Philanthropy Discussion

I’m taking Monday off work because I’m moving and trying to do that with two kids is a full time job in itself. But the discussion going on regarding Mike Brown’s comments at NetSquared is great. This kind of cross disciplinary discussion is why I started Tactical Philanthropy. So to tide you over until Tuesday, I’m posting the entire comment thread below:

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.


This is a reply to Mike Brown’s last post in the previous thread,and will serve as my response to Sean’s above.

Mike, It is true that if some number of armpits are not getting sufficiently deodorized, the private sector marketplace will figure out how to solve that ‘problem’ and will do so with a fair degree of efficiency. Deodorant makers will compete. The more efficient will prosper. The less efficient will be acquired or merge or fade away. If someone comes up with a great new deodorant, they will secure investment and be afforded a chance to compete in the marketplace. It’s a wonderful thing and we all come out of it smelling fresh as a daisy.

However, if some number of people are starving or being subjected to genocide or are dying from h.i.v. or can’t get access to clean water etc., the private sector marketplace doesn’t work quite as well, does it? It’s not a marketplace problem at all! It’s a government problem, a policy problem, a political problem, a social problem. And that means it becomes, on one level or another, a problem that is addressed by the nonprofit sector. There is certainly not the same rush to corner the market on hungry people that there is to corner the market on non-deodorized people!

So that is what I believe is the larger context in which your remarks at N2 and your comment above needs to be considered. The marketplace principles which you cite so approvingly have already been waived on a fundamental level *before* we get down to allocating hammers to the better (or worse) builders.

I have no quarrel whatsoever with the premise that even given this context, it makes all kinds of sense to evaluate quality of nonprofit management and operation and make resource allocation decisions based on this evaluation. Of course we need to do that. And we already do that. Every funder, small or large, is implicitly or explicitly comparing Nonprofit A to Nonprofit B before writing a check. There are inefficiencies in generating data to enable these comparisons, and I support efforts to decrease or remove these inefficiencies, so donors can make more confident (and more!) decisions to provide support.

However, when you write, “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,” I take issue with the part after “because”. That’s *not* the reason, in my opinion, that m&a isn’t a strong engine in the nonprofit world. It is way more complex than that. The reasons go back to what I tried to adduce with my deodorant vs hunger example. The market is broken from the get-go. There really isn’t a “market” in the private sector sense of the word. To my mind, you’ve latched onto one consequence of a much larger problem and annointed it as the cause of what ails us here.

So, from that point of view, when I read your admonition to “learn the meaning of the term “hyperbole” and stop being so sensitive,” I have to push back. I know you pretty well and know that you do indeed care deeply about social issues and devote substantial time and resources to addressing them. But that still doesn’t validate this particular choice of words, in my opinion. You are still situated in a particular and quite privileged relationship to this sector and its work. It’s great that you support that work and you, and everyone else who has skin the game, has every right to advocate for improvement. But if your advocacy takes the form of denigratory language, you shouldn’t be surprised if people forcefully object. And if your response to their objection is your “learn…sensitive” response above, I guess we’ll just have to agree to disagree on whether that is helpful and appropriate. Perhaps our linguistic exploration should proceed from “hyperbole” to “noblesse oblige” –