The current issue of the Stanford Social Innovation Review has an in-depth article about the vicious cycle nonprofits face in trying to balance unrealistic funder expectations regarding administrative costs with the reality of building an effective and efficient operation. As anyone who’s worked with or for a nonprofit knows, well-meaning grant requirements whose goals are to direct the maximum amount of funding towards program delivery often result in reporting shell games, where administrative costs are buried in program line-items in order to achieve unfeasible expense ratios. Ann Goggins Gregory and Don Howard, the authors of the article and partners at the Bridgespan Group, assert that the best place to break the cycle is where it starts -- adjusting Funder expectations.
“A vicious cycle is leaving nonprofits so hungry for decent infrastructure that they can barely function as organizations—let alone serve their beneficiaries. The cycle starts with funders’ unrealistic expectations about how much running a nonprofit costs, and results in nonprofits’ misrepresenting their costs while skimping on vital systems—acts that feed funders’ skewed beliefs. To break the nonprofit starvation cycle, funders must take the lead.”
But as they rightly point out, the responsibility for solving this problem does not rest solely with funders. Nonprofit leaders must understand and effectively manage their true infrastructure needs.
I would add another point: nonprofit leaders must embrace new tools and technologies to amplify reach and mitigate costs. Social Media is a perfect mechanism for tapping into constituent interest, spreading the word about a cause or issue, and engaging supporters, whether as volunteers or donors. Nothing demonstrated this better than the Obama campaign’s superb use of social media, which not only extended its reach but allowed the campaign to secure unprecedented levels of donor support. But there are countless other organizations who have Facebook groups or causes, who tweet, and who blog their way to broader awareness and support. Mashable posted on this last week in a terrific article on how to Do Good on Facebook.
Despite their desire to change the world, nonprofit managers are often themselves resistant to change. It’s time for them to recognize that the “low pay, make do, and do without” culture undermines their lofty goals.
Addendum: Here's a link to a great presentation on this topic.
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