Charity Defense Council

4 Types of Nonprofits: Which Ones Should We Celebrate?

Posted by Jason Lynch on Jun 29, 2016 12:00:00 PM

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PHILOSOPHY OF SOCIAL CHANGE

At the Charity Defense Council, we believe big fundraising efforts should be celebrated. If we're actually going to eradicate poverty, homelessness, or Alzheimer's disease, scale is absolutely crucial. Tiny organizations won't cut it.

In some circles, that emphasis on fundraising has raised eyebrows. Our cynical side is awakened whenever large sums of money are involved. Where's all this money going? Is it really reaching the people who need it? Do charity execs need to be making six-figure salaries? Can't organizations spend less and get the same results?

Others have questioned whether our philosophy gives cover to bad actors in the nonprofit space (e.g., organizations that raise a lot, but don't do much with it). That's an important concern and something we're actively working to avoid.

But, whether it's popular or not, we need to make a stronger case for fundraising. So, we came up with a simple two-by-two framework to shed some light on our philosophy.


SWEET SPOT FOR SOCIAL CHANGE

Without effective fundraising, organizations remain small and incapable of solving huge problems. But, for true social impact, big fundraising must support high-impact programs. That's what the public should demand. Otherwise, what's the point of raising so much money?

Within the nonprofit community, we see four types of organizations: the Fixer Uppers, the Charmers, the Phenoms, and the Game Changers. We want to see more organizations join the Game Changers in our framework's top-right quadrant, achieving high impact with high fundraising success. It's not easy to get there, but that's where major social change happens.

As we walk through these four types of nonprofits, it's important to highlight one of our assumptions: that nonprofit organizations and their leaders are well-intentioned. Despite what the media will have you believe, fraud and scandal are very rare. Almost all charities and charity leaders want to do good for the world. Sometimes, they just get stuck in a rut and need some refocusing.

(Notice that we said refocusing and not persecution. Unless fraud is happening, we believe persecution is counterproductive to social progress.)

1. The Fixer Uppers:
Assess Viability

At the bottom-left of our framework are the Fixer Uppers. They achieve low impact and have low fundraising success. Their programs are inadequate and they're under-resourced, making them ineffective overall.

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These organizations should be a concern, because they're failing to properly address a social problem. There are many reasons an organization might wind up here, from people to strategy to systems to implementation. No matter the culprit, there's a lot of work to be done for these organizations. If they're truly concerned with social impact, they need to seriously assess the viability of their strategy and approach.

After some honest self-reflection, these organizations need to adapt by refining their strategy, attracting better talent, and/or investing in growth. If these solutions don't cut it and they remain stuck in this quadrant, they should join forces with a competitor or perhaps even shut down.

The sector needs high performers, not well-meaning organizations without any substantial results to show. A major problem with the sector's current charity rating method is that many Fixer Uppers are able to fly under the radar. As long as their overhead is low, we don't demand any improvements; even if organizations are failing to have any real social impact, there's no criticism. And, it's because we're looking at the wrong indicators. The longer we continue to do so, the longer social problems will persist.

2. The Phenoms:
Bring To Scale

At the bottom-right are the Phenoms. They do a lot with a little, achieving high impact in spite of low fundraising success. They have a program that works, they're experts in program or service delivery, and they're creating a disproportionate amount of social good given their modest size.

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Usually, these organizations have a scale problem. If they could just figure out how to generate more resources, they'd be able to replicate their program and expand their social impact. If that's the case, we'd like to see these organizations further invest in fundraising and bring their programs to scale. As Jeffrey Bradach from The Bridgespan Group has argued, social change will happen much faster if we focus less on launching new programs and more on figuring out how to replicate the programs that are already top-notch.

This recommendation comes with one caveat. Bringing programs to scale is much easier said than done. It comes with a whole new set of challenges, which may or may not be realistic for a particular organization. Not every team is prepared or qualified for serious growth or expansion. So, depending on the problem an organization is trying to solve, this bottom-right quadrant might be a perfectly good place to stay.

High-impact programs are praiseworthy whether they're delivered at scale or not. As long as the impact is high, these organizations deserve a big thumbs-up.

3. THE CHARMERS:
FOCUS ON OUTCOMES

At the top-left, we have the Charmers. They have big fundraising success, but their impact is low. So they're great at raising money, but they don't deliver much once they raise it. These organizations take the most heat from the media and the general public -- and rightfully so. There's a huge responsibility when you're raising so much cash.

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Most likely, somewhere along the way, these organizations decided that they needed to serve more people and make a bigger impact. An admirable goal. They turned their focus to fundraising and got really good at it. But, they became more focused on fundraising than program delivery. They either forgot to shift their focus back to programs -- or they didn't know how.

When a group finds itself in this quadrant, the public's likely to call for a crucifixion. We don't like to see anyone take our money and squander it!

Though it might be tempting to bring the Charmers to their knees, we have a very different suggestion: as long as there's no evidence of fraud, we should firmly remind them of their mission, demand better impact, and force them to focus on outcomes. It's incredibly difficult to achieve high fundraising success, just as it's incredibly difficult to develop high impact programs. It takes years and years of very hard work to get there. By knocking down every flawed organization, we're forced to wait for a perfect charity to rise to the top. Each year we wait for another high performer to emerge, social problems endure and more suffering occurs.

The Charmers, with a big resource engine already in place, are positioned to create enormous impact. If our goal is to destroy imperfect organizations, then we suppose it's okay to throw stones at the Charmers. But, if we truly care about social impact, then we'd better start coaching them on stronger outcomes. As the adage goes, "don't let perfect be the enemy of good."

4. The Game Changers:
Feed The Fire

At the top-right, we see the rare organizations that have developed into Game Changers. They simultaneously deliver high impact and achieve high fundraising success. They have highly effective programs and the resources to replicate them at scale. It's the recipe for rapid social progress. In fact, we believe it's the only way big social problems will be eradicated.

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For the exceptional organizations that enter this quadrant, our advice is simple: keep feeding the fire! These organizations shouldn't shy away from fundraising and should remain laser-focused on outcomes and social impact.

But, Game Changers should be keenly aware of one major threat: optics. Once an organization gets good at fundraising, all eyes are watching. The media's always eager to expose a Charmer or spin a nasty story about a growing organization. Unfortunately, even if Game Changers have high impact programs, they're vulnerable to unfounded criticism and media attacks. Unfortunately, the modern media has become more concerned with inflaming than informing. This is one of the biggest impediments to social progress. We view it as an injustice to the sector and it's the reason we created our anti-defamation function.

The sector needs to build a capacity to develop all high-potential charities into Game Changers. And, we need to stand up for ourselves when the media interferes.


FOCUS ON IMPACT

When it comes down to it, we're calling for high-impact organizations and a culture that supports the growth and improvement of nonprofits. We're not here to give cover to under-performers and we're not trying to remove transparency or accountability from the sector. In fact, we're demanding the exact opposite.

At the end of the day, social impact is what counts and big fundraising is required for major social change. As a sector, we need to get better at measuring the former and celebrating the latter.

Over the past several years, the nonprofit community has made important progress on these fronts, with widespread acknowledgement that impact is a better indicator than overhead. But, that knowledge has not trickled down to the general public or effected any significant changes in the way people think about charity.

Until that changes and our sector is finally able to maximize its potential, the Charity Defense Council is committed to organizing the grassroots, educating the public, taking on the media, and accelerating social change.

Now, let's go build a movement!

 

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Topics: Fundraising, Social Impact

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The Charity Defense Council is a brave new leadership organization for the charity sector. Our purpose is to create the conditions under which charities can realize their full potential and remove the conditions that prevent them from doing so. Our goal is singular and bold: to change the way the donating public thinks about changing the world.

Visit our website to learn more and get involved.