NGO Soul + Strategy 046. Signaling your financial trustworthiness lowers your NGOs impact by half: George Mitchell and Thad Calabrese
Summary
Did you know....
When nonprofits signal they are financially trustworthy, they actually give up to half of their potential impact.
Why is this "financial trustworthiness signaling behavior” so pervasive, when it has this high a cost?
In this podcast episode, I interview George Mitchell, Professor of Nonprofit Management at Baruch College, City University of New York – and a long-time collaborator, including on our book (Between Power and Irrelevance: the Future of Transnational NGOs’ (Oxford University Press, 2020) -- and Thad Calabrese, Professor of Public and Nonprofit Management at New York University about their provocative new findings.
George’s Bio:
- Professor of Nonprofit Management at Baruch College, City University of New York
- Director at Center for Nonprofit Strategy and Management
- Moynihan Research Fellow at Syracuse University
- Independent consultant at InterAction
- Ph.D. from Syracuse University
- Co-author of our joint book ‘Between Power and Irrelevance: the Future of Transnational NGOs’, together with Hans Peter Schmitz, University of San Diego (Oxford Uni Press, 2020)
Thad’s Bio:
- Professor of Public and Nonprofit Financial Management
- Assistant professor at Baruch College, earlier on
- Ph.D. from New York University
We discuss:
Nonprofits frequently adhere to four financial ‘orthodoxies’ or norms:
- Though shall keep your overhead costs minimal
- Though shall be financially lean, i.e. not look too profitable, not sit on a large financial or capital reserve
- Though shall diversify one’s revenues as much as possible
- Though shall avoid taking out debt (in the form of loans, bonds, bank notes) etc to acquire capital for investment
What if these practices, these financial norms, actually reduce your impact as a nonprofit by as much as 50% (in terms of your overall spending levels)?
George and Hans did a large-scale, quantitative study on US-based international and domestic nonprofits that indicated exactly this. Their research findings were picked up by several national US media, given their provocative nature.
Quotes:
“Norm-adhering nonprofits sacrifice about half of their mission impact over a 10-year period compared with norm-busting nonprofits.”
“Forgone mission impact is the hidden cost of trustworthiness”
Resources:
George's blog post – pointing to an article in The Conversation: HERE
Related article in Nonprofit Policy Forum (Open Access): HERE
Book: Between Power and Irrelevance: the Future of Transnational NGOs’ (Oxford University Press, 2020): HERE
Youtube video of this podcast
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