, or at least my take on it, was directed towards allocators. We measure what we care about and in philanthropy we tend to measure how much capital is given, not how effectively it is allocated. This is why “Some nonprofits just suck” was such a powerful line. Mike wasn’t speaking from a position of power down to the nonprofits in the room. He was talking about how the sector, all of the players (and the room was a diverse cross section), allocate capital.
In the for-profit sector, market forces drive poor companies out of business. Therefore, we don’t need anyone running around reminding people that some for-profit companies suck. But this hasn’t always been the case. In the late 1990’s, the technology bubble, an event of mass psychological hysteria, broke the efficient market system for awhile. During that time, capital allocation was terrible. Companies that destroyed value were given massive amounts of capital. Anyone who questioned these allocation decisions were told that they didn’t understand the New Economy. During that time a website called F**ked Company came about. The site pointed out companies that Mike Brown might say “sucked”. At that time, the for-profit sector desperately needed this pointed out to them. With the lack of market forces and the lack of reliable outcome metrics in the nonprofit sector, we still need to be reminded that just because a company has 501c3 status doesn’t mean that giving them money does any good at all.