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Efficient Charities: Is your nonprofit pursuing something inhuman?

iamoverhead
Recently, Dan Pallotta wrote a post in the HBR about using the phone. It was called, “Just call someone already.

I think it’s odd that he chose that forum, and that medium, as the subject of his piece. Of all of the business topics to write about, he’s telling us which communication method to use?

What was really behind the article, however, was something deeper.

It was about the ruthless culture of efficiency and how it erodes our humanity. Pallotta clarified in the comments, where he said,

“I notice a glorification of efficiency going on in some of the comments, as if efficiency is the end-all and be-all of life itself, and certainly of business. I disagree.

This elevation of efficiency, as opposed to humanity, is not good for human beings. At some level it’s not even ultimately efficient. And it’s not good for business. If our humanity is not integrated into our daily business lives then we cannot really create the best businesses; after all, those businesses serve human beings.

The “don’t bother me,” “I don’t have time to listen to your small talk” unfriendliness that some would promote is troubling.

It’s judgemental and harsh, and whenever someone is being harsh to someone else I know they are doubly harsh on themselves. That tendency toward self-punishment underlies a lot of this efficiency elevation, and until one deals with that tendency in themselves, whether or not their business becomes successful is rather irrelevant.”

I agree!

What is business efficiency? According to Arthur Brooks at the National Center for Nonprofit Enterprise,

For-profit organizations think of efficiency in the allocation of funds in terms of getting the greatest output, given a fixed amount of inputs, or using the fewest inputs to get a fixed output. Measures like ROI are derived from this “most from the least” standard. It is appropriate for commercial firms, because we often assume that they have a profit-maximization objective. This objective is met by spending and investing up to the point that the last dollar in expenditures earns a dollar in revenues, a concept economists call “equimarginality.” (If a firm were to spend more than this, the return would be lower than the expense, lowering total profits. If were to spend less than this, it would be forgoing positive net returns on spending.)

Frederick-Taylor-Scientific-Management
The background for “business efficiency” is Frederick Taylor, who came up with the scientific management theory.

“Hold up!” you’re saying.

“I didn’t come here to learn about no MBA curriculum!”

Right, but I have to tell you these things! Because the people running your nonprofit are thinking about these things. They’re thinking,

“How can we make this nonprofit run more like a business, with RUTHLESS EFFICIENCY?” and this may be the wrong question to ask.

When people talk about efficiency in nonprofits, they generally mean, “Your overhead has to be under 25%.” Nevermind what your “output” is.

Never mind if you’re actually solving the problem or not.

You’ve got financials, they’re lookin’ at them, and by god they’re not good enough!

Brooks continues, “It is reasonable to assume that effective nonprofits generally do not maximize profit. In fact, it seems counterintuitive that an effective nonprofit would produce less than it can in services every year, simply to have a larger and larger pot of savings (a point lost on many elite private universities). A better standard than profit maximization for nonprofit allocative efficiency might be that of maximizing net returns to some types of spending—fundraising expenses, for example—while maximizing core services, even in spite of negative net returns on core service spending.”

The Institute on Nonprofits wants to crack the nonprofit efficiency myth wide open.

They write, “There are tons of inefficient and dysfunctional nonprofits, just like there are tons of inefficient and dysfunctional businesses. Their existence does not invalidate the sector.”

Trying to move towards endless efficiency is what leads to superjobs.

What is a super job? It’s when you take on the work of 2 or more people, without an increase in pay or benefits.

Why are you asked to do this?

Because “scientific management” wants to squeeze ever more work out of ever fewer workers, so that they can get bigger profits, bigger salaries, bigger bonuses, and look better to their boards, or possibly, their donors who insist on “NO OVERHEAD!”

(Do you have a superjob?) Endless efficiency leads towards digital, mental and psychological exhaustion in our nonprofit sector.

Phil Cubeta at Gift Hub writes,

“This (emphasis on efficiency) is not about democracy, open source, open society, social activism, social movements, self organizing systems or volunteerism. It is about the control of all things considered from within an ideology of cost/benefit means/end management. The urgency of the demands being made is the urgency of those who want more power (for the good of all, course), and who see the oportunity to seize it with funding from Gates, Hewlett, and other business minded foundations. They gain power by controlling the definitions that go into what is allowed to count as “results.””

Metrics may measure the wrong things, but they serve as a reliable, scalable and repeatable control mechanism. And control is far more important to those with wealth than the “result” of an empowered, and democratic society working on its own from below and from the edges. Colonialism.

Where else is efficiency touted but in actuality, efficiency is a myth?

Factory farms versus family farms

Modern “Scientific” Management Theory, which is what our business board members probably think we should be doing

How can we escape this endless efficiency, which has become destructive of our own humanity?

I honestly don’t know.

What do you think?

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