Rethinking "efficiency" in social impact work

What the nonprofit sector knows that business doesn't

I have Steve Alley to thank for this post and insight. I worked for Steve years ago, when he was CEO of the Community Foundation for Southern Arizona. Together, we launched a newspaper column on leadership in the nonprofit and philanthropic sectors—Steve was the thought leader; I helped him craft and articulate his ideas.

Our best column, the one I’ve never forgotten after all of these years, was on the distinction between “effective” and “efficient” in nonprofits. At the time, we were frequently hearing, from philanthropists and others, that there were too many nonprofits in Tucson—they needed to merge, or at least collaborate, because this would create efficiencies. We argued that efficiency is like a well-oiled machine—but effectiveness means making sure the machine is doing what actually matters.

On the whole, we are no less confused about this today.

The value of efficiency overshadows that of effectiveness in our culture. We like being efficient. It’s speed, convenience, and output. We read executive summaries, not the entire report. We automate our bills and subscriptions rather than tending to our banking. We give kids tablets to keep them entertained while we power through our to-do lists. All of these efficiencies are easy to understand and justify, even when they cost us.

Effectiveness, on the other hand, is messier, especially when it involves intangibles like impact or the transformation of human beings. Effective approaches are less fast, less convenient, and not always linear. It’s stuff like slowing down to process our emotions, maybe working with a therapist or a coach, instead of powering through. It’s committing the time and resources to repair a workplace culture rather than limping along. It’s going out of the way to support local businesses over shopping in big-box stores or online.

Sometimes efficient solutions are going to out-stage effective ones, though it’s easy to see, in these examples at least, the trade-offs. But, as the problems and solutions scale, I think we start to lose the thread.

Here’s the metaphor Steve and I used years ago to illustrate our point. Consider your neighborhood. Your favorite coffee shop is probably nearby—and likely so is your gym, grocery store, pharmacy, and shopping centers. Perhaps you have fabulous Mexican and Thai restaurants, too. (Lucky you!) This same arrangement is replicated for most everyone you know, because each neighborhood has similar amenities. This isn’t considered inefficient, because these are conveniences.

Then imagine that you do not make enough money to feed your family each month. Thankfully, you get assistance from a nearby community food bank. One day, the food bank announces its merger with others; the vision is to cut administration costs, dedupe efforts like fundraising and data management, and shore up less stable operations. But now, to prepare the meals your family is used to—the ones that are traditional to your culture—you have to ride the city bus an hour each way to the food bank’s central location, the only place that stocks ingredients specific to your cuisine. The food banks may have reduced their inefficiencies, but you, as a client, are saddled with more inconveniences.

Most of us aren’t striving to be punitive when we suggest our social and government sectors become more efficient; most of us, I believe, are working from the myth that there is a problem of efficiency, and the corporate sector knows how to solve for that, so we should trust and heed its executive advice. In reality, it’s more complicated than that.

We demand efficiency from nonprofits in ways that we give corporations a pass. For starters, there’s an enduring, deep-seated belief that nonprofit administrative costs are inherently bad. Because nonprofits often deal with suffering, human and otherwise, we think about their work emotionally. Consequently, we’re watchful that our donations directly support victims and programs, instead of paying for salaries or infrastructure. This feels right to us.

But corporations aren’t held to the same expectations. When corporations spend liberally on research and development, communications, salaries, technology, etc., we consider these to be strategic investments. It’s logical for them to spend money this way.

We also moralize nonprofit spending. As stewards of public trust, we believe every dollar a nonprofit spends must be stretched, scrutinized, and justified. Inversely, we rationalize corporate spending. Corporations are expected to grow and generate returns, or the promise of returns, and as long as this happens, no one is requiring them to spend wisely or equitably. How we think about these sectors differently is, in part, the result of how we measure their success: nonprofits report their impact on the dollar, whereas corporations report on growth, valuation, or revenue, irrespective of efficiency. In other words, markets don’t punish inefficiencies, they just measure other things—including power, narrative power, and disruption.

This is just scratching the surface of a complex topic, but I hope the distinction is coming through. Nonprofits have been asked to prove their impact constantly, and the expectation has always been on efficiency. Requiring more of it won’t make them more effective. That’s like telling contractors to build a house, but refusing to hire an architect or let them to use tools.

Despite that my professions of coaching, team coaching, and even writing are about slowing down and grappling with how to be effective, I, too, have a mind that’s wired for efficiency. Probably we all do. My point is I understand this learning curve, and perhaps that’s why the article Steve and I wrote originally never left me—it asked me to think more complexly, and with more humility.

True, lasting transformation takes bold vision and sustained, localized efforts. We do have problems in the social and government sectors that need to be addressed for our communities and households to thrive. But we’re still not asking the right question. It isn’t how can we be more efficient; it’s how can we be more effective.

Your cup may be full now, but in the end, it will be empty. —Vic Ruggiero

• Your feedback, insight, and collaboration mean everything to me, and I want to begin recognizing you for it. Not everyone leaves a ❤️ or comments publicly, but with their permission to share, thanks to Erin, TC, Michael, Eric, and Paysha for their insight and generosity this week.

• If you want to get to know Steve Alley, he’s co-leading a workshop on assets under influence (AUI) for community foundations, and you can register here.

• Ezra Klein and Derek Thompson co-authored a new book, Abundance, which dives deeper into related themes. This episode of Plain English is a great discussion between the two if you’re curious to learn more.

• Shout-out to everyone who attended the EQ and emailing workshop that Eric and I co-led last Thursday! It was wonderful to see you, and more workshop dates will be announced soon.

• Thanks to Julie and Sydney for the real-life co-working and strategy session to re-launch Vegas Breakfast Club April 17.

• If you aren’t watching Jackie and Shadow raise eaglets, do you even know the definition of self care.

• Reach out if you want to talk about coaching, training, or anything else. Thanks for reading.

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“V is for Very Bad Aims.” Collage trio made from Russell Games alphabet cards (1930s). 2.5” x 1.5 “ ea. Available as a set. Message me for details.