What Nonprofit Leaders can Teach Business and Government Leaders
It is commonly noted that NGOs can learn a great deal from business. Better accountability, a greater focus on results, and improved stewardship of scarce resources are some of the benefits claimed from nonprofits beings students of business.
However, Grant Oliphant, writing for the February 26, 2009 issue of The Chronicle of Philanthropy has a contrasting perspective: What business and government leaders can learn from nonprofits. Grant Oliphant is the chief executive of the Pittsburgh Foundation.
After all, the economic collapse has revealed major cracks in two persistent myths -- the myth that nonprofits and foundations should be "more like business" and the myth that foundations are secretive, unethical, shady institutions requiring oversight from enlightened legislators and bureaucrats. As Oliphant notes, given the current crisis, which business should nonprofits emulate, Wall Streets collapsed financial houses or the near bankrupt Detroit automakers? And should foundations and be nonprofits be given oversight and gain guidance from the same watchdogs who cannot account for how banks used the $350 billion in bailouts the federal government provided them or missed Bernard Madoff's $50 million dollar scheme that ripped off thousands of people?
Grant Oliphant lists five lessons that the nonprofit sector could have taught both business leaders and government leaders.
Set conditions for the use of money given. Lesson one: "When giving money away, set conditions on how it will be used." Oliphant notes that the U. S. federal government gave billions of dollars to banks with the goal that they would use this money to start lending again, loosing up the credit markets. However, the federal government did not require banks to use this bailout money to start lending again! They just gave them the money, such that they could whatever they wished, including using it to puff up their balance sheets and award themselves huge bonuses. An NGO leader would have difficulty explaining an "error of this magnitude" to his or her board without being thrown out on their ear. Those in philanthropy know that behavior is changed by money only when conditions are tied to specific actions and results; otherwise, the money "is just a gift."
Accounting of money given. Lesson two: "Make sure that one of the conditions" for the use of money given "is a full accounting of where the money went." How can you give someone $350 billion and they do not have to tell you what they did with the money? Well, if you do not make such a report a condition of accepting the money then someone can indeed accept the money and not report on how it was used. Foundations generally make a report on the money's use a condition for any grant they give.
Good intentions. Lesson three: "Good intentions don't always produce good results." Opening homeownership up to everyone, even those without financial means, is a laudable goal, but this does mean it is a laudable program. Nonprofit leaders know this. The subprime fiasco in the housing market, which started the financial collapse in the United States, was because of such misguided actions by policy makers and financial leaders, who forgot this rule that nonprofit leaders know very well.
Giving more than people or organizations can handle. Lesson four: "Giving people or organizations more than they can handle is just setting both them and you up for failure." Oliphant notes that nonprofit groups and foundations know how unwise it is to give or lend money to people who are not able to use it wisely or pay it back, but they will only dig themselves a deeper hole. Foundations make sure an organization can handle an influx of resources before they give it.
Hiding mistakes. Lesson five: "Hiding your mistakes just leads to bigger mistakes." Foundations have embraced the idea that disclosing failures produces fewer of them. During the financial crisis, we saw financial institutions bundling their mistakes (high-risk mortgages), repackaging them, and selling them to unsuspecting buyers -- leading to the collapse.
Oliphant summarizes his paper with the reflection: "Perhaps, in the age of the big bailout, it is time for the teacher to become the student, for government and business to be 'more like philanthropy.'"