can non-profits really make a difference?

When I chaired MOUSE in the late 90's, Sarah Holloway was not only one of the founders, she was also the Executive Director.  I loved working with Sarah.  She is smart, insightful, has great instincts and can see through the lines.  Fast forward, Sarah is a professor at Columbia University teaching a core class on non-profit financial management and she more than anyone I know understands how inefficient non-profits are.  Not all of them but most. 

She shared with me a speech she gave on this topic and truth is we have been having the same converstion for years.  The good news is Sarah is speaking on the topic to a group of young people who are interested in making the world a better place as socially responsible entrepreneurs. 

Here is some perspective.  The NYC public school system has an annual budget of $24 billion a year.  That means that one in every 283 Americans are currently enrolled in the NYC public school system.  There are 311 million Americans and 1.1 million kids in the NYC public school system.  You can figure out the math. 

I do not know the number of nonprofits who are either vendors of the Department of Education or are trying to work with individual schools but here is some numbers that might be of help.  The Gates Foundation has an endowment of $33.5 billion.  Most foundations give away about 5% a year so if we go by that statistic that means the Gates Foundation gives away about $1.6 billion a year.  $800 million of that goes to global problems such as health.  $250m goes towards building smaller schools.  That number is probably less than half of what it costs just to build a school in NYC. 

The numbers above makes you wonder why it doesn't make more sense to set up a booth in Union Square and have underserved high school students stand in line and just give them a computer with a number that pays for the services they need for the year.  That would make an impact.

Why do non-profits end up spinning their wheels?  One of the main reasons is that they spend a lot of time trying to remain alive by just raising money each year to retain staff.  The other thing is that non-profits don't evaluate themselves like for profit companies.  Most don't ask themselves "how are we doing and how can we do this better" but spend more time being concerned about the audit committee, insuring next years resources and less focused on being effective. Non-profit boards do not expect much from the organization.  To many, it is a charity not a business. 

I look at an organization like Donors Choose.  Donors Choose is about voluntary contribution so scale is about more people giving money directly to the problem needing to be solved.  No different than setting up a kiosk in Union Square and giving out computers to underserved kids.  Initially Donors Choose had to raise money to kick off their mission but now people who give through the organization are happy to pay for Donors Choose overhead because they are making sure the product is going directly into the hands of the people using the product.  MOUSE, although not a sustainable organization, it is run like a business.  They have two years of their operating budget in a bank account so they do ask themselves every year, what can we do better vs how do we raise money to keep our jobs.  Then there is Hot Bread Kitchen.  A social enterprise.  They are making a product that is being sold to the marketplace bringing back a revenue stream into the business.  At one point, they will be able to be sustainable.  Are they impacting hundreds of women, no but they are impacting a small group of women and their families and to me that is success. 

I want to support Social Enterprises.  Organizations that act like profit businesses and do not rely on charity.  They can find ways to work with partners, they can create solutions to become sustainable by making a difference in the world.  I am going to circle back to the Gates Foundation.  Even if they spent the entire $1.5 billion a year trying to fix a $24 billion a year organization it would be impossible.  What we need is more socially responsible companies who are trying to disrupt the ways of the past which are just feeding money into organizations.  We should all ask the question before just writing a check…is this organization really making a difference?  Some certainly are but the majority of them, unfortunately, are just feeding the staff.