3 Ways Little Cuts Hurt Charities Most

My last post talked about charities closing their doors not due to a lack of need for their services or offering poor services, but simply due to a lack of funds.  It's also true that seemingly small changes, minor increases in costs, can have a disproportionate impact on charities.  Here are three key ways that "little cuts" can be painful in ways that are different from for profit organizations.

1. Increases in costs, say for example a new fee for garbage pick up, are hard for both charities and for- profit firms to absorb. However, while firms can "pass on" these increased costs to clients, charities have no such option. So for example when the City of Toronto imposes a new garbage collection fee on over 1,000 charities, there's no customer to pay more to offset this cost increase, just a decrease in services to those who can least afford it.
2. Charities have proportionately smaller voice for their size than their for-profit peers (#9 on my Top 10 list of differences). From Boards of Trade to business leaders that have worked within government (and vice-versa), businesses are simply better connected to government. Also, businesses are seen as providing jobs / tax revenue to all levels of government as opposed to perceived as begging from / costing money from all levels of government.  Not the case you say?  Well, in the example of the garbage fee the charities were denied the ability to protest: my bet is that business leaders wouldn't have been treated this way.
3. Another way cuts and increased costs hurt charities most is more philosophical in nature.  By definition charities help those most in need.  So when their revenue is reduced those who suffer from the reduction in services are those who are most at risk. And where charities are providing preventative and proactive supports, keeping people from "costing the system" even more down the road, these extra costs (touted at cost savings) can actually cost the rest of us a lot more in the future.

No doubt that new costs to any organization can be difficult to manage, but the charity and non-profit world is often hurt the most when this happens.

New Year's Top 10 List - Differences in the Charitable World

I got off the phone this morning with a woman who is thinking about making the move from the for profit world into the charitable world. At the root of most of our conversation was the question "just how do the two differ?" So in the spirit of New Year "Top 10" lists, here’s my Top 10 List of for-profit versus charitable differences. Note that I’m not going for the obviously different aspects, but what might surprise you on the "other side"….

1. Passion – in the charitable world it’s about wanting to make a difference. People, inspired by their experiences or insight into a need, set out to change the world. Not make a profit: change the world.
2. Mission – most corporate employees don’t know their corporate Mission statement. Most charitable employees live their Mission statement every day. This affects every aspect of the charity.
3. Volunteers – are a key defining difference. Most charities simply could not exist without what volunteers bring: their skills, their passion, their heart and they’re free. This all has its own set of intrinsic pros and cons, but whatever the case I don’t remember many volunteers helping out the corporations where I worked
4. Boards – sure big corporations often have Boards, but unlike the vast majority of businesses charities of all sizes have Boards
5. Complexity – given that charities have Boards and volunteers, and structures or staff that parallel virtually all for-profit activities, charities of roughly the same operating budgets (size) as a for-profit business are more complex
6. Structure – at the same time, in comparing most organizations of a similar size, my experience is that charities are relatively unstructured for their size (e.g. fewer policies and manuals, less robust Human Resources practices, etc.)
7. Lean – if you think your for-profit experience was with a lean organization, I’m pretty sure there are still charities that can show you a trick or two. All funds (for better and for worse) are often pushed to the furtherance of the Mission
8. Intangible – a bit of an "obvious" difference but with important implications, unlike many for-profit organizations what is "sold" in a charity is a feeling or outcome, not a "thing". For example, this difference results in different skills for fundraisers versus salespeople
9. Voice – manufacturing has a sector voice, but in Canada non-profit is even bigger but with less "clout" (and same as the automotive sector) – Imagine Canada does great work as one voice (and in U.S. not even a single voice at all), but as evidence of this difference no Federal bail-out money was coming to struggling charities in this economic downturn
10. Understanding – most Canadians have a fairly good sense of the ingredients in the food they buy, or the "value" of property they live in, but most don’t understand the causes they support as well. If buying something and making a gift are both transactions of a kind, the difference here is that purchases are often made first through the head, while donations are often made first through the heart.

Not better or worse, but very different indeed!