Misconceptions about nonprofits

In an ongoing series in Smart Money, Jason Kephart has recently written about the 10 things that nonprofits won't tell you. None of these items are particularly surprising to nonprofit leaders. What may be the most telling about the article is how little most people outside of the social sector know about how most nonprofits work. Here are two misconceptions that colleagues and friends have mentioned to me in the last 3 months:


1. As there is more need, won't nonprofits grow? (or alternatively as a college professor, shouldn't there be more jobs for students in nonprofits since there is so much new need in the economic downturn?) The answer to this is unfortunately no. Nonprofits, like for-profit organizations, require resources. Unlike for-profit companies, often their core business activity doesn't bring in that money. Instead, nonprofits are behoven to multiple different stakeholder groups with different priorities including: clients/policy-makers (depending on type of nonprofit), donors, staff, and volunteers. So, while there may be more need among clients, there may not be more resources from donors.


2. Can you tell me which nonprofits are most effective? The answer to this question is again more complicated than for many for-profit organizations, since the bottom line is more ambiguous. Do you mean effective in terms of the proportion of administrative costs verses program costs (available via Charity Navigator)? Do you mean effective in the number of people served? What if a nonprofit serves fewer people but addresses their needs more completely? What if they are an advocacy nonprofit and don't do direct service? 
While there are a number of tools that have been developed over the years to help nonprofits identify areas for growth including: 

·         Institutional Development Framework (Renzi, 1996)

·         Participatory, Results-Oriented Self-Evaluation (Levinger & Bloom, 1997)

·         Organizational Capacity Assessment Tool (PACT, 1996)

·         Participatory Capacity Assessment Tool (CARE International, 2000), and

·         Institutional Strengths Assessment (Child Survival Technical Support Project, 2001).

they are largely designed to help nonprofits compare their past, present, and future. These metrics are ill equipped for comparisons among nonprofits. While evaluation is a growing area of interest among many, there is still a long way to go before more rigorous standards for nonprofit evaluation are available.

What other misconceptions about nonprofits have you heard? Post them in the comments section, and I will take them up in future posts.