NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, March 10, 2015

Efficiency. We can get obsessed by efficiency. In our businesses, jobs and personal lives we often ask, ’How can we do more with less?’. We have the 4 Hour Work Week, 4 Hour Body and numerous ’life hacks.’ But often lost in the mix in the discussion around efficiency is the focus on quality. What type of life does this give us? What type of business does this give us?

And nowhere is the hyper focus on efficiency as pervasive as it is within the charitable sector. We’ve created rating systems focused solely on what percentage of dollars are spent where with little to no thought on what those dollars are doing. We celebrate organizations (and, unfortunately, organizations celebrate themselves…) who spend less and less on things like staff, marketing and fundraising without knowing if they are even doing good work. And we have an industry that, by and large, would rather spend $10,000 to raise $100,000 than $500,000 to raise $1,000,000. For those keeping track at home, this means we’re saying that we’d rather have $90,000 for ’the cause’ instead of $500,000.

I realize not every organization has $500,000 just lying around to invest in growing their revenue base but you’re missing the point. We’ve built a charitable system that isn’t encouraging organizations to think like that. We are asking charities to change the world without investment and long-term thinking, creating a starvation cycle and donors are, often inadvertently, reinforcing short-term efficiency based thinking.

And where has a hyper focus on efficiency gotten us? We are no more charitable today than we were 40 years ago in terms of giving as a percentage of GDP. The gap between the ’haves’ and ’have nots’ continues to grow to near pre-Great Depression levels. And other issues like homelessness, education, the environment and poverty are hardly solved with even progress up for debate – both domestically and abroad.

The oft quoted Albert Einstein talking about insanity said it is doing the same thing over and over but expecting a different result. If we keep forcing and focusing our charitable dollars to be hyper efficient then we shouldn’t expect any great leap in results in the next 40 years.

So if we don’t want charities to be efficient, what do we want them to be? The obvious answer is ’impactful’ but how we can get there might revolve around responsiveness.