In this blog, I want to reiterate an ideal that I spoke about in one of my past blogs, that all nonprofit organizations should be wholly dedicated to the cause. That is the point of a nonprofit organization. However, if you are considering starting a nonprofit organization or are a fledgling startup that is still trying to get its feet underneath it, you need to make sure your nonprofit organization is stable before you made wholesale contributions to the cause you are pursuing.
From the beginning, you should start making contributions to the cause you are pursuing, but you should be focused on growing your organization so that in the future, you can give more to the cause. It is all about being able to give a bigger piece of a pie. This is an idea I touched upon in one of my past blogs, titled “We are Holding Back Non-Profit Management“,
“Think it through. In five years, the organization could have an annual revenue of $20 million because it worked on itself as an organization. That would be $5 million. $5 million is more than $1 million. This is how we need to view nonprofit organizations and growth. We need nonprofit organizations to better themselves so they can better the cause. If they cannot get better as an organization, it is unlikely they will get better at fighting for the cause. If we can change our thinking of nonprofit organizations, we can undoubtedly make the world a better place.”[¹]
The basis of my argument was that contributing more to the cause is more meaningful than contributing a higher percentage of your profits to the cause. If you contribute 100% of your profits to pursuing the cause, but never grow as an organization, you will be giving less than if you contributed 60% of your profits to pursuing the cause and used the other 40% to grow your organization so that you can give a larger amount.
The counterargument to this ideal is that individuals would startup nonprofit organizations and pay themselves large salaries and say that it is “to grow ourselves”. This is where having accountability standards in place will disallow this. In another of my previous blogs, titled “The Ethics of Allowing Nonprofits to “Improve Themselves”, I explored solutions to the potential of greed in a nonprofit organization supposedly “growing itself”,
“There are several ways that we can ensure that nonprofit organizations do not take advantage of the idea of “improving self” by paying themselves exorbitant salaries. First of all, every nonprofit organization should have a board that includes members not employed by the organization itself. Ideally, this board should be vested in the interests of the nonprofit organization, and as a result, expose any unethical actions by executives. Secondly, nonprofit organizations must submit their financial documents to the IRS, which includes salaries of directors, officers, and other employees. Most importantly, the IRS and nonprofits themselves are required by law to disclose these amounts to anybody who asks. This is what happened in the Omaha Goodwill case, and it is the responsibility of the media and the public to uncover any excessive executive pay among nonprofit organizations.”[²]
In addition, I proposed that all nonprofit organizations should have yearly annual reports that now only show financials and spending habits, but provide justification of why they decided to spend money here, and how it made an impact on the growth of their organization.
I wanted to emphasize these ideals again because I believe they can make such a huge impact on the growth of nonprofit organizations. Let nonprofit organizations use their first substantial profits to grow themselves so that they ensure a future for themselves. Some for-profit organizations are not expected to return a profit for ten years while they grow their organization, but investors stick with them. We need to encourage nonprofit organizations to help others but not neglect themselves. This is a key to ending humanitarian issues that still plague our world.
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