“Nonprofits Are Run Worse Than Corporations…” (and Other Harmful Myths)

by Joan Garry

You’ve probably heard at least one of these myths about nonprofits before…keep reading as I debunk some of the most common misconceptions about the nonprofit sector.

There seems to be an endless list of myths about nonprofit businesses and the nonprofit sector – and a few of them really make my blood boil.

Yes yes, it’s true. I am a fiercely loyal advocate for nonprofit leaders but I am not close to naive about their challenges.

But here’s a myth that really drives me nuts:

Nonprofit businesses are not as well run as for profit companies.

Are you kidding me right now?

Corporate America is the holy grail? Holy smokes. It’s a pretty cold day in hell when we can say THAT with a straight face.

Just talk to organizational expert Jim Collins – you know, the “Good to Great” author — he will say that while some business concepts apply, many don’t actually apply to the nonprofit sector. It’s an entirely different ballgame when profit is not the motive and when meaning and purpose are.

I came from corporate America into the nonprofit sector and learned as many gems about leadership and management from the nonprofit model as I brought with me from my corporate executive gig.

It is time to STOP with the nonprofit vs for profit comparisons.

Time to stop belittling the nonprofit leaders as well-meaning folks (“God love em” is what my mother would say) and see the sector for what it is — a vital cornerstone of every town and state…of every civil society. In fact, it is these organizations that make our society civil.

Here are five additional myths. Let’s tease them out. What you will find interesting is the extent to which nonprofit leaders themselves perpetuate some of these.

Let’s make it our business not just to debunk them but to escort them to the door.

MYTH #1: Nonprofit leaders are ill-equipped to do their jobs.

The nonprofit sector ballooned during the Vietnam war era. Young people who were not willing to sit idly by joined causes or started organizations. Thanks to these leaders, our nonprofit sector is robust and impactful. Did these folks have degrees in nonprofit management? Uh no.

But they had their passion, grit, and determination and learned about leadership and management on their own or with the support of volunteers and board members. They made remarkable things happen and made an incredible impact.

Many of these individuals are now in their sixties and beginning to retire. And the bias our society has toward professional (read: corporate) experience is leading many organizations to look in the private sector because that is where you will find the ‘real’ leaders.

Lots of veteran E.D.s joke (but not really) that their boards would never hire them for the jobs they are currently doing so very well.

Oh, there is another HUGE problem with this myth – it presumes that a new CEO has to come fully-equipped. And we all know that nonprofit CEO gigs require you to be good at many, disparate things. And professional development including coaching is not a luxury but a necessity.

Let’s bust this myth and get terrific people in leadership positions with diverse backgrounds and then let’s give them the support they need to be successful. We all know how much is counting on that.

MYTH #2: Nonprofit board members should be wealthy.

True story #1: The head of a board nomination committee asked me once if I could help him find a billionaire.

True Story #2: A friend of mine in town was asking me about how to get more involved in nonprofit work. This woman would bring so much passion and empathy and also had a particular skill set that would be a gift to many nonprofits. And I told her so.

“Oh no,” she replied. “I’m not wealthy. Nonprofit businesses want wealthy board members.”

Boards drive myth (1) but this one sits squarely on the shoulders of the board and staff.

“I need board members who can fundraise.” OK, so who doesn’t want a billion dollars for their organizations? But leave these ideas for your invisible thought balloons.

Why? Because when this myth escapes from your lips, you amplify the message that the sole criteria for board service is wealth and the sole metric of a board member’s worth is whether or not they have closed a gift or written a big check.

And that means that far too many people who would make terrific board members believe they are not qualified. And when that happens, everyone misses out.

It’s not about the money. Here’s how to select first rate board members.

MYTH #3: Meaningful work should be exhausting.

Here’s a myth out there that nonprofit leaders perpetuate. It starts with board members who have not had nonprofit experience and do not have the lived experience of the emotional toll that the work takes. AND nonprofit staff do not take self-care seriously and so they ARE exhausted and that’s what boards see, thus affirming the myth.

Note the wording of this myth. Meaningful work ‘should’ be exhausting. Here’s the truth. Nonprofit work is exhausting. Oh, what a difference a single word can make.

Here’s how you bust this myth. Staff leaders need to start taking self-care more seriously and model it for their teams. Model that exhaustion is not a “should” thing that comes along with the territory of nonprofit work.

And board members need to take staff burnout seriously. It’s time for board members to look in the mirror. Are you part of the solution (really supporting the staff and encouraging self care) or part of the problem (overburdening staff with new ideas, ceding responsibility for board committee meetings to staff, requesting analyses or reports that may not be mission-critical, or just being MIA)?

MYTH #4: Nonprofits cannot make a profit.

Yup, I hear this one too. Legally there is truth to this but this myth keeps nonprofit businesses from taking one of their most important steps to ensure stability and sustainability: building a cash reserve.

So let’s not call it ‘profit’ because it isn’t. Let’s call it surplus and let’s make sure that a good portion (if not all) of the surplus goes into a restricted reserve.

Better yet. BUDGET for a reserve investment every month like the old-fashioned Christmas club account. That’s what we did at GLAAD. The monthly amount went to the reserve as if it was one of our ongoing expenses. Slowly but surely we found our way to a $2mm reserve, sized just right to cover 4-6 months of operating expenses.

Can I give you a better reason to bust that myth? Don’t think so.

Click here for a free, easy-to-use, nonprofit budget template.

MYTH #5: Low overhead is a nonprofit success metric.

Shame on the hundreds of funders who ask us to turn nonprofit leaders into pretzels to prove that they don’t spend very much money on the foundational components of any organization.

This is the worst one of all. Because it strangles our sector.

OK, let’s have our senior program officer spend time doing something that just about any staff member could do. To save on overhead, sure. And also to limit the time that program officer can do what they were hired to do.

And yes, let’s be sure that nonprofit businesses live in the 1970s in terms of technology because funders don’t see technology as central to growing the reach and impact of the organization.

Should I go on? Nah, too painful.

Myth-busting here demands that board and staff leaders work even harder to shift the narrative, pushing back against the status quo. It also demands that we shine big ol’ spotlights on those funders who have evolved to a focus on general operating support.

Let’s be sure the whole sector hears the stories of the impact made possible by trusting the leaders to invest wisely and to hold them accountable to do just that.

THE IMPACT OF THESE MYTHS

What is deeply problematic about these myths? The implications.

Leaders feel diminished and unsupported… burnout high… excellent human resources stay on the sidelines…. Nonprofit businesses are pushed in a host of ways to operate from a place of scarcity.

We can and should do better. We need great and diverse talent, we need to take care of that talent, we need to give them the support to do their jobs, and we need to build stable organizations that can raise the gaze away from cash flow and down the road.

Let’s hold ourselves and each other accountable to bust these myths. They diminish a sector that needs to lead the way.

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