Another important thing to remember when comparing non-profits and companies is the power of the customer. Companies go bankrupt because the customer has the power to discontinue their patronage if they deliver a product or service poorly (unless there are anticompetitive practices in play - ahem comcast). However, in the non-profit world the recipient of the service or products has very little power to motivate a market. Those who contribute money to non-profits could theoretically be this force, but does someone who wants to invest in reducing malaria really have to invest in understanding the health metrics and do this assessment with each investment? I don't think that is a permanent solution either. No doubt feedback and accountability are vital to making non-profts more successful, but let's challenge ourselves to think of a more systematic way to implement this type of change rather than summing with measurement is needed.
The trouble with non-profits
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Re: The trouble with non-profits
#22This is why I don't donate. Charities usually don't publish exact reports what's the money is used on and what have they achieved.
Building schools doesn't help if you don't hire teachers and get kids attend school and money used on clever guilt marketing doesn't solve ecological problems.
Re: The trouble with non-profits
#23Does anyone have a recommendation for a charity with demonstrable results in improving the lives of people in a measurable way?
http://givewell.net/ investigates charities to make sure they achieve demonstrable results, they have a list of those that do.
There are also meta-charities like GiveWell and the MIT Poverty Action Lab that investigate other charitable attempts.
Re: The trouble with non-profits
#24"This isn’t to say that we should have companies replace non-profits..." Actually, that is not necessarily a good thing to just sidestep. A lot of things that non profits work on might work better if they were worked on by companies. A lot of things that companies work on might have to be filled by non profits if companies weren't doing it. Think of second hand stores. They are often run not-for-profit in order to pr…
"Grameen Bank provides small loans to poor people. It seems very possible that this NGO (and its many imitators) will be put out of business by commercial banks."
Traditional, for-profit banking simply can't, which is the entire point. Even when microfinance institutions lean further toward for-profit, they end up more and more like traditional banks making traditional big loans.
And that's the way it actually moves, with microfinance institutions edging toward becoming more commercialized, and when they drift too far away from poorer clients, new micro institutions will likely come in to take their place. In other words, the shift naturally moves in the opposite direction.
Re: The trouble with non-profits
#25> This isn't to say that we should have companies replace nonprofits Yes we should. Charities I donate to are selling me a product just as much as companies I buy from. That the product is a better world--by some measure that seems reasonable to me, rather than a simple benefit for myself, matters not a whit to my decision making process. I don't give without a very concrete understanding of what the money will be us…
It's worth noting that "non-profit" doesn't always translate to charity. Microfinance, for instance, exists as a whole spectrum of quasi-for-profit operations. And on the strictly non-profit side you have things like ROSCAs, one of the foundations of microfinance, which are micro-level, semi-formal, non-charitable "non-profit" groups that resolve a number of different financial issues for participants, similar to tin…
Oh, indeed, I'm well aware that there are for-profit philanthrophic ventures and questionably profitable non-profit groups. I don't mean to suggest that it is simple. Indeed, groups that adopt a hybrid, hard-to-classify approach often strike me as the healthiest. I am very fond of certain microloan groups or folks like TechnoServe.
But I do advocate approaching philanthropy as a consumer, however the group you're working with is legally classified. Be honest with yourself about what you're buying -- even if what you're buying is a warm fuzzy feeling. Perhaps especially in that case.
Re: The trouble with non-profits
#26Another important thing to remember when comparing non-profits and companies is the power of the customer. Companies go bankrupt because the customer has the power to discontinue their patronage if they deliver a product or service poorly (unless there are anticompetitive practices in play - ahem comcast). However, in the non-profit world the recipient of the service or products has very little power to motivate a ma…
What you're really addressing is the issue of incentives, as economists call it, and so is the original author of the story. I wrote this comment on his blog:
To my mind, this isn't news, but that might be in part because I've worked in my family's grant writing firm for so long. The real issue you're discussing is one of incentives: nonprofits don't have much incentive to measure how well they're doing because funders don't demand that they do, or at least don't as a large group.
If the funder is federal, state, or local, the funder doesn't have the resources (or the brains) to really measure effectiveness; if the funder is a foundation, the funder probably cares more about the appearance of doing good than effectiveness. I've addressed this point in some detail here: http://blog.seliger.com/2008/01/04/more-on-charities and here: http://blog.seliger.com/2008/01/23/foundations-and-the-futur... . The blow, which I contribute to, deals with the issues you raise on a regular basis, and if you want to learn more about why things are the way they are at the moment, take a look at the archives.
Re: The trouble with non-profits
#27"This isn’t to say that we should have companies replace non-profits..." Actually, that is not necessarily a good thing to just sidestep. A lot of things that non profits work on might work better if they were worked on by companies. A lot of things that companies work on might have to be filled by non profits if companies weren't doing it. Think of second hand stores. They are often run not-for-profit in order to pr…
"Grameen Bank provides small loans to poor people. It seems very possible that this NGO (and its many imitators) will be put out of business by commercial banks." Traditional, for-profit banking simply can't, which is the entire point. Even when microfinance institutions lean further toward for-profit, they end up more and more like traditional banks making traditional big loans. And that's the way it actually moves,…
Compartamos in Mexico is a for-profit bank making microloans. There's some controversy about that: http://www.nytimes.com/2008/04/05/business/worldbusiness/05m...
Re: The trouble with non-profits
#28"This isn’t to say that we should have companies replace non-profits..." Actually, that is not necessarily a good thing to just sidestep. A lot of things that non profits work on might work better if they were worked on by companies. A lot of things that companies work on might have to be filled by non profits if companies weren't doing it. Think of second hand stores. They are often run not-for-profit in order to pr…
The difference between a well-run non-profit and a well-run business: the non-profit puts 100% of profits back into its operations, while the business may re-invest the profit or distribute it to its owners. Most states already require non-profits to operate like businesses; indeed, non-profits are expected to operate better than businesses -- most states require non-profits to maintain levels of capitalization that…
A bigger difference is that the donors aren't the customers. A charity has positive cash flow so long as it pleases its donors, who don't necessarily know what's really happening with the people who receive the charity's services.
Re: The trouble with non-profits
#29Does anyone have a recommendation for a charity with demonstrable results in improving the lives of people in a measurable way?
I'm fond of Children International. They're very good about letting you know exactly and specifically what your donations achieve. I suppose any evidence of the effect on people is anecdotal, but in such a well-established relationship, it's also self-evident.
Re: The trouble with non-profits
#30Earlier quoted context omitted.
"Grameen Bank provides small loans to poor people. It seems very possible that this NGO (and its many imitators) will be put out of business by commercial banks." Traditional, for-profit banking simply can't, which is the entire point. Even when microfinance institutions lean further toward for-profit, they end up more and more like traditional banks making traditional big loans. And that's the way it actually moves,…
Compartamos in Mexico is a for-profit bank making microloans. There's some controversy about that: http://www.nytimes.com/2008/04/05/business/worldbusiness/05m...
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