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Management of Nonprofit Organizations

  • Dec 2019

By definition, the nonprofit sector operates in the humanitarian goals and objectives space. This means that many nonprofits are loosely structured and are often volunteer driven without formal hierarchies and patterns of management. However, this does not mean that nonprofits need not have formal boards, management structures, and financial control. The point here is that though nonprofits are made up of committed individuals working for a cause, there is still a need for a corporate type structure and management. This is especially the case with those nonprofits that receive large amounts of money and handle multiple projects across the breadth of the country. Further, the fact that the government monitors the performance of the nonprofits means that there needs to be accountability and financial due diligence done periodically. Hence, there is a need for proper management and structure of the nonprofits and means of control and process driven internal environment as well.

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Non-Profits and Impact Based Measurement

  • Dec 2019

The non-profits sector is a sector, which unlike the private and the public sector cannot access the debt and equity markets for funds. Hence, it has to rely solely on donors and the government for funding. This means that it is heavily dependent on these channels for funds. Ever since the economic crisis of 2008, more and more non-profits are facing a squeeze in terms of funding and stricter accountability. The private donors and the governments are insisting on the non-profits making their impact visible and measurable. In other words, the non-profits are being asked to report on their progress in terms of measurable and verifiable metrics. This has accelerated the need for non-profits to show results that can be quantified so that the donors are satisfied that their monies are well spent.

Thus, the impact of the non-profits work in terms of how many objectives actualized and the difference that it has made to the lives of the intended recipients is measured in figures like the Social Return on Investment or the SROI which would help the donors make dollar-to-dollar comparisons of the impact that different non-profits are having in the chosen field of operations.

For instance, a non-profit that is working in the education sector needs to report how many schoolchildren have graduated year on year and the rate of growth in terms of the number of kids who completed a certain stage in their schooling. This metric is then compared with the amount of dollars that have been spent on the program. With this measure, it is easy for the donors to compare the progress made by different non-profits in terms of the impact that the monies are having on the social sector.

While this might sound as though the non-profit sector, which by definition does not quantify its gains, is being forced to take the corporate route, it is nonetheless the case that non-profits have long reported on the progress made by them to the donors. The added aspect here is that the non-profits the SROI quantifies and compares the impact that different non-profits are having in terms of their social spend and the return that the donors are getting for their dollars. Hence, in these recessionary times when each dollar has to be accounted for, the non-profits better adopt this metric as a means of reporting their progress better to the donors.

The bottom line for the SROI usage is that in case of the non-profits sector, efficiency matters, but effectiveness matters even more. Hence, the SROI measure is one reliable and valid measure to tackle the problem of the donors not getting information regarding how much impact their dollars are having within and between non-profits. Of course, the fact is the scale of the operations does make a difference cannot be ruled out. This is something we would be exploring in subsequent articles in detail. It would suffice here to state that the best indicator of the non-profits viability and effectiveness is through the adoption of measures like the SROI, which provide a detailed and reliable measure of the impact that the non-profits are having in their chosen field of work.

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Non-Profits: The Role of Prizes in Increasing Effectiveness of Delivery

  • Dec 2019

The non-profit sector is a sector that has traditionally eschewed monetary gains since the very definition of the term implies a not for profit motive. However, in recent years, there has been an added emphasis on including token and substantial pecuniary gains for the participants in the non-profits who are attracted by the lure of honor, recognition, and monetary gains. In this respect, donors the world over are realizing that motivating the non-profits who are participants in the sector would be better if prizes are announced.

The point here is that though subsistence salaries and altruistic motives might motivate the main actors in the non-profits, there is a significant section of volunteers and participants who are attracted by the monetary component of the rewards. This has spurred foundations like the Ansari X Prize that offers a reward of $10 Million for anyone who can build spacecrafts to enter and return from space.

Studies have shown that prizes are motivators for non-profits and the participants since monetary gains are always welcome for the cash strapped non-profits. One has to consider the fact that non-profits are peopled with participants who have to bear expenses and costs that are both personal and professional. Hence, motivating them with the attraction of a monetary reward has its own advantages. The other aspect of using monetary prizes is that it is easy to measure the impact of the change that is actualized once the donors throw open the field to the invited participants. Since there is a monetary component, donors can insist on measurable and time bound targets that can be matched with the goals set. In this manner, non-profits can be expected to better the previous targets with each year as progress can be tracked.

However, the fact remains that large cash rewards are by themselves not a guarantee of success as there might be participants who are solely attracted by the prospect of making money. A possible solution to this dilemma can be found in the way the Ashoka foundation encourages collaborative efforts instead of competitive endeavors. The point here is that the donors and the foundations can ensure that the spirit behind the prize or the award is realized by fine-tuning the terms and conditions for such rewards.

Finally, the incentive of monetary gains works to increase participation by the members of the society at large and broadens the scope of the work involved. Donors can track the progress better, participants can be motivated better, and measurable results tracked better if the attraction of monetary gains is factored into the picture. Added to this is the fact that the purse might be kept low initially and after vetting the participants in a few rounds of elimination, the donors can then identity the prospective qualifiers better. Of course, as the saying goes, money cannot buy everything, but can make the wheels grind faster. This is the basic premise behind announcing rewards and monetary prizes by the donors to the non-profit sector.