Don’t get me wrong, I love non-profits
In fact, I struggle much more with finding meaning when working with for-profit companies. It is much easier to feel the noble altruism and earth-shattering difference you are making when you are saving the whales, or the earth, or even people.
But there are several key differences in the way non-profits are structured that present them with a unique set of difficulties and challenges. They would do well to face these challenges head-on.
1. Non-circular feedback
One of the biggest issues I have observed in non-profits is the method in which they receive funding.
A normal business has a circular feedback loop. Let’s say you have a business affixing horseshoes to people’s doors (yes, you can steal my idea). You exert your efforts into promoting your business, and if your idea is a good one (and I see no reason why you wouldn’t be), you get money from your clients. This in turn motivates you to grow your business, etc. etc. ad retirement. In this case, you have a feedback loop that lets you know your business is a good one.
Imagine that instead of going into the horseshoe business, you decided to go into rabbit’s feet. Turns out that's a bad idea, since this is the worst rabbit’s foot slump the market has seen since the Salem witch trials. Pretty soon (depending on how stubborn you are), you will realize that regardless of how much time and money you invest, the business will go nowhere. This idea is just not taking off, so chalk it up to bad luck and move on. In this case, the negative feedback (in the literal sense, as in, negative results) forces you to accept the unfortunate but realistic reality.
Not so in donation-based non-profits (hats off to all those cookie sellers out there). Here, the money comes in from one end and gets channeled out another.
Of course, the more you accomplish with the money you are given, the more likely people are to give in the future. But there are still some major issues: are you measuring impact or output (see the next point)? Is your data completely accurate? Are you judging yourself by the right criteria? At the end of the day, it is public perception that decides whether you continue to receive funding instead of the results themselves, and if people like you you could go on doing stupid things for a very long time (think rock stars).
Businesses may try to do this as well, and even succeed for a period of time (think of a certain Madoff). But ultimately, a regular business cannot sustain this kind of deception long-term, while a non-profit can continue to perpetuate many well-intentioned but non-intelligent decisions without ever realizing it.
But now you know.
2. Output vs. Impact
This first issue of lack of feedback is closely related to the issue of Immeasurable impact.
Output is the amount of energy you exert into an act. Impact is how much results that output gives you. Contrary to popular belief, more output does not necessarily imply more impact; the opposite is very often true.
Let’s say you decide to give out banana flavored condoms (banandoms?) to underprivileged youth in order to fight aids. What you don’t realize is that they are actually getting aids from unsanitary needles (used in vaccinations, I assume). If you focus only on how many condoms you gave out, and not on the actual AIDS rate, you are completely missing the point.
Yet a huge number of non-profits judge themselves only on output. To their credit, measuring their impact is often very difficult, if not impossible. Go measure how many whales are actually left in the ocean or the impact of your after-school program on literacy rates. These things are much less tangible and are harder to measure than conventional business ventures.
That said, it is often easy to confuse output with impact- many savvy businessmen suddenly forget economics 101 and get very excited by the fact that you handed out 8 billion banandoms. As I once heard Bernard Marcus, the billionaire founder and CEO of Home Depot once say: “These intelligent board members take stupid pills as soon as they walk in the door”.
As you can see, the issue of immeasurable impact and non-circular feedback are very much intertwined and negatively affect one another. The more you are able to measure your impact, the closer you are to creating a form of circular (constructive) feedback. The money is still not speaking directly to you the way it does in a normal business, but you are much closer to embracing the (sometimes unpleasant) true reality.
3. Perpetual Problimating
Think about it. If all the deforesters suddenly put down their axes and started hugging trees, what would Greenpeace do? This obviously hasn’t happened yet, so there is lots for Greenpeace to do (blowing up fishing trawlers anyone?). But somewhere deep inside the recesses of their collective unconscious a non-profit knows that it thrives on the very issues it attempts to solve.
This can lead to blowing issues out of proportion, making them bigger than they actually are. It takes a lot of fortitude to be able to say I am working as hard as I can today so that I close down my operation tomorrow”. As usual, this issue does not apply to all non-profits; those that focus on increasing the positive instead of eliminating the negative have a lot more going for them in this case, but this is still an important issue to keep in mind.
What do you think? Have you recognized any of these issues yourself? Do you agree with this analysis? Let me know in the comments below.
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