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Is The Nonprofit Sector Really Broken?

By Nell Edgington

There was a bit of a dust up in the (social change) Twitterverse yesterday. Ryan Seashore from CodeNow wrote a post on TechCrunch arguing that the majority of nonprofits are “broken,” and should act more like for-profit startups in order to create impact. The post follows a similar line of other arguments over the years (most recently Carrie Rich’s argument that nonprofits should all become social enterprises) that the nonprofit form is so dysfunctional that it should be tossed out. But there is a real danger to this idea of abandoning the nonprofit sector.

As he often does so well, Phil Buchanan, from the Center for Effective Philanthropy, shot back against Ryan’s post, Tweeting (among other things):


Debates like these are crucial not because of the entertainment value (although I do love good drama), but because they force us to uncover and analyze our underlying assumptions. Yesterday’s debate, and others like it, which take the nonprofit sector to task for being inefficient, broken, unbusinesslike, lay bare some false and destructive assumptions about nonprofits and about social change in general.

Ryan sees nonprofits as aging dinosaurs with “too much overhead, too much bureaucracy, and a lack of focus on impact. Everything feels slow.” But for real change to happen you have to integrate the institutions that already exist with the networks, or “startups,” that want change, as I discussed in an earlier post. The two (institutions and networks) must work together. Ryan’s argument that nonprofits need to be more like startups is fundamentally flawed because if everything were a startup, change wouldn’t happen.

To quote David Brooks from a recent The New York Times piece, “Post-Internet, many people assume that big problems can be solved by swarms of small, loosely networked…social entrepreneurs. Big hierarchical organizations are dinosaurs…[but] this is misguided…Public and nonprofit management, the stuff that gets derided as ‘overhead,’ really matters. It’s as important to attract talent to health ministries as it is to spend money on specific medicines.”

To be sure, in his blog post Ryan outlines some areas where many nonprofits could improve (becoming more focused, continually innovating, diversifying revenue sources, thinking big), but these are best practices that any organization (startup or established institution, for-profit or nonprofit) should embrace. It is simplistic and misguided to think, as Ryan writes, that “the nonprofit world must embrace the nimble ways of successful startups to become more effective, and do better.” I know its not sexy, but real social change is much more complex than startup versus institution.

So let’s move on from this either/or mentality. Effective social change requires institutions AND networks, it requires Millennials AND Boomers, it requires startups AND established organizations, it requires public AND private money (and lots of it), and it requires for-profit and nonprofit solutions. We are wasting our time (and our keystrokes) by creating false dichotomies. Let’s work together toward strategic, sustainable social change.

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About the Author: Nell Edgington is President of Social Velocity (, a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively. For more information, check out Social Velocity consulting services and clients.

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7 Comments to Is The Nonprofit Sector Really Broken?

leif r
January 8, 2015

Specious arguments all around, although each with a kernel of truth (in my opinion). I have spent many years in both sectors and would have to agree that the nonprofit sector is (generally speaking) truly – and probably irrecoverably – broken. That said, if they all adopted a start-up model, I believe things would quickly get worse, not better. And yes, many for-profit organizations also have issues.

Some make the argument that for-profits have market mechanisms (profits and capital markets) in place to weed out the weak players while that doesn’t exist in the nonprofit sector. Not true – they just get their funds from other sources. I know several nonprofits that fail to deliver on their missions but are good at fundraising, so they survive. That’s not really different than a corporation with crappy products and great advertising. Buyer beware.

The path forward is for grant makers to be smarter about giving their money to organizations that actually have the impact they say they are targeting. And BTW @PhilBuchanan, the arrogance of the private sector critics is more than matched by the self-righteousness of the nonprofit under-performers. A little humility on all sides would go a long way.

Michael Benami Doyle
January 10, 2015

@Leif r You’re assuming most or even many nonprofits have a muted or misguided impact, and that funders are too dense to realize that. You’re generalizing. Where are your data on all that?

As far as the startup mentality, what’s missed is that startups pivot to find a product and a market. What they end up as when they become stable businesses is often not what they set out to be, and sometimes totally different. With such little room for mission consistency at the startup level, how does anyone expect this model to be of service in the nonprofit world where mission and consistent service delivery are critical?

leif r
January 10, 2015

Yes, I am making an assumption that many nonprofits’ impact is muted or misguided (or often unknown), but not that funders are dense. I think that funders often base their financial support on other factors, such as activity measures, personal relationships, compelling fundraising methods, or a genuine concern for the mission but with limited options for grantees. I base my opinion on my limited personal observation rather than on sector-wide data, but I have had the opportunity to work with dozens of nonprofits in various social sectors and U.S. regions.

I do think there is a place for start-ups in all sectors (including government) but agree that it’s no panacea. A vibrant marketplace should have flow and turnover of entities, with the majority being – as Michael suggests – established ventures with reliable service delivery.

January 12, 2015

When the venture capital world provides seemingly limitless debt financing to unprofitable nonprofits- just like they do with tech startups- the startup culture will be much easier to implement. Every time I see some an article about the latest San Fran app or website company receiving 5 or 10 million bucks, I marvel at the good that money could do in the nonprofit sector.

Laura Ryding-Becker
January 14, 2015

Nell, once again, you tell it like it is. Who is this Ryan, anyway? “Ryan sees nonprofits as aging dinosaurs with “too much overhead, too much bureaucracy, and a lack of focus on impact. Everything feels slow.” Yes, I suppose that might be true of a minority of nonprofits (they know who they are), but for Pete’s sake: “too much overhead”? A “lack of focus on impact”? OMG!

Jim Schaffer
January 20, 2015

Like most everyone here, I’ve given many years to this work. I started a new website recently; it began as a love letter to charity circa 1980’s when I had my start; when I started to actually think through what I believed to be case today in our sector the text began to change and (it stalled) I think it will continue to change to include much more of the impact investing spirit we are debating here. I’d give Ryan (never head of him before now) some slack — he’s new to the fight/work and he has his own cause to promote, which his article did a very nice job of doing (our few comments here vs the some thousand shares his article received). Nell, I have long followed you and apologize for never taking the time to comment. You are really important. Lief R, I appreciate your frank comments; you do know what you’re talking about for sure. I think we all agree that it’s got to be a balance of funding sources. But overall I am feeling the excitement of what’s coming to our sector. I am with difficulty giving up some old scared cows, but it is nevertheless freeing to do so.

[…] change is much more complex than start-up versus institution,” the consultant Nell Edgington wrote on her blog in response to Mr. Seashore’s piece. Indeed it […]

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