Monday, October 20, 2008

Bad Charities with Heart

One quick and dirty way to define charities is the good, the bad and the ugly. The good charities are those three and four star agencies that have strong financial capacity and efficiency. They are also effective at performing their mission, day in and day out. The ugly are some of those charities that get into trouble due to poor ethical judgment and general mismanagement. We are frequently called upon to talk about these two groups of charities, but much less often about the other group - the bad charities.

The leaders of bad charities often have a heart for their mission, but they can not manage their way out of a paper bag. They have risen up within the ranks of the charitable sector due to their hard work and dedication to the cause. We have noted before that a CEO is not just a fundraiser, but they also are not supposed to be a social worker, psychotherapist or a case manager. If they function like that, you may see leadership who can speak passionately about the agency mission and little about financial matters. When the management of a public charity comprises people who are truly dedicated to the program but have little business acumen, they can easily become very, very good at not making a profit. That is to say, they lack the expertise to develop funding to enable the organization to maintain and grow its programs or save for the proverbial rainy day.

These agencies (along with the ugly ones mentioned above) are the kinds of places that we talked about a few weeks ago, that may end up going belly up in these bad economic times. Regardless, they are generally a royal pain in the neck to work in. Of course any organization can be hampered by hidebound procedures and lack of creative thinking on the part of management, but the problem seems particularly rife in charities. In the absence of pressure from stockholders and the inherent belief that the cause itself is all that matters, it’s very easy to settle into “business as usual” while the world changes around them and leaves them behind. When a creative employee or donor suggests a new way of doing things they will reply with phrases such as "we've always done it this way" and "we are a very good at what we do". Since some of them also tend to have an us against the world attitude and do not want to be measured on their performance, they may never realize that they have not been doing very well at anything.

Another perspective I have heard often in the charitable sector is "we are a family". What a load of baloney that is! Families have very different boundaries and rules than the workplace. I could give countless examples to show the difference, but I think one will suffice. At one charity I worked for, we had to cut the budget by over a million dollars and lay off twenty plus staff due to the problems described above. When one of the long time managers at the agency reminded me that we were a family, I replied simply "Family does not fire their family!". Bad charities often want to deny the reality that they are a business that has a bottom line and requires a modicum of professionalism and a set of procedures that you do not hold your family to. When confronted with financial realities their eyes can glaze over as they remind you that they work in a non-profit as if that means they get a pass on all financial matters. Alternatively, they can look at you with disgust as heartless by concerning yourself with the bottom line.

In circumstances such as those described above, the stark reality of their denial becomes crystal clear. However, agency leaders in denial will continue to carry on the tired old rhetoric regardless of the shining realities staring them in the face. We believe that our rating system is particularly helpful in ferreting out these kinds of charities. Since they are often self-described as "all heart" (which means "no head"), financial management is usually out the window. Not all the charities below three stars fit this description, but we suspect that enough of them do as to cause donors to proceed with great caution in supporting them. You should insist upon seeing their reports on performance both programmatic and financial. If they do not supply the information or it appears unclear, consider donating to someone else. At the end of the day, we believe that the agencies with the healthiest hearts have good heads on their shoulders too!

Note: It is my pleasure to thank my colleague Vince Bogucki for generating the ideas that led to this blog entry. He has helped by giving me great feedback on drafts of virtually every blog I have written thus far and now I am happy to get to react to his good ideas!


Anonymous said...

Very well said. Thank you.

Often this kind of reality is met with disbelief and anger by those who believe that all not-for-profits are filled with angels willing to work slavishly for free. To suggest otherwise, according to some, is akin to calling Mickey Mouse a pervert.

The shame of donating to an inefficient charity is not only is the money going to waste, but an efficient charity is not getting that money. ;

Anonymous said...

Very informative article. I am just sorry that more Christian Charities do not submit reports, but happy to see that World Vision & Christian Children's Fund are listed as 4 star. I am sorry that I can't get a rating on Smile Train as I think this is a very worthy cause & I have supported them in the past. I hope that I can see a rating soon. I have limited resources & want to use them wisely. Lory

Anonymous said...

Thank you for those comments. Nonprofit businesses are just that--BUSINESSES! In having to ask for the resignation of the board president residing over the nonprofit I founded just this year, I knew it was something I had to do for the good of the company. Unfortunately, the board president seemed to think that she was elected as president out of friendship and not because she was expected to actually contribute to the building up of the company through concerted efforts and maintaining integrity in her personal and professional life. My passion to establish this organization as a viable entity to the community was not to gain friends and excuse mediocrity, but to provide services to persons facing life challenges they cannot overcome without the help of the community. Nonprofits operating as families are great. However, let us not forget that families work together as functioning units that empower one another and represent the community in positive ways,

Ken Berger said...

In reply to Anonymous of December 2nd, I must take issue with your second to last sentence, "Nonprofits operating as families are great." They are not "great" under any circumstances I have seen. I think a nonprofit should always be a professional organization where the boundaries of such a structure are maintained. Families by their nature have a completely different set of rules and structure, the two do not mesh well. I do agree that non-profits should strive to be nurturing and supportive of their staff and provide the best culture to foster creativity and dedication to mission. However, it is dangerous when we blur the lines to the point that we consider are fellow workers as family members.