Overhead Is Not The Enemy

September 9, 2011 • Beliefs, Blog, Leadership, nonprofit • by
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I was out last night with some people working to bring a social entrepreneurship conference to Chicago and during the discussion one of the offhandedly made a comment deriding overhead in non-profits. Unfortunately overhead has come to mean waste when really that should not be the case.

Overhead is not the enemy, inefficiency is.

All organizations, including for-profit companies have overhead but they are forced to use that overhead efficiently, maximizing the return on that investment. For example, what if Apple had to cap salaries at $100,000? Would they be able to retain the talent necessary to succeed? What if every dollar pumped into R&D had to show immediate ROI?

Overhead can actually increase the effectiveness of the programming and if an organization increased overhead a little, they might actually be able to do more with the fewer resources going into the field. Yet, non-profits have been forced to compete on overhead numbers and it is hurting the end result, impact.

To Profit or Not

August 29, 2011 • Blog, Business, nonprofit, Stories • by
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There is only one thing that identifies a non-profit, the inability to distribute net income. That’s it. If a non-profit makes more than it spends it cannot give that excess income to anyone. It must remain in the organization. To help induce people to give money to nonprofits they are given a tax deduction for their gift but in today’s tough economy it is becoming increasingly difficult to attract that capital.

So some non-profits are becoming for-profits.

For example, Forbes reports that the non-profit Couchsurfing, which connects travelers with free places to stay, has changed to a B-Corp and raised $7.6 million in venture capital. That’s right, they left their non-profit status behind and got a nice $7.6 million check.

This does raise the question though, why was Couchsurfing a non-profit to begin with? Or did all of those people that gave to Couchsurfing while they were a non-profit receive a tax-deduction for a gift that later resulted in profit for a for-profit organization? The questions could go on and on.

What we are seeing is a blurring of the lines. Non-profits are becoming for-profits. For-profits are buying non-profits (see GOOD buying Jumo). In a lot of ways I think this is a good thing, social missions are not relegated to the left-over economy of the non-profit world. But it is also an example of innovation moving faster than regulation and the tax implications of this emerging gray space needs to be figured out.

Proof

August 24, 2011 • Blog, Measurement & Evaluation, nonprofit • by
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Should non-profits be forced to prove that their interventions actually work? All too often the strategies and programs employed by non-profits seemed haphazard and have no real basis in scientific research. That does not mean however, that proof should be required.

Proof is a tricky thing. For one, attaining scientific proof of something is very difficult, requiring lots of time, money, and people. Second, as discussed in this post from Tactical Philanthropy, proof seemingly declines over time. “For all the perceived precision of a large study “proving” that something is true, the fact remains that over time our understanding of facts and truths change.”

The post quotes a New Yorker article title The Truth Wears Off that is quite interesting.

“The test of replicability, as it’s known, is the foundation of modern research. Replicability is how the community enforces itself. It’s a safeguard for the creep of subjectivity. Most of the time, scientists know what results they want, and that can influence the results they get. The premise of replicability is that the scientific community can correct for these flaws.

But now all sorts of well-established, multiply confirmed findings have started to look increasingly uncertain. It’s as if our facts were losing their truth: claims that have been enshrined in textbooks are suddenly unprovable. This phenomenon doesn’t yet have an official name, but it’s occurring across a wide range of fields, from psychology to ecology.”

This is not to say however, that non-profits shouldn’t strive to understand the effect their interventions are having. All too often non-profits flee from facts and cling to anecdotes. They never step back and examine the impact they are having on the communities, people groups, or issues they are seeking to affect.

Scientific proof should not be the goal, but ignorance is unacceptable. A balance must be struck that seeks to understand affect without necessarily scientifically proving it.