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The trouble with non-profits

aaronsw.com

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Re: The trouble with non-profits

#51

Post by billswift »

carbon8 wrote: post #24
netsp wrote: post #7

"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,…

Which strongly suggest microloans don't really produce that much actual value.

Re: The trouble with non-profits

#52

Post by patio11 »

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.

How do you measure the "results" of a non-profit, when most of them work in non-quantifiable fields?

If McDonalds can work out how to quantify feeding hungry people then any charity working in Africa should be able to quantify feeding hungry people. If an insurance company can tell me the average lifespan of their clients to six decimal places and what exactly the risk factors are among that pool, then health-focused charities should be able to do it as well. etc, etc

(I have some familiarity with the literature and know the excuses for why charities operating in Africa with mobile phones and computers can't be expected to have as good a handle on their numbers as a British bank circa 1780. Yeah yeah, it must be difficult when you rely on globally distributed workers, many of whom are not literate. Oh wait, so does McDonalds.)

Re: The trouble with non-profits

#53

Post by cwan »

billswift wrote: post #48
baran wrote: post #42

This is one of the reasons why non-profit companies are flawed. There are no incentives in place for monetary gain. Non-profits are good at raising awareness, not being a sustainable entity. If someone wants to make a difference and change world (especially developing countries), I believe there has to be financial incentives : social entrepreneurship .

If you can't make money doing something, is there any good evidence that it is worth doing at all? Leaving aside goods with "free" competition from the gov't (schools, roads, libraries, etc). EDIT: Also leaving aside things you do for your more direct benefit, like growing your own food or contributing to open source projects you use.

There are cases where charity in its more pure forms are important - I do think from time to time that individuals need help as a result of an event that may be no fault of their own. I personally try to be compassionate - but I don't think we should shame/force people to be charitable - and even in implementation, local not-for-profits tend to be far more efficient than government at assessing needs and addressing them.

When it comes to foreign relief/charities, it's a really tough call. On one hand, oppressive governments are incentivized to actively show their people at their worst so that they can get more money and in turn collect graft (e.g. Saddam Hussein and baby incubators), but on the other what are the rest of us supposed to do? Let these people die? We play right into the hands of their governments when we don't. Following natural disasters, war/strife, I also personally feel a strong need to help. In these scenarios, there can be no room for sustainable profit because they tend to be unique/unusual events.

Re: The trouble with non-profits

#54

Post by fhars »

billswift wrote: post #48
baran wrote: post #42

This is one of the reasons why non-profit companies are flawed. There are no incentives in place for monetary gain. Non-profits are good at raising awareness, not being a sustainable entity. If someone wants to make a difference and change world (especially developing countries), I believe there has to be financial incentives : social entrepreneurship .

If you can't make money doing something, is there any good evidence that it is worth doing at all? Leaving aside goods with "free" competition from the gov't (schools, roads, libraries, etc). EDIT: Also leaving aside things you do for your more direct benefit, like growing your own food or contributing to open source projects you use.

Did you really ask "is there any value in leading a moral life if it doesn't pay off financially?"

Non-profits do not actually aim at financial gain (duh!), so measuring their success in monetary term is an error of categories. Of course it is difficult to assess success of an endeavour like that, and Aaron is right in raising awarness for these difficulties, but forcing an inappropriate kind of measurement (did your non-profit make enough profit?) on them doesn't help solving this problem.

The correct question to ask are "what are our goals?" "How do we go about reaching our goals?" "Did our past activities in fact further our goals?" and so on. "how much more money did we raise and distribute" may factor in the analysis, but on its own it is pretty meaningless.

Re: The trouble with non-profits

#55

Post by daydream »

"But it does mean that if you’re involved in nonprofits (or predictions), you need to be much more careful about making sure you’re doing a good job. Unfortunately, few nonprofits do that."

Oh really? So he can cite research that says, for example, that only x% (where x His assertion may be true. But just throwing this out there with absolutely nothing to back it up, in a blog post titled "The Trouble With Nonprofits", is frankly insulting to me.

I spent > 4 years working in a technical role for a nonprofit, and I can assure people that measurement and evaluation were very much on the minds of staffers. Everyone (funders, management) was becoming more data-driven, so our organization got a grant to conduct a multi-year evaluation. It was a very positive and necessary process, and the results were very positive. Like Aaron, I definitely recommend some sort of measurable goals for most every nonprofit out there.

I don't take issue with his opinion. What I take issue with is the tone of the article.

For example: "...but an actual attempt to measure how much they’re improving people’s lives. For most nonprofits, I expect these numbers will be depressingly small. "

It can be easy, as young paragons of technology and entrepreneurship, to look over to the nonprofit world and disparage it, to think of it and it's practitioners as "lesser than". I should know; it's the attitude I had before I started working at a nonprofit.

Truth is, running a nonprofit can be a hell of a lot harder than running a for-profit. At any stage, you have all the issues that for-profits have - hiring, firing, managing employees, management issues, getting money in the door, technological problems - PLUS a whole other layer.

A lot of this other layer comes because of the weak link between financial health and results. Am I accomplishing my mission? How do I measure success? How do I maximize success based on dollar spent? How do I judge where to allocate capital or resources - when maximizing revenue isn't a goal?

Why am I wasting my time writing this? Because this article uses a lot of conjecture and one very poor example to make the entire nonprofit sector seem like a bunch of bumbling idiots who don't know how to use spreadsheets. They're not, and it's not fair for this community to see such a distorted view.

Re: The trouble with non-profits

#56

Post by billswift »

cwan wrote: post #53
billswift wrote: post #48

Earlier quoted context omitted.

If you can't make money doing something, is there any good evidence that it is worth doing at all? Leaving aside goods with "free" competition from the gov't (schools, roads, libraries, etc). EDIT: Also leaving aside things you do for your more direct benefit, like growing your own food or contributing to open source projects you use.

There are cases where charity in its more pure forms are important - I do think from time to time that individuals need help as a result of an event that may be no fault of their own. I personally try to be compassionate - but I don't think we should shame/force people to be charitable - and even in implementation, local not-for-profits tend to be far more efficient than government at assessing needs and addressing t…

I have nothing against helping in emergencies, but Ayn Rand had a good essay on that - emergencies are situations outside of normal operations and the response to an emergency should be working to end the emergency situation.

Re: The trouble with non-profits

#57

Post by Eliezer »

billswift wrote: post #48
baran wrote: post #42

This is one of the reasons why non-profit companies are flawed. There are no incentives in place for monetary gain. Non-profits are good at raising awareness, not being a sustainable entity. If someone wants to make a difference and change world (especially developing countries), I believe there has to be financial incentives : social entrepreneurship .

If you can't make money doing something, is there any good evidence that it is worth doing at all? Leaving aside goods with "free" competition from the gov't (schools, roads, libraries, etc). EDIT: Also leaving aside things you do for your more direct benefit, like growing your own food or contributing to open source projects you use.

For the love of Cthulhu! Repeat after me: Profit is not determined by how much value you create, it is determined by how much of that value you can capture.

Some value isn't easily captured and that's a perfectly legitimate reason for nonprofits to exist.

Re: The trouble with non-profits

#58

Post by billswift »

Eliezer wrote: post #57
billswift wrote: post #48

Earlier quoted context omitted.

If you can't make money doing something, is there any good evidence that it is worth doing at all? Leaving aside goods with "free" competition from the gov't (schools, roads, libraries, etc). EDIT: Also leaving aside things you do for your more direct benefit, like growing your own food or contributing to open source projects you use.

For the love of Cthulhu! Repeat after me: Profit is not determined by how much value you create, it is determined by how much of that value you can capture. Some value isn't easily captured and that's a perfectly legitimate reason for nonprofits to exist.

I didn't say you should try to make as much profit as you can, but if you are not able to make anything, what evidence is there that you are benefiting anyone or even doing more harm than good? On the other hand, I've been following OB and LW since they started so I can easily see why you want to believe in the goodness of non-profits.

Re: The trouble with non-profits

#59

Post by cwan »

fhars wrote: post #54
billswift wrote: post #48

Earlier quoted context omitted.

If you can't make money doing something, is there any good evidence that it is worth doing at all? Leaving aside goods with "free" competition from the gov't (schools, roads, libraries, etc). EDIT: Also leaving aside things you do for your more direct benefit, like growing your own food or contributing to open source projects you use.

Did you really ask "is there any value in leading a moral life if it doesn't pay off financially?" Non-profits do not actually aim at financial gain (duh!), so measuring their success in monetary term is an error of categories. Of course it is difficult to assess success of an endeavour like that, and Aaron is right in raising awarness for these difficulties, but forcing an inappropriate kind of measurement (did your…

In the world of development, it is often quite easy to get cynical over the multitudes of people who make rather significant amounts essentially tax free working abroad. Even in some local charities, we have to be careful about this notion that because their mission seems pure that they are in fact pure.

Sometimes (and I'm afraid more often than even I suspect) instead of generating profits what would be "profits" instead accrue to what I'll call local empire building - managers building their own little fiefdoms of employees who report to them. Generally there's not as much pressure to stop it if the organization is reasonably well funded. Alternatively, they pay themselves more to soak up any potential profit so they can perversely call themselves not for profit.

Otherwise I agree - choosing metrics is not an easy task to be taken likely. Profitability/+cash flow are however far easier metrics to measure and manage.

Re: The trouble with non-profits

#60

Post by fhars »

There is of coure a very important problem charities trying to do this kind of measurments of efficiency face. They are in a market for public perceptiom to get donations, and (if we take the numbers the article cites for Oxfam), can you imagine the loss of donations and goodwill after a few newspapers and TV programs run the headline "Charity X spends half their donations on statistics instead of helping people!"? Even if the costs could be amortized over a few years, the charity would be dead by then.

Perverse incentive factors, again. (And the news might be right, collecting in depth statistics about the help program might just be a pretext to give a lucrative consulting contract to the director's best friend).

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