AUSTIN, TEXAS – Nonprofits share a number of common challenges impeding their effectiveness. Panelists Matt Taylor, director of strategy and operations at IDEO.org, and Lane Wood, founder of Woodwork Consulting, recognized several critical ways the conventional charity is failing and discussed how a reimagined charity model with business driving change can be an effective means of true social impact during a session at the SxSW Interactive Festival.
Problem #1: Aid often denies economic agency to recipients
While working with impoverished communities, Leila Janah saw firsthand how the traditional lens of charity denies people their humanity. So many social problems stem from poverty or lack of access to dignified jobs. Janah believes in providing people a form of income through job-creation programs so they can choose the kind of goods and services they have. In 2008, Janah founded Sama out of the belief that the best way out of poverty is providing people with dignified work opportunities.
Janah explained how Sama has cultivated a new model of impact sourcing that connects technology companies to skilled low-income digital workers. Workers receive job training and access to skilled digital work that they otherwise could not access. Getting a living wage through the model has lifted thousands of workers out of poverty. In turn, it’s often inspired staff at companies that use Sama services to hear these stories of change.
Problem #2: The need for constant fundraising
For Taylor, the fundamental problem of the conventional charity model is fundraising. The need to constantly raise capital means nonprofits are always running to reach funding goals, racing to catch up with their mission work, and struggling to get through to their core issues. Wood agrees the crux of the problem for nonprofits is the continual need for fundraising. Plus, there are often capital restrictions to grants limiting how funds can be used. With the private sector constantly innovating, how are traditional charities going to remain relevant?
Problem #3: Attracting top talent
Finding and keeping skilled staff is a major issue as it’s difficult to attract top talent to jobs with a large salary and resource disparity from their for-profit counterparts. Why is there outrage over paying nonprofit staff salaries comparable to for-profit jobs? Wood observes many nonprofit CEOs are deeply concerned with not giving off a perception of wealth and argues that it should not be a shameful thing for successful people to be well compensated for hard work and success.
Panelists brought up the argument of Dan Pallotta and others have made about using return on investment (ROI) instead of administrative overhead as a measure of nonprofit performance. Woods notes some organizations have attempted to change this by fundraising for operations separately from public fundraising. However, this creates its own set of problems with having to focus on additional fundraising for operations. It is a perception problem from both donors and media.
Janah stressed the importance of keeping good people around. At Sama, they have set up earned income strategies to offset as much fundraising as possible. She’s been able to bring salaries up close to market in order to secure and retain a strong team.
Problem #4: Short-term, short-sided solutions
Taylor worries about the efficacy of short-term solutions and simple heuristics. Unlike the private sectors, nonprofits often must focus on demonstrating impact through short-term or limited grants. There often isn’t enough to time to let results neither play out nor develop the right kinds of partnerships. At Ideo.org, the organization takes a human-centered design approach, working with constituents to get feedback, adjust accordingly to needs, test, and iterate throughout the design of a project.
A common mistake is to think that passion for a cause is enough to sustain an organization. “You’re not going to sell your company on pure passion,” said Wood. “I can think of very few reasons to start a nonprofit right now. Most start-ups fail especially in the nonprofit space. Those who do make it have a sustainable business model and a plan for where they will be in several years.”
Problem #5: “Impact is the new black”
“Is impact the new black?” Janah asks and wonders if like Clorox’s Green-works greenwashing efforts, there might be something similar happening with the emphasis on social impact. What measures are being used to determine if sustainable change is taking place?
There is a competitive marketplace for impact in terms of outcome but fortunately now outcomes can be measured that were not possible before. Taylor discusses a more sustainable approach to poverty reduction. For example, efforts to reduce the HIV infection rate in Zambia and Kenya involves getting young people the right information on reproductive rights, but also the need to have someone looking at the local level (working with local government, community organizations, etc.) to design the right fit that will work.
When looking to show true social impact, panelists advised looking at the depth of the impact on a single person. Understand their life trajectory beyond that – and start to tell the story of how one intervention transforms the course of a life vis-à-vis competitors in the industry.