Charities: The Model of Efficiency?

As governments at all levels decrease support of the charities and non-profits I see both risk and some potential for positive impact on these sectors. However, for the record I believe that strategically guided government funding provides unique efficiencies that no other amount of individual or corporate giving can match.  By its very nature the gifts of individuals and corporations are guided by their unique scope, which is unlikely to be as encompassing as that of government.  For the same reason that schools and roads are deemed public goods and thus funded through taxes, I argue that some degree of government / tax funded support is required to support the public good delivered by way of charities and non-profits. The real debate is how much of these good works should be funded by - if you will - forced donations through the use of taxes.

This debate is informed at least in part by the argument that for-profit businesses are more efficient than charities and non-profits. Certainly that was the case made recently page 9 of the Globe and Mail’s Report on Small Business by Catherine Swift of the CFIB. Her suggestions that reduced government support to charities will result in greater small and medium size business donations is plausible and may actually prove true.  While this doesn't mitigate my concern over sufficient funding for the best organizations guided by a broad strategic view, she also highlights the “more efficient” private sector.

And on that front I argue that the most efficient model is often already found in the charitable and non-profit world.  I’m not suggesting that learnings can’t be found in the for profit world, but here’s why many charities already win on the efficiency front:

1. Charities and non-profits leverage volunteers – this keeps costs down and multiplies the effectiveness of the organization
2. Charities and non-profits generally pay less for talent and staff than their for profit peers, and have a reputation for passion and commitment from these same staffers
3. Charities and non-profits by their very definition don’t seek profit – this eliminates a “middleman” who desires maximum profit as opposed to maximum impact, which increases efficiency

So while I would welcome increased support by small and medium sized business with or without decreased government support, I also hope we won’t confuse this with a sign that these same generous donors are by their nature more efficient than the recipients. The learnings around efficiency can actually flow both ways.

5 Benefits to Government Cutbacks

Government cutbacks to charities and non-profits will likely do a lot of harm and undermine many aspects of what makes Canada such a special place.  However, in a contrarian way I can argue there will be some benefits.

1. While it won't happen overnight, eventually the pendulum will swing the other way.  As valued charitable services and societal supports erode and disappear, the problems they currently address will get worse. Ultimately there will be a clamour to support (either through donations or "forced donations" via government financing) the highly cost-efficient solutions that charities bring to problems.  And when this happens we'll be less likely to forget their value again so soon.
2. There are too many charities. The bad news is that due to cutbacks some fabulous and innovative new organizations won't survive (or ever see the light of day), but without the fertilizer of government funding at least some portion of the over-abundance of charities will diminish.  Think of it as a very haphazard and unwieldy pruning if  you will.
3. Lean times will force innovation. Fact is, charities by their nature are driven by passion, and that same passion to help others and make the world a better place won't be stopped for long by fewer dollars.  Volunteers, Board members, staff and supporters will (like they always do) step in to help pick up the slack. In so doing they'll all learn new skills, and the organizations still standing will be that much more resilient.
4. Cutbacks will actually allow for greater freedom of opinion and unfettered voices for change. We all know the expression "don't bite the hand that feeds you", and very few organizations that receive government funding are eager to risk offending this funder.  Some do and have clearly been targeted for cutbacks (e.g. women's advocacy groups). However, for organizations that can survive they will less constrained in their ability to speak.  Greenpeace certainly is a good example of this freedom provided by how they're funded.
5. Diversified revenue streams will have a positive effect in the long-term.  Once a donor (or company) is engaged in giving, in my experience they generally enjoy the experience and continue to be philanthropic.  So if the cutbacks encourage entirely new donors to ultimately step in, then we'll see new faces at the funding table once government does come back.

Painful? Yes, and likely hurting a lot of people who most need the help in the first place.  But not without some benefits.