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 LinkedIn Profile

Thad’s LinkedIn Profile

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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