Every now and again we get a news story about a big nonprofit organization that is abusing its money or power. There was the three-part series in the Washington Post on The Nature Conservancy back in 2003. There was the report last year by ProPublica and NPR on how the American Red Cross misspent funds allocated for relief efforts after the earthquake in Haiti. And last week, the New York Times did a story on the Wounded Warrior Project (WWP).
The article highlighted the organization’s lavish spending on travel, retreats, and compensation. It examined the organization’s drive to model for-profit businesses, with a focus on generating profits to scale its work. And it discussed the organization’s drive to produce results – and how that drive produced an intense and aggressive culture.
The article is constructed in way that makes a compelling case. The reporter got unflattering stories from former employees, and further evidence of questionable behavior from current employees. He was unable to get a quote from the founder, who supposedly left the organization when another executive took the organization in a different direction. It was noted that Charity Watch has given the organization a “D” rating for the last four years, and of course, the infamous Charity Navigator was cited in reference to the organization’s inflated overhead percentage.
Honestly, I don’t know a lot about the organization. I’ve never been much involved or informed about veterans affairs (other than the incredible need for support for our troops coming home from overseas). I’ve heard of the Wounded Warrior Project. I know that it has had amazing growth since its inception. I know it’s got amazing brand recognition. I know it’s an interesting case study of how to scale an organization. And I know that there’s a lot we all can learn from the organization’s presence in the news of late.
Here are six basic lessons that other organizations should learn from all this:
1. Life isn’t fair.
We all know the disparities between charitable organizations and for-profit businesses. Through both investment and management practices, non-profits are put at a severe disadvantage for growing their work and solving programs at scale. And these practices are driven by misguided expectations, whether we like them or not (and we don’t by the way). If a for-profit spent money the way WWP did (and they do – and worse – all the time), it wouldn’t matter, as long as investors made money. A charitable organization that spends money on paid advertising and administration and salaries and defending its overhead expenses, even with the aim of growing its work? Wasteful and unforgivable.
Granted, I still believe in cost-effectiveness and not wasting money – especially when you are entrusted with another’s money to produce results – and it seems like WWP crossed the line of efficiency. But still, these guys followed all the advice non-profits get about being more like a business – metric-driven, results-oriented, more tightly managed – and they got torn down because of it. (Okay, so they got torn down for not doing it well, and for fostering a wasteful, aggressive, demanding culture, but you get my point…)
Damned if you do, damned if you don’t. The system is rigged against you, and until the rules can be changed (see below), you need to play along.
2. Reputation matters.
The way charitable organizations work – responding to societal needs and serving underprivileged communities – makes them dependent on donations from others to cover the cost of doing business. As such, you need people to want to give to you. If they don’t like you, they won’t want to give to you. And so you need to make sure people like you.
If you treat people poorly, they won’t respond well. This goes for internal relationships – employees, Board members, staff, volunteers – as well as external ones – donors, funders, partners, vendors. Especially in a sector that was established to do good, organizations should foster compassionate relationships within themselves and with others outside.
Because let’s be honest: people talk. Current employees talk, former employees definitely talk. Funders talk with each other about grantees, and they talk to other organizations. These people could either be allies who spread your message and garner you more support, or they could be dissenters who spread doubt about your work, your intentions, and your worthiness of their support. It all depends on your own choices about how to treat others. But at the end of the day, your reputation will determine whether people like you or not, and thus whether they support you or not.
Besides, you never know when journalists might come along digging for information. What what will they find when they do?
3. Beware the Pursuit of Success.
In order to succeed at achieving your mission, you have to grow to respond to the problem at scale. This means generating more revenue, hiring more staff, and doing more work. It’s a lot of effort, but the benefits of success for a nonprofit organization are huge: more impact, less problem, and a better world.
The problem with growth is that organizations can sometimes falter in their pursuit of it. This often happens because of how organizations (and the people who run them) think growth happens. Too many organizations think the answer to their problem is more money, or changing their work, or changing their brand, and in doing so, they move away from the mission and values that define them. They end up fixating on the ends without regard for the means.
The WWP was committed to growing, and to do so they adopted a focus on metrics and revenue. But the New York Times piece paints this focus as creating mission-drift, misguided goals (see below), and a hostile work environment.
Moreover, if you’re really doing all that growth, it means that you’re connecting with more and more people – donors, funders, staff, volunteers, beneficiaries, etc. This bigger base of support is a huge asset, but it also means more visibility. And while more visibility can be an asset, it can also be a liability: more talk, more eyes watching, more scrutiny. This is why the bigger organizations are easier to target for scandals – your Nature Conservancies, your Sierra Clubs, your American Red Crosses, and your WWPs. (Remember: reputations matters.)
They say to be careful what you wish for, but you should be more careful about how you pursue it…
4. We need solid measures of impact.
This isn’t news. (None of what I’ve written so far is, really.) Still, if a large, “metrics-driven” organization like WWP can be accused of making up or faking its numbers, then what about a smaller organization with less resources dedicated to monitoring and evaluation?
Organizations need to use reliable and verifiable data to measure their progress. They should track outcomes (not just outputs) and they should track process indicators as much as performance indicators. And in doing so, they should get a better sense of their cost-effectiveness so we can move away from simple (and useless) measures of efficiency like overhead percentages.
Monitoring and evaluation is a huge challenge for nonprofits who are pushed to spend all of their money and resources on doing the work, and aren’t provided the resources needed to measure its effectiveness. The irony is that those who provide the money want to know that their money is being spent well, but they won’t pay to have someone figure that out.
Which leads me to my next point.
5. We need help to dispel the myths around overhead.
I’m not gonna rehash the overhead problem here (because you read more about it here) and of course I’m not surprised that it was discussed in the WWP piece.
What did surprise me, however, is how the WWP took heat for actually doing something to try and dispel the overhead myth.
Here was an organization that had the resources to do something on behalf of the whole sector – something that is desperately needed and would greatly enhance the success of all nonprofits everywhere trying to do good for the world – and their actions to spread awareness and solve the problem were painted as selfish and unethical. They were portrayed like a big bank lobbying for less regulations so it could make more profits and threaten the entire economic system for its own gains. Except if nonprofits didn’t have such tight restrictions on overhead percentages then the world would actually get better, not worse.
Would WWP benefit from less restrictions on overhead? Maybe. They seemed to be doing just fine financially and getting away with a higher-than-normally-allowed overhead rate under the current conditions. Would the entire nonprofit sector benefit from someone going to bat on their behalf to remove those restrictions? Absolutely.
Unfortunately, it seems that if an organization tries to remove the overhead limits, it may be perceived as self-interest. So if not us, then who? I guess the lesson here is that nonprofits need other allies to help fight this battle on their behalf. We need some funders to step up, we need some donors to spread the word, we need some affinity groups and alliances to speak out, and we need key leaders across the sector to make a concerted effort to build support for the cause. The battle is daunting, but it must be won, and there must be a strategic, coordinated movement to win it.
I’ll be completely honest: reading news like the WWP piece makes me incredibly frustrated, disappointed, and even pessimistic (which is not my nature). It’s a challenge for me to find the silver lining here, but I think the best we can do is learn from what happened so we do things better in the future. If anyone else out there has thoughts on how we can learn from this and improve the sector, share your thoughts below.
Here’s to a brighter future.