The Myth of Nonprofit Inefficiency

(By Duane Silverstein) Rarely a month goes by when those of us working for environmental nongovernmental organizations (NGOs) do not hear the comment...

Rarely a month goes by when those of us working for environmental nongovernmental organizations (NGOs) do not hear the comment that nonprofit organizations are not as well run as businesses. Certainly we all know of several poorly run nonprofits. Yet it is equally clear that we all interact with poorly run businesses on a daily basis. Using my organization, Seacology, as an example, let’s see how we stack up to the supposedly more efficient business community.

1. Budget: Seacology’s annual budget is $650,000. For that amount of money we pay all salaries, rent, office supplies and everything else we need to operate. In 2002 the median compensation for CEOs running 100 of the nation’s biggest companies was $33.4 million, or almost 60 times the entire Seacology budget. Due to the difference in salary structures, for the same amount of money, businesses cannot provide the same degree of results as Seacology. Efficiency score: Seacology 1, business 0.

2. Responsiveness to the public: If a member of the public calls Seacology, a human being answers the phone. Try talking to a real live person next time you have a question for your phone company. If a caller wants to talk to the CEO of Seacology, I will speak with them. Try speaking with the CEO of your internet service provider. Every donor to Seacology promptly receives a thank you letter personally signed by me. Only a small minority of businesses can say the same. When is the last time you received a letter from the CEO of your supermarket for purchasing a quart of milk there? Efficiency score: Seacology 1, business 0.

3. Reliability: How often have you missed a half day of work because a repairman did not show up at the scheduled time? In the past five years I can’t think of a single example of a member of the Seacology staff not showing up for an appointment. Efficiency score: Seacology 1, business 0.

4. Board meetings: Most large corporations compensate their board members and pay all their expenses to attend corporate board meetings. Seacology does not compensate board members. All our board members pay their own way to attend board meetings. In fact, our board members give very generously to Seacology. Efficiency score: Seacology 1, business 0.

5. Bang for the buck on expenditures: Seacology has built many schools on developing islands for less than $20,000. On top of that, in exchange for building a school or community center, a marine or forest reserve is established. $20,000 would not begin to pay the transportation costs and fees for a corporate consultant to assess the feasibility of constructing a school in a foreign country. Efficiency score: Seacology 1, business 0.

TOTAL EFFICIENCY SCORE: Seacology 5, business 0.

Of course there are many very efficient businesses and many inefficient nonprofits. But why does the myth persist that all NGOs are not as well run as businesses even though this flies in the face of our daily experience? The reason is the accepted but incorrect wisdom that businesses ”˜earn’ their revenue and nonprofits do not. In my many years of running nonprofit organizations, I have yet to come across an individual or foundation that said, “I think your organization is doing a lousy job, but I have nothing else to do with my money, so I am going to give you a large grant.”

There is a vast free market of causes and charitable organizations that work hard to attract donations. We must prove our worthiness to each and every potential donor just as surely as a corporation needs to convince a consumer to buy its product or service. It is time to drive a stake in the heart of this myth of nonprofit inefficiency once and for all. Now please excuse me while I call my for-profit hospital to complain because they just lost my x-rays.


Duane Silverstein is the executive director of Seacology, a nonprofit nongovernmental organization whose sole focus is preserving the environments and cultures of islands throughout the globe.

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