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The trouble with non-profits

aaronsw.com

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Re: The trouble with non-profits

#31

Post by blasdel »

aaronsw wrote: post #23
netsp wrote: post #9

Does 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.

Fuck that noise -- if you'd have even bothered to google their name, you'd have found that Givewell are total scumbags:

http://metatalk.metafilter.com/15547/GiveWell-or-Give-em-Hel...

Summaries: http://mssv.net/wiki/index.php/Givewell

They got caught out because they were blatantly astroturfing for themselves and slagging 'competing' charities all over the web. Then it turns out that even by their own generous accounting, more than half of their funds goes directly to their own overhead. On top of that, their 'research' is at best based on getting charities to rigorously assess themselves.

Their rubberstamp board publicly (in the NYT) pretended to fire one of the founders, but less than a year later he was quietly back at his old position.

Re: The trouble with non-profits

#32

Post by carbon8 »

skybrian wrote: post #27
carbon8 wrote: post #24

Earlier 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...

Indeed, it's former NGO that aggressively went for-profit. That's a good article and sums up some of the major debates around latin american microfinance.

The problem with for-profit microfinance is that, as a general rule, financial performance increases with loan size, and that's why commercialization is a cause for concern, along with a lot of the other baggage that comes with commercialization like pressure to increase profits and employee incentive programs that negatively impact service toward small clients.

Compartamos accounts for the problems of the small loan market (notably the inability to determine which borrows are good or not) the same way moneylenders needed to before them, by charging very high interest rates. But this ends up screening out lower end borrowers, hence the discussion of "mission drift."

Commercial banks have long dabbled in elements of microfinance, but there are fairly concrete obstacles, mostly operational and information-related issues, that make it tough to be profitable, and even tougher to approach it as strictly for-profit while continuing to be actual microfinance.

Re: The trouble with non-profits

#33

Post by chaostheory »

"Making a bad prediction isn’t like that... it’s months or years before your prediction is proven wrong. And then, you make yourself feel better by coming up with some explanation for why you were wrong: ...And so you keep on making predictions in the same way — which means you never get good at it."

I think this also applies to many macro-economists

Re: The trouble with non-profits

#34

Post by jseliger »

tokenadult wrote: post #18

As a board member of two very active nonprofit organizations, and former board member of another, I really appreciate the suggestion to devote attention to demonstrable results. I'll bring that up at our next board meeting for each organization. It's easy to track membership, and reasonably routine to track member satisfaction in membership organizations, and some organizations set policy goals (within the scope of t…

"But, yes, organizations doing work far from most supporters (e.g., foreign relief organizations or missionary organizations) often can gain funds for years without having to show results. It's regrettable when a willing donor isn't giving money to best effect."

Not to be a shill for my own blog again, but the reason so few organizations run real evaluations is that it's really, really hard, expensive, and time-consuming to do. Consequently, funders by and large don't offer real money or incentives for it, and if they don't, there's not much of an impetus to improve, and I describe this basic idea in much greater detail here: http://blog.seliger.com/2008/04/24/studying-programs-is-hard...

Furthermore, some funders don't want real evaluations, even if they say otherwise; for example, we wrote a bunch of Community-Based Abstinence Education proposals for various clients, where the main purpose of the evaluation was to try and demonstrate that abstinence-only education works, and I described the problems with that in this post: http://blog.seliger.com/2008/10/12/what-to-do-when-research-...

Re: The trouble with non-profits

#36

Post by fatdog789 »

skybrian wrote: post #28
fatdog789 wrote: post #17

Earlier quoted context omitted.

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.

I don't think you understand quite how the donor-charity relationship works. The donors are the customers. The charity earns money by pleasing the donors. The venue for pleasing the donors is by performing charitable acts.

If a donor is pissed, it will force the charity to conform to his/her demands. The recipients of the charity's services are usually an afterthought, b/c they are far more easily replaced than any donor.

Re: The trouble with non-profits

#37

Post by joseakle »

fatdog789 wrote: post #14
russell wrote: post #3

I take his essay to mean that, if you want results, measure results and hold them to it. Chess experts are experts because they are measured by their results. Political pundits are hit hit or miss because they are not held accountable for their results. Non-profits should be measured by their results, not their process, PR, or grants. Makes sense to me, but quantifiable results are often hard to get, witness the disc…

How do you measure the "results" of a non-profit, when most of them work in non-quantifiable fields? You end up with the quantity versus quality argument, favoring large, superficial efforts over narrowly tailored, substantive efforts.

The Gates Foundation has been doing some research regarding this, you can find it here.

http://www.gatesfoundation.org/learning/Pages/december-2008-...

Re: The trouble with non-profits

#38

Post by rapind »

Dove wrote: post #6

> 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…

For-profit companies selling you goods and services often spend enormous amounts on marketing, advertising, and branding in order to convince you to part with your hard earned money. This doesn't mean their product is any better than their competitors though. It just means they've spun you into believing it is.

While I think it's a good idea to research your charity or donation to a non-profit, I definitely do not think they should operate like a for-profit business.

I think this is a great article, and there are some really pointed areas of improvement for non-profits. However, let's not turn to the free market gods for a solution please.

Re: The trouble with non-profits

#39

Post by netsp »

blasdel wrote: post #31
aaronsw wrote: post #23

Earlier quoted context omitted.

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.

Fuck that noise -- if you'd have even bothered to google their name, you'd have found that Givewell are total scumbags: http://metatalk.metafilter.com/15547/GiveWell-or-Give-em-Hel... Summaries: http://mssv.net/wiki/index.php/Givewell They got caught out because they were blatantly astroturfing for themselves and slagging 'competing' charities all over the web. Then it turns out that even by their own generous accoun…

You would expect that any organisation doing this kind of work would attract criticism. There is a taboo against harming a charities ability to raise funds.

Do you know of any organisation doing similar but better?

Re: The trouble with non-profits

#40

Post by cwan »

rapind wrote: post #38
Dove wrote: post #6

> 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…

For-profit companies selling you goods and services often spend enormous amounts on marketing, advertising, and branding in order to convince you to part with your hard earned money. This doesn't mean their product is any better than their competitors though. It just means they've spun you into believing it is. While I think it's a good idea to research your charity or donation to a non-profit, I definitely do not th…

I think it really depends on the specific area/charitable cause - but where it comes to economic development, markets are a far better solution than charities and aid which have often done far more harm than good (e.g. food aid). In general, the potential for inefficiency and even fraud is arguably even higher given the lack of transparency and often weak governance).

Anyone who donates money to a charity should at least spend as much time researching what they're "selling" as they would a comparable product/service. The tax returns are available but some of these firms spend as much as 80% of their funds raised in administration and overhead - which is often far worse than most for profits. Yes, not for profits also "often spend enormous amounts on marketing, advertising, and branding in order to convince you to part with your hard earned money".

Fortunately at least anyone can look up any charity's IRS Form 990 that lists such things as salaries (which are sometimes as much if not higher than private market salaries). I usually start here: http://www.guidestar.org/ (using bugmenot for login/password)

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