The Charity Trap
Why a recent exposé on Red Cross failures in Haiti highlights unrealistic expectations for social sector organizations.
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.
Matthew Scharpnick (@mattscharp) is chief strategy officer and cofounder of Elefint Designs (@elefint), a strategic design studio that works with good causes to create a better world.
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COMMENTS
BY Cathy J Sharp
ON June 8, 2015 05:15 PM
Bravo Matthew! Couldn’t agree more. Surely you are familiar with the “nonprofit starvation cycle” that was the subject of an article a few years ago in this publication and stresses how nonprofits are literally starved of operating funds because of the decades long unrealistic expectations? And there is Dan Palotta who is the standard bearer for adequate operating funds as well as paying nonprofit staff what they are truly worth, the same as in the for profit world. I’m very glad you’ve added your voice and this important perspective to this critical issue. (I recently read a comment in a different article about nonprofits that no executive director should earn more than $50k! I could barely see straight!). We are fighting a pervasive attitude throughout society that nonprofits should do all you say and those of us who work at them should be paid poverty wages. But it’s a fight worth fighting so we can continue to change lives, save our environment or accomplish many worthy missions.
BY Don Frazier
ON June 8, 2015 09:12 PM
“.....flexible funding that adapts to changes in the world, and embrace innovation and failure.”
Intriguing. You suggest that the Red Cross does not have this understanding.
What was the right way for all of that money to result in housing?
BY Akshaya
ON June 9, 2015 03:19 AM
Transperancy should be there. This will allow people to see what’s happening inside.
BY Kathleen Delph
ON June 9, 2015 06:42 AM
Well said, Matthew! With a 25 year career in the sector I cannot point to a more pressing issue than this.
BY Jill granquist
ON June 9, 2015 08:23 AM
NGO’s should be aware of their limitations and know when to pass the torch. There are many organizations that have been serving in Haiti for decades, and would have certainly be able to utilize the money in a more responsible way. Haiti Endowment Fund has been there for 30 years, not a single American taking a salary. It is possible, but the humbleness to admit something is beyond your ability is required.
BY Don Frazier
ON June 9, 2015 08:40 AM
I take it that the Red Cross finds it difficult to turn to the HEF and organizations like it for implementation of its plans. Why is that?
BY Ken Davenport
ON June 9, 2015 10:39 AM
Mathew—
I wrote something here last week that addresses the same theme (http://www.ssireview.org/blog/entry/working_in_the_dark) and couldn’t agree more with you. Unfortunately, the “overhead” and salary focus in the mainstream media continues—see the article on the Wounded Warrior Project in the Daily Beast as evidence: http://www.thedailybeast.com/articles/2015/06/08/vet-charity-s-new-fight-to-waste-your-cash.html. Apparently it’s a “waste of cash” to pay the CEO of a $250mm organization $450k a year.
We must continue to push on this issue to educate the public that solving problems requires innovation and top talent, and that great people won’t work for free, no matter what the cause is.
BY Matthew Scharpnick
ON June 10, 2015 09:51 AM
Thanks for all the great thoughts everyone. I think you all echo many of the points I tried to make here and address some of the key issues.
Here are some questions that have emerged in this debate that are interesting to me:
Should the Red Cross seek to provide longer-term relief rather than just giving immediate aid?
If so, how much failure is reasonable to tolerate as they learn new skills and adapt them to new situations?
If not, what should the organization do when it sees a larger need than its core competency? Is it ok to pass funds off to other organizations - such as HEF in this example? Will donors be ok essentially funding a different organization if donations are simply handed off? Should we fault the Red Cross for spending on management fees when subcontracting?
While the Red Cross story is interesting, the larger issues this situation surfaces are far more interesting for their relevance to the social sector in general.
In the discussions I have had following the publication of this article, it’s clear that there are a range of opinions on the above questions. It seems that as advocates for social sector success, we need clarity on the results we want, and consistency in advocating approaches that will lead to those results.
To solve problems organizations will have to invest in themselves. For those organizations that are great fundraisers but which are not equipped to meeting the challenges of a specific situation, we will need to be ok with the organization either investing, transferring funds, or subcontracting - and we cannot fault it for the perceived inefficiencies of these activities.
I am optimistic that more communication, collaboration, and systems thinking can allow organizations with different competencies to address the challenges posed in the ProPublica article.
BY Bill
ON June 11, 2015 05:13 AM
Akshaya is correct. Transparency would help. Unfortunately, with every blow up, the Red Cross reacts by retreating. This began anew with 9/11 when, in my opinion, it received unjustified, ill-informed criticism of its work. Also, as a behemoth, it doesn’t always play well with others.
I know from experience that it is trying. To your points, another way to think about it is this: Why would we expect an organization that relies upon volunteers to respond like a disaster services SWAT team? Why would we expect an organization that has to raise money for disasters after the fact to be well-prepared? Why do we require the Red Cross to spend money raised during a disaster only on that disaster regardless of need? What is the proper mission of the Red Cross? Is there even such a thing as a well-planned, organized response to major disaster that isn’t conducted by the military? etc. etc.
BY Peter Barker
ON June 17, 2015 10:20 PM
The Red Cross tries to be a generalist organisation. It may achieve more if it passed the money to specialist groups, especially if that group is already active in the disaster area.
This is why I think specialist organisations like Médecins Sans Frontières probably do a better job, as they only provide medical treatment.