Cutting the non-profit world in half

Over the past year I have been having many of the same conversations about the non-profit world.  How is all that goodwill held accountable and in turn make the most impact possible?

Just a few statistics to start.  There are supposedly 90,000 non-profits functioning in New York City alone.  Think about that.  The city council of New York City gives to 4000 non-profits annually from their budget.  I do not know the number that comes from the mayors office or even each senators office.  Yes, each senator has appropriations that are set aside for non-profit work. 

There is no doubt that Government offices should be giving a portion of their budget to the non-profit world.  For the organizations that have actually done an external review of the impact they make, most of them save the city and the Government lots of money.  MOUSE, which I am familiar with, saves each school that they are in thousands of dollars per student because the city doesn't need to pay for a technology staff.  Of course, the upside isn't just not having to pay for the tech staff but that kids who go through programs that boost their self-confidence have lasting impacts for each individual.

A few stories that are of interest.  One school decided to get rid of every non-profit working under their roof.  Step back, assess what they really needed, then brought back the non-profits a committee decided was appropriately needed which was a significant reduction and the results were astounding.  That in a nutshell is what should be done everywhere. 

Years ago, when MOUSE began, there was another organization in our space.  The group was called Heaven.  Of course we were all working to close the digital divide but each group had a different agenda.  One thing to keep in mind is we were both going after the same dollars, not only from foundations, the city and the Government but from the same industry that we were all connected in.  Personal money. 

Heaven was a terribly run organization yet wonderful people on the board who were big names in each of their own industries.  That can be important if those people use their connections to help the organization.  I do believe in the mantra, "give, get or get off".  Bottom line, the money was going down a big black hole.  They wanted to do the right thing but couldn't get out from under themselves.  Here is where I believe things need to change but I will get back to that.

At the time, I was chairing MOUSE.  We did something that is rarely done, I am not sure if it was ever done.  I went to the Chairman of Heaven and said let's merge.  A friendly merger.  MOUSE will take the board members who are doing the good work and really want to stay involved, we will do a study of all the programs you are running and decide which ones make sense to keep or incorporate into our programs  and we will let the Executive Director and her staff go.  The last part was tricky, after all, this is a non-profit.  Non-profits are supposed to be different, they are for do-gooders.  This is where I firmly disagreed.  No matter what the mission is, profit or non-profit, accountability is the most important.  Also, you don't maim the king, you kill the king, and so I did.  I got a lot of shit for it but in the end, MOUSE is 11 years in the running and the impact of the organization is felt worldwide and continues to grow.

SO, let's get back to where things need to change.  There should be a small council who is looking at all non-profits in the city and the money they are taking from the Government.  Many times it is hard to qualify or quantify what some groups do and that needs to be taken into account.  For instance, a group on a city block in East New York that is given $1500 a year and is able to keep a teen center going which impacts the entire block, tough to see the need.  In essence, this council really need to drill down.  Next, they need to look at organizations that are doing similar things.  Merge them.  Maybe 8 groups are working in one arena and the real impact is only made in 2 of the programs from 8 of the groups.  Figure out a way to create a leaner, meaner, organization.  If that means letting staff and keeping one Executive Director, pairing down the Board and having one Chair instead of 8 to create a more efficient organization, then do it.  If they won't do it, then don't give the funds.  Also hold groups accountable.  I am not sure how easily this can be done from the Governments prospective given that the money is in the annual budget and that is lots of work annually but foundations should begin to think about this.  The Government needs to begin with literally looking at each organization they give money to and reassess each of them every so many years to insure that the money is going to not so much a good place but a place that is making an impact.

If the Ford Foundation grants $500,000 to a group for the work it is doing, they should be held accountable just like an investor holds a company accountable, or a VC goes to a monthly board meeting and expects accountability from the CEO.  If not, they are fired and perhaps the organization gets restructured.  Foundations should give money out in segments.  Here is the first $100,000 and you need to get this done before we give you the next installment.  It will change the way that non-profits think.  Generally the hardest part in getting money from a foundation is getting the money.  Once you get it, there is little accountability. 

Just on a side note, there is one particular organization in New York City, which I will not name, that has raised millions upon millions of dollars annually from their personal base.  The impact the city should have felt from that group, based on the money that went through their coffers, should have been mind blowing.  Why hasn't it?  Probably because the board didn't hold the Executive Director or the staff accountable as they would have if they were a profit organization.  It should.  As far as I am concerned, so much of the money went down the big black hole that it is an absolute tragedy. 

There are many conversations going on around the city in the non-profit sector about what I have suggested.  Painful perhaps but the impact would be huge.  In these times, where money is not exactly flowing, if there was accountability, mergers of non-profits and focus on what is really making an impact and what is needed.  Don't try to fit the square peg into the round hole theory.   Money given out would get a much bigger bang for its buck and we would see a big difference in missions accomplished.  Just because people want to do good doesn't mean they shouldn't be held accountable for doing so. 

Comments (Archived):

  1. johndodds

    I’m no expert in the field but you make perfect sense to me. Such organisations (and their concomitant use of taxpayers money – be that directly or via tax breaks) should exist solely if they do good and not so that the people involved can be seen to be trying to do good.

  2. rdeichert

    Great post, there needs to be more oversight from the big donors (Ford Foundation), which organizations are most efficient at translating funding into results. The idea of setting milestones is a great one.My gut is that most individual people donate and feel great about it, but would feel guilty if they cut off their charity if it wasn’t as efficient. There’s a social pressure as your friend might be running the fund raising event, etc. Maybe if they told them to merge with a donation to the better run organization.I’m skeptical that a small council could be setup to oversee and choose as this would most likely become politically spoiled.On a side note, if you’re all out in the Hamptons – this coming Saturday is the East Hampton Library’s Authors Night event.

    1. Gotham Gal

      I am completely skeptical too about the political implications of a councilbut not sure if there is any “clean” way to do it.Thanks for clueing me in on the Authors night. Sounds interesting.