You Don't Want Charities to Be Efficient

I realize not every organization has $500,000 just lying around to invest in growing their revenue base but you're missing the point. We've built a charitable system that isn't encouraging organizations to think like that.
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energy efficient light bulb...
energy efficient light bulb...

Efficiency. We can get obsessed by efficiency. In our businesses, jobs and personal lives we often ask, 'How can we do more with less?'. We have the 4 Hour Work Week, 4 Hour Body and numerous 'life hacks.' But often lost in the mix in the discussion around efficiency is the focus on quality. What type of life does this give us? What type of business does this give us?

And nowhere is the hyper focus on efficiency as pervasive as it is within the charitable sector. We've created rating systems focused solely on what percentage of dollars are spent where with little to no thought on what those dollars are doing. We celebrate organizations (and, unfortunately, organizations celebrate themselves...) who spend less and less on things like staff, marketing and fundraising without knowing if they are even doing good work. And we have an industry that, by and large, would rather spend $10,000 to raise $100,000 than $500,000 to raise $1,000,000. For those keeping track at home, this means we're saying that we'd rather have $90,000 for 'the cause' instead of $500,000.

I realize not every organization has $500,000 just lying around to invest in growing their revenue base but you're missing the point. We've built a charitable system that isn't encouraging organizations to think like that. We are asking charities to change the world without investment and long-term thinking, creating a starvation cycle and donors are, often inadvertently, reinforcing short-term efficiency based thinking.

And where has a hyper focus on efficiency gotten us? We are no more charitable today than we were 40 years ago in terms of giving as a percentage of GDP. The gap between the 'haves' and 'have nots' continues to grow to near pre-Great Depression levels. And other issues like homelessness, education, the environment and poverty are hardly solved with even progress up for debate - both domestically and abroad.

The oft quoted Albert Einstein talking about insanity said it is doing the same thing over and over but expecting a different result. If we keep forcing and focusing our charitable dollars to be hyper efficient then we shouldn't expect any great leap in results in the next 40 years.

So if we don't want charities to be efficient, what do we want them to be? The obvious answer is 'impactful' but how we can get there might revolve around responsiveness.

Why Responsiveness?

I read a great article on First Round Review with Adam Pisoni, co-founder and CTO of Yammer, where he discusses the need for tech companies to think less about efficiency and focus more on responsiveness. As I kept reading, I was struck by the parallels between his argument and its application to charity. Statements like this...

Most organizations, including the most tech savvy of startups, are working with a century-old framework, and they don't even know it, Pisoni says.

And this...

Efficiency is great if you can plan for the long-term," Pisoni says. "If you know what you're going to do for a long period of time, you can really get into the nuts and bolts of how to do it efficiently." But because efficiency, by design, locks in roles, processes and practices, it also makes it much harder to change.

... are definitely applicable to charities. Adam says efficiency is fine with empires of control, when the future is known and the need for new ideas and innovation is little. I'd hardly describe the charitable sector that way and believe his framework on how companies can become more responsive in three main ways is useful for charities as well.

Secrecy vs. Transparency

We've come a long way in terms of financial transparency. Today, you can access financial statements and raw data fairly easily with sites like Guidestar and most organizations publish their own reports and numbers. Where we have a long way to go still is around results. Outcomes. Achievements. It's not that organizations aren't producing these but they aren't as easy to quantify and measure and there is no meaningful punishment or rewards -- from donors or regulators -- for a lack of transparency around these.

The end result? We don't really know who is great or even good and who is not. So donors and funders by default have to go off the information that they have and are given which is irrelevant, out of context and, in my opinion, useless financial data. They need and want transparency, yes but it has to be focused on impact and results. An increased focus on being transparent around results will force donors and organizations alike to better assess true impact and respond if there is little or none.

Planning vs. Experimentation

This one is a bit more of a stretch from Adam's framework but where planning represents the known and safe, and experimentation represents the unknown and risky, there is a definite need to move more towards experimentation. If you are always trying to do more with less, it's easiest (and safest) to do what you did last year but with some minor tweaks and improvements. Trying new things not only takes more time in thought and resources to get it off the ground but comes with risk where donors and boards are usually quite punishing if it doesn't work.

So we stick to what we know. That's not just stale and boring but dangerous in today's environment where there is rapid change. I was in grad school studying nonprofit management with a focus on fundraising less than 7 years ago and there was little or no discussion around online fundraising, social media, peer-to-peer, cause marketing and Millennials. 5 year plans are increasingly irrelevant and the one year plans we used 5 years ago are irrelevant as well when it comes to growth strategies.

I'm not suggesting we forget about what works and the basics of fundraising but rather be more open to risk, failure and innovation in understanding how good fundraising can be done in today's different and ever-changing environment.

Control vs. Empowerment

Organizations do not own donors. Nor do they own a cause or issue. People care about and support multiple organizations in different cause areas. Charities at times forget this and while they desire data and information in a good way to build relationships with their donors, it's possible to build loyalty and relationships without a mailing address. And the time spent just managing contact information could better be spent getting to know what supporters care about and how they can get more involved. Because people can increasingly do what they want to do, for who they want, when they want and how without the charity.

Look at the ALS Ice Bucket challenge. That was a $100M example of empowerment when it comes to fundraising and charity in today's world. An efficiency focus wouldn't come up with that strategy and a classic charity mindset wouldn't be so free and loose with 'brand', data and their donors. Which is why it wasn't built or executed by a charity but by a groundswell of passionate people using tools they know and already exist.


Adam rightly points out in the article that moving all the way to transparency, experimentation and empowerment suddenly and all at once can have adverse affects and I agree. But understanding how damaging and ineffective the focus on efficiency is and has been is key. Then we can start moving more towards transparency around results, experimentation for growth and empowerment of supporters to be more responsive as organizations and a sector overall.

And that starts by us as donors, funders, fundraisers and practitioners letting go of our absolute love of and blind faith in efficiency. Efficiency hasn't worked very well for the past 40 years so let's see what responsiveness might be able to do in the next 40.

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