I recently read an article from The Chronicle of Philanthropy about how one-third of people do not have confidence in charities. Click here to read the piece. This was the first measurement of its kind since 2008.
What was interesting is that one-third of the general public believed, “…charities do a ‘not good’ or ‘not at all good’ job spending money wisely; 41 percent said their leaders are paid too much. Half said that in deciding where they will donate, it is very important for them to know that charities spend a low amount on salaries, administration, and fundraising; 34 percent said that was somewhat important. And 35 percent said they had little or no confidence in charities.”
Earlier this year, I wrote about the “rise and fail” of charities. I talked about the loss of trust capital with the nonprofit sector. This validates what others and I’ve been saying. And, it’s providing an opening for the for-profit sector to believe they can, in some instances, even supplant charities for social good.
Why Does One-Third of the Public Not Trust Nonprofits?
I think this is a matter of information. I’ve written about this in the past. You can read my article about paying a living wage by clicking here. The bottom line is if nonprofits don’t want to continue to be thought of as replaceable, they have to step up.
Stanford Social Innovation Review has stated that operating expenses in the for-profit sector are about 25 percent of total expenditures. In the nonprofit area, however, it’s expected to be approximately 15 percent. The general public has been misinformed. It’s a fallacy to believe nonprofits should operate with exceedingly low overhead. That’s just crazy and it’s harmful. That’s why so many nonprofits struggle and do patchwork.
Nonprofit executives and foundation funders, in particular, have not done a good job in being realistic. They’ve created this myth, that’s been coined the “starvation cycle”. Even major donors believe nonprofits are supposed to achieve their goals, with very little or even no operating revenue. 80 percent, 90 percent or even 100 percent of all money should go to direct program costs. This is a false narrative that is being perpetuated, in many instances, by nonprofits themselves.
And now, the nonprofit sector is faced with one-third of the public thinking they don’t spend money wisely and more than 35 percent saying they have little or no confidence in charities.
Change the Discussion, Or Leave the Table
I believe nonprofits that are perpetuating the starvation cycle, are not doing anyone, including themselves any favors. Executives have to step up and join with thought leaders and others in the industry. We all have to inform donors and the public that to make great social impact, there has to be investment.
See that tin cup that’s sitting on the corner of your desk? Toss it in the garbage.
If you’re not out there asking for a large investment and speaking boldly about your mission and work, you’re just perpetuating the problem. If you’re not telling major donors why their significant financial support is needed, including in operations, you’re failing your organization and the industry as a whole.
More and more, big business and others in the for-profit sector are aligning their business plans with social impact. The general public is now expecting this of them. So, for them, it makes business sense.
There’s also a trend for the largest foundations and donors to target their giving. In other words, they’re giving more money to fewer nonprofits. The organizations that are getting the funds are the ones that don’t shy away from talking about money. They’re not afraid to talk about investment. They’re aggressively telling donors if they want to make broader and deeper impact, there has to be more investment into the backbone of the enterprise (i.e. operations and administration).
This is not a sin. Nonprofit leaders should take this survey as a warning. In today’s world, there’s a much greater likelihood they’ll perish if they’re not open, transparent and truthful about what it takes to make social impact.
© 2015 Wayne Elsey and Not Your Father’s Charity. All Rights Reserved.