The Charity Trap

Social sector organizations should be expert fundraisers. They should have a deep knowledge of how to solve problems in their given area. They should be nimble and able to respond to crises and changes in the world. They should be lean, and able to pivot, iterate, and adapt. They should gather data, see what works, and scale their efforts seamlessly to a variety of locations and contexts. And they should do all of this without taking any support for the organization’s core operations and management.

Does anyone else see a problem with this formula? We are asking organizations to meet competing demands—many of which are at odds with how they are funded. We want nonprofits and NGOs to solve problems as effectively as private-sector organizations, and we want them to do it without any of the advantages and with far more constraints.

The nonprofit investigative news outlet ProPublica recently published an article that highlights a number of disturbing Red Cross failures in Haiti following the 2010 earthquake that killed at least 100,000 people. The article does a good job of showing inconsistencies between Red Cross claims and results on the ground as a result of mismanagement and incompetence. For example, the number of homes the organization actually built and the number of vaccinations it delivered are far lower than what it states in its reports.

Analyses like this are important—they let donors know that their money is going where charities claim it’s going. However the article also illuminates some of the unreasonable expectations that society has for social sector organizations.

The Red Cross, like many decades-old charities, grew up in a world that expected donations to travel quickly to areas of need without organizations skimming too much off the top. This expectation continues to prevent the social sector from creating problem-solving entities that can adapt to a changing world. We want the Red Cross to respond quickly to major disasters. We want it to create meaningful long-term impact. And we want it to do both of these things while using only 9 percent of its budget to support the fundamental operations of the organization. This doesn’t make any sense.

The ProPublica article also looks at the challenges that organizations like the Red Cross face trying to meet competing demands. Rebuilding parts of the world’s poorest country after one of the world’s most devastating earthquakes requires expertise in a large number of areas. The Red Cross needs to understand the technical aspects of rebuilding homes and roads and of the relevant supply chains; it also needs the ability to hire talent, navigate regulations, and understand local customs. These skills are not easy to learn and don’t come cheap. Building skills in-house takes a long time, and contracting out for them is expensive.

It seems to me that we need to make a choice. We should either expect an organization like the Red Cross to serve only a band-aid function, or we should allow it to build an organization that can grow and adapt to create longer-term change. We should either ask organizations like the Red Cross to simply deliver aid and move on, or we should stop criticizing them for the failures and costs of trying to do something more ambitious.

The Red Cross’s first and foremost role—and one that’s consistent across all its projects—is to be an expert, agile fundraiser. And it plays that role excellently. Beyond that, each crisis requires a different set of skills, and to expect any NGO to thrive when facing a new crisis in a new country seems unrealistic.

Both funders and society need to align their incentives and expectations with their goals for the social sector. If we want charities to pivot, iterate, and adapt, and to have meaningful long-term systemic impact, we need to remove the handcuffs. We need to support them in building the expertise they need to do what they do well in a variety of contexts. Yes, we need to hold organizations accountable when they have failed or squandered funds, but we need to stop simultaneously faulting these organizations for investing in themselves and for not being experts at everything. If funders want meaningful systemic change, they have to allow for flexible funding that adapts to changes in the world, and embrace innovation and failure. If society wants the Red Cross to transform the lives of millions of Haitians in a meaningful way, we have to drop this obsession with efficient overhead and help it build the kind of organization, relationships, expertise, and partnerships that make it possible. If we don’t reorient these contradictory demands, ProPublica will have plenty more stories of failure to report. 

Read more stories by Matthew Scharpnick.