The Nonprofit Sub-Par Management Debate

The Parties Involved

I?ve just touched upon an interesting topic that I feel compelled to dive into ? about nonprofits having sub-par management. It started with a research paper that said YES, they do have sub-par management, and that led to an outraged response from 2 authors from the Nonprofit Quarterly which led to a marketing blogger?s response of well?nonprofit leaders really do need better business and marketing skills, and ends with me saying HELL YES they do.

The Whole Story

Article #1 from the Journal of Business Research
In search of responsible CEOs: The case of CEOs with non-profit experience ? September 2012

This one cost me $31.50 to read and I had to slap myself awake a few times but I did survive the reading and here is the gist of it.

The study ?examines whether prior non-profit experience signals a lower/higher tendency for mismanagement at the CEO level.? For ?mismanagement? they are mainly referring to the frequency and types of financial statement restatements during a specific time period.

It?s not focused on nonprofits but on CEOs in Corporate America with nonprofit experience. One hypothesis was that there would be no connection between the level of fraud and mismanagement in corporations ? mostly because people attracted to the nonprofit world tend to not be motivated by money.

The 2nd hypothesis (which I had a harder time with their supporting info ? as did the authors of Article #2) was that since nonprofits were so inefficient they would attract CEOs that tend to mismanage.

The result when they compared their test subjects to their control group was that firms headed by non-profit CEOs had a lot more financial restatements resulting from ?accounting irregularities including aggressive accounting practices, intentional and unintentional misuse of facts applied to financial statements, oversight or misinterpretation of accounting rules, and fraud.? This led them to their final conclusion of:

?Prior non-profit experience may be an important indicator of an above-average propensity for mismanagement and/or negligence at the corporate level.?

As a previous founder and CEO of a nonprofit organization and working closely with lots of nonprofits as a consultant, I can?t entirely disagree with this statement. I think a lot of nonprofit leaders are severely undereducated ? I?m not talking about a lack of degrees ? but a lack of actual management training, which includes board development, human resources management, and a serious knowledge of accounting and business principles.

Article #2 from the Nonprofit Quarterly:
Nonprofits ?Attract and/or Mold? Subpar Managers? Hogwash! ? July 23rd 2012
Article #2 focuses mainly on this quote (which the authors are upset about) that they attribute to the author of article #1 which actually the author of article #1 claims it came from Monster.com ? although I have a hard time believing Monster.com would actually try to dissuade people from working at nonprofits:

?Many nonprofits are stressful places to work because of the chaotic nature of their organizations and decision-making. Some are highly political and bureaucratic. Boards of directors often work against their best interests. Some nonprofits have notorious reputations for administrative incompetence and disorganization; lack quality personnel and staff development; operate with antiquated equipment and from cramped quarters; and have attitude problems.

Relationships between the CEO, board members, staff and volunteers can become a nightmare. If you prize strong leadership, clear decision points, high levels of efficiency and the latest in office technology, many nonprofit organizations will disappoint, frustrate, and discourage you. If you can tolerate ambiguity, inefficiency and chaos and function well in makeshift work environments, you may do well in such work environments.?

My sister (who works in Corporate America) would definitely argue that this can just as easily describe her world as it could mine. But I am continuously shocked to see nonprofits that are scarily disorganized and clearly mismanaged, receiving regular government, corporate, and foundation funding with little oversight from the funding institutions; they obviously look good on the outside, but not so much on the inside.

The authors of Article #2 end their article with this statement:

?We guess if you were to see efficiency as the maximization of profits alone, maybe you?d have a case but it might come with threats to the well-being of patients, staff and taxpayers. Ah well.?

And to me, that statement embodies the problems I see with many nonprofits ? a distrust of traditional business methods combined with a belief that as long as we?re doing good things we don?t have to be as efficient, or even as accountable, as a for-profit.

Article #3 from Elaine Fogel, Totally Uncorked on Marketing
Do Nonprofits Have ?Sub-Par? Management? ? July 25th 2012

Elaine responds to Article #2 and comments:

?Of course, there are exceptions, but overall, leaders need better business and marketing skills. The general ?mindset? needs to change to one of greater innovation, managed risk taking, and investment.?

I completely agree with her. It seems clear that she and her colleagues have had some close encounters of the inefficient nonprofit kind as we have also had.

I?ve actually sat in on board meetings filled with board members from Corporate America who literally seem to leave all their business sense at the door. I love the compassion but we need business skills with it. I know of nonprofits with multi-million dollar budgets that still have a slight variation of their original ?yes? boards (from Boards From Hell ? my absolute favorite book when I started my nonprofit ? your first board when you start is usually a group of friends who say yes to everything you do).

I?ve seen nonprofits plow through fund development directors every few months (blaming the economy and the development directors) with no one stopping to think that: a) leadership is unable to make sound hiring decisions or b) leadership doesn?t know enough about fund development themselves to track and evaluate (and take responsibility for) the development hires and their decisions. Also, when a project takes 6 months for a decision to start, or when a 3-month project takes 2 years to complete, these things scare me from a donor?s perspective.

Real Capacity Building

I know a lot of foundations are focusing on ?capacity-building? and I think that funding (from any major funding source) needs to come with a REAL evaluation of the inner workings of the non-profit to identify their greatest needs from an outside source ? in a helpful and non-threatening way so that nonprofits can get to the real source of their funding issues and obstacles. Wouldn?t that make an interesting reality show? Turning Tabitha?s Salon Takeover into Tabitha?s Nonprofit Takeover?

I remember getting some extra help from a government grantor that was invaluable in helping me set up internal processes and I had applied for and received a mentor for one year (through a local foundation) that really helped me identify weaknesses and grow the nonprofit I had started. It?s not easy to identify problems when you are standing in them; and most money problems can?t be fixed with more money. I also think there is a serious lack of quality training for nonprofits ? but that?s a whole other article and I think I?ve gone on way too long with this one already.

Source: http://branded4good.com/blog/infrastructure/nonprofit-subpar-management-debate/

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