The Nonprofit Sector is a Bad Christmas Present
Guest Post by Andrew Means, the founder of Data Analysts for Social Good and the lead quantitative analyst for the YMCA of Metro Chicago.
We’ve all been there. It’s Christmas morning and we’re passed the present from grandma. Out of the corner of our eye we see her beaming, so proud of her purchase. As you unwrap the paper you become more horrified with each tear. Inside is something you would never have gotten yourself, not in a million years. She spent her money, who knows how much, on something that is of absolutely no value to you.
Economists call what just happened Dead Weight Loss. I call it The Nonprofit Sector.
The basic problem that we have with Grandma is the same basic problem the nonprofit sector faces; the person paying for the gift or services is not the one receiving them. This distorts the market. The reason capitalism is successful at allocating resources is because of market efficiency, which is driven by the fact that the person receiving the services pays for them. I can decide whether the $13 cocktail I bought yesterday was worth it or not because I both paid for and consumed it. If I only purchased it or consumed it then the efficiency of the market would fade. Exactly what is happening in the nonprofit sector.
But there’s a solution.
What the nonprofit sector really needs is a feedback mechanism that gives those funding nonprofits a better sense of the quality of the organizations and work they are funding. In essence they need a better way to determine whether the $13 cocktail was worth it and avoid buying presents no one wants.
The use of overhead ratios and surveys of those receiving services are generally pretty awful for judging the quality of an organization’s work. What we need our efficient ways to measure, track, and identify the marginal impact of nonprofit programs and organizations.
The bad news is this won’t be easy. The good news is it’s not impossible.
This summer my organization, Data Analysts for Social Good, will be hosting a conference in Chicago on this very topic. Do Good Data 2013 will bring together leading thinkers and practitioners from the social and nonprofit sector to talk about how data is changing our sector and our work. From keynotes discussing the big ideas to breakouts focusing on very practical applications of data analysis and tools, the conference is tailor made for nonprofit professionals.
I hope you can join us in moving the nonprofit sector forward!