Nonprofits & Their Good Intentions
“Eliminating poverty from the face of the earth” is a noble intention, but not a goal. It is not attainable. Why? Because poverty is relative, defined by the gap between the rich and the poor. The poor of the today have access to better living standards as compared to the poor of 100 years ago, yet they feel poor, relative to the conditions and opportunities that today’s rich enjoy. In comparison, “Ensuring that 80% of the malnourished people in our city have at least one nutritious meal a day for the next 5 years” is a very specific goal, making it much more attainable.
Nonprofits are generally founded on such noble intentions. Most of them struggle to define very specific goals, because of multiple reasons that form the scope of this blog.
Aslema! As promised, I am back to share my lessons learnt during my Social Sabbatical in Tunis. i.e. lessons from the legendary management guru Peter Drucker that I had learnt a while ago, but not got to experience in practice. With due respect to the training program I worked for, I will not narrate my exact experiences, but I will rather use the example a fictional college to explain the challenges in good detail.
To understand the reasons behind the aforementioned lack of specificity, we need to understand the main differences between business and services, such as public institutions (schools, hospitals etc.), governments and nonprofits. Businesses produce surplus, which in turn fuels their continuity and growth. In other words, once a business is up and running, it sustains itself, until it’s “out of business”. So, businesses have the choice to decide upon what, where and to whom they want to sell. For example, a manufacturer of trousers can decide to sell only vintage styled trousers to the population of senior citizens living in the west of the city. Now this may constitute only 3% of the overall market for trousers in the city, but as long as this manufacturer retains a competitive advantage for this particular market segment, it can continue to produce surplus.
On the contrary, services are funded by higher authorities. Governments are funded by taxpayer’s money; public institutions are funded by government budgets and nonprofits are funded by donors. To keep their revenue stream on, nonprofits must please their donors. And when donors are multiple in number, each with their own agenda, nonprofits end up doing several never-ending bits and pieces of nice deeds, rather than focusing on specific objectives and bringing them to a close.
Now coming to my example — A social entrepreneur Mira sees the potential of the upcoming job market in an emerging economy and decides to establish a college with the objective of producing talent that can capitalize on jobs of the future. Brilliant idea, noble intention, no question about that. Several advisers give their thumbs up.
Now the next step: identify and convince potential donors. After a lot of efforts, digging through her network, asking for referrals and connections, Mira comes across 3 donors, who agree to continuously fund her project. Good news? Relief? Hold on..
Donor 1 is John, a private businessman, who shares the same vision as Mira. He wants to invest in new technologies soon and wants this college to provide him with the skilled talent that he can hire in the future. He sets up high expectations — Every year, 80% of the college students must get placed within 3 months of graduation.
Donor 2 is the State Ministry of Education. Jack, the minister, expresses that he has an objective to increase the enrollment rate of students in that country and that he would fund only on the condition that the college enrolls at least 300 students every year.
Donor 3 is the National Employment Agency. While Jill, the head of the Agency is pleased with the long-term prospects of employment that the college promises, she wants some immediate gains. So, she expresses her condition that, over the next year, the college must hire at least 20 new teaching staff from those registered as unemployed at the agency.
Whoa! Mira’s head is spinning. For her dream to be realized, she wants every penny that is available for the taking, but then she must meet the requirements of all her donors.
John’s requirement places a focus on the quality of the output. This would require Mira to enroll the students who are best suited for the future job market. The number of students wouldn’t matter. If she got 100 suitable students, she would need to place 80 of them. For that, she would need to focus on the profile of the incoming students i.e. quality of the input.
Jack’s requirement places a focus on the quantity of the input. To meet both John’s and Jack’s requirements, Mira would need to enroll a minimum of 300 students and place 240 of them. Now this target creates complexities. Are there as many as 300 suitable students available? If not, then she would need to compromise on the quality of the incoming students.
Finally, coming to Jill. Her requirement has absolutely nothing to do with the students. It only introduces conflict by diverting the limited resources of the college.
John, Jack, Jill and Mira — all have noble intentions. By itself, each of their requirement is specific. But as a combination, they do not allow Mira to focus on any one objective. She is left with no choice but to make compromises to please her donors. Welcome to life at nonprofits!
“Good intentions are no excuse for incompetence”, said Drucker. For nonprofits to be successful, like business, they must define specific purposes and objectives, and be firm on declining expectations that do not match with these. Successful nonprofits such as Red Cross, Doctors without Borders and Girls Scouts have also managed to turn the tables around i.e. by producing best practices that businesses can learn from. For further reading on what makes these nonprofits successful, I recommend reading the chapter What Successful and Performing Nonprofits Are Teaching Business from Drucker’s Management — Revised Edition.
