Not for Profits = Not too Successful

There are a couple of interesting articles in this past week’s Economist from their survey of wealth and philanthropyy about non-profits and how notoriously inefficient they are. One article quotes a Harvard Business Review article stating non-profits in America alone can save $100 billion through better management. As there are currently very limited market forces if any that weed out bad charities, an example is the existence of around 40 homelessness projects in London of which only eight are any good.

Solutions are not just the obvious business management skills that need to be implemented in non-profit organizations, there are a slew of other business practices that need to be garnered. Often times donors, including me, have looked for charities that have the least overhead to ensure my money goes to the cause. Although these thoughts are well-intended and may have some merit, they are short-sighted for charities that have a bigger vision of expanding their successful operations. Charities like businesses need to build infrastructure.

Organizations such as the New Philanthropy Capital are attempting to provide more knowledge to potential donors as to the efficiency and successfulness of a charity. Providing a form of accountability to donors and incentive to non-profits through a philanthropic version of stock “buy, sell” type recommendations or ratings will hopefully form a more developed market for non-profits. This sort of knowledge is sorely needed as many people simple donate to the most famous “brands” in the charity.

Even the idea of having a social stockmarket has been suggested using social merit points. However in order for this idea to float, the most difficult question for charity work needs to be answered: how does one measure success?