Imagine a company that doesn’t outsource its work, supports local businesses, pays all its employees a living wage, throws Christmas parties and appreciation events for their staff, focuses heavily on staff training and education, pays its interns, provides benefits for its employees, pays proven and qualified staff that go well beyond their role to do a good job mid range salaries for their field and invests in research on an ongoing basis. Because of their ability to attract and retain top level staff and invest in research, the company is able to produce high quality, technologically advanced products. Even though the products may cost more people are more than willing to pay for the products because of the technology, innovation and reputation of the company. To most people this sounds like the ideal company with the one objectionable item being that qualified and extremely hardworking staff only get paid mid range salaries. When a company invests in their staff and community it is called a model company, socially responsible and a place that you should buy from and invest in. A nonprofit that fulfills any of the above though is demonized for being frivolous and spending too much on staff and administration.
Nonprofits, which cover the gap of needs and services that the government and business deem too difficult and not profitable enough to get involved in are expected to be chronically understaffed, extremely underpay the staff that they do employ and have some sort of system that allows them to be administration free while keeping track of both outcomes and every dollar that comes in and out. While fulfilling these 3 obligations organizations are expected to operate at amazing efficiency to solve problems of world hunger, homelessness and poverty.
Understaffing
While no one would ever expect a one person company to make much of an impact in the world, people expect a one person nonprofit to. While a nonprofit does have the benefit of being able to attract volunteers, the work that volunteers are able to do is vastly different than a paid employee would do and volunteers also require training and supervision. Expecting a nonprofit to predominantly run off of volunteers is the equivalent of getting multiple people to run a business in their spare time and not giving them any monetary compensation or any repercussions for not doing their job.
Underpaying
The fact that there are people in charities making millions of dollars gets thrown around a lot and yes, there are a few executives in large charities that make this much. Companies of an equivalent size are still likely paying at least 2 to 10 times more to their executives. It’s considered good business practice to go to great lengths and great paychecks to recruit top talent to manage large international companies, with the reasoning being that to manage companies of that size top level leadership, skills and ideas are crucial. Not surprisingly large charities benefit from having great leadership, skills and ideas at the top as well. While it might be true that no one in the world should be making a million, when nonprofits have the same needs of top quality experienced talent that companies have they have to be able to pay someone an amount that’s in the same ballpark.
While high monetary compensation of employees is cited by people as a reason why charities are bad and why they don’t donate, I am pretty sure the majority of people know that this is bullshit. I have never heard anyone say that they would switch to working in the nonprofit sector since the pay is so great, nor a parent that’s relieved when their kid wants to go into the nonprofit sector because they know that they’ll be making big money. The vast majority of staff in the nonprofit industry are underpaid. While people criticized Wal-Mart for underpaying it’s employees to the extent that Wal-Mart needs to set up donation bins in the store for its own employees, people praise charities that do the same thing. With the wages paid in many nonprofits, people either think that only the 1%, with enough built up wealth to sustain themselves without a well paying job should be working in nonprofits, or they expect those that work at nonprofits to be utilizing charities themselves in order to survive. The age of young, idealistic skilled not rich people going to work in the nonprofit industry is over. While most people in the sector, me included are willing to take a paycut in order to do “good work and work that we believe in”, most people also aren’t content to live below the poverty line for long periods of time. The turnover at many nonprofits is high because of the low wages and lack of benefits. While a high turnover might be ok at jobs requiring little skill, because nonprofits are usually understaffed and have to do multiple roles, the turnover is extremely damaging to progress.
Administration costs/Overhead
“To this day, they make do with donated furniture and second-hand computers. Staff get multiple quotes on substantial purchases to make sure they’re getting the best price, and expenses are scrutinized by upper management.” http://www.moneysense.ca/spend/which-charities-use-your-money-most-efficiently
It has become common for companies to invest money into trying to create the best work environments for their staff hiring designers and investing in nap rooms, game rooms and art. Charities on the other hand are not expected in to invest any money on their office decor, instead they rely on donations. If a clearcut answer ever emerges to whether open offices or cubicles improves productivity, nonprofits will be doing the opposite, because after all they should be using the donated furniture. While office furniture likely wouldn’t drastically improve workplace performance, things like computers and internet speed definitely do. Many nonprofits are reluctant to spend money on technology, likely influenced by the public into thinking that frugality is the answer for everything. It is a common complaint that charities have not caught on to web and mobile technologies though and walking into the offices of nonprofits, it’s pretty easy to see the reason why. For some reason forcing nonprofits to use technology from 10 years ago has caused them to fall ten years back. Perhaps with the increasing school underfunding, students may end up graduating equipped with the knowledge to use computers that are as old them.
The quickest and easiest way to lower administration costs would be to donate large sums of cash anonymously with no strings attached. A large part of a charity’s administration that is unnecessary to the work they are doing is processing donations and providing tax receipts. While both donors and charities themselves would like to be able to better measure and track their successes and evaluate their programs, with donors unwilling to donate to administrative costs, this is simply not possible.
When looking at companies to invest in people look at the company’s past successes, current projects and the previous successes of the CEO. When evaluating a nonprofit people look at the amount of money going towards the cause, the pay of the executive director and other staff and the amount of money spent on administration. Measuring how much money goes towards a cause is the equivalent of measuring a company’s success on how much product they are able to produce, with no regard to what the quality of the product is and whether people are actually buying it. While my previous blog post goes into further detail, essentially when trying to evaluate or predict a charity’s success, you should be looking at similar things as a business. The current standards and expectations that we have in place for nonprofits are wrong and are moving organizations further and further away from their goals.
Philanthropy Nerd 