1. Status Quo Culture
A status quo culture, which means nobody striving for more efficient and effective activity. Because their salaries are not tied to actually solving the problem, in any way. Nor are salaries tied to how much money they raise. Nor are salaries tied to any measure of client satisfaction or employee satisfaction.
So if you want to be a change agent in your nonprofit, you will be undermined because you cause more or unfamiliar work.
2. Paying Employees TOO LITTLE
There is this stupid idea that working in the non-profit sector means paying employees less. Organizations that hire employees who are willing to work for less-than-market wages can often mean that you are undermining the employee’s ability to live, to have a reason to work harder, to respect the organization. If an employee cannot live on what you are paying them, how can you justify your mission to make a better world when you are forcing your own employees into penury? I knew nonprofit workers that could not live on their paychecks, that had to take out credit cards just to pay the bills every month.
Non-profits create a vicious cycle of inefficiency by attracting less skilled employees. They say, we will pay someone to LEARN how to do development, and then we can keep paying them artificially low wages. Rather than pay workers less just to stretch that budget, nonprofits should try to attract the highest skilled and most effective employees. Then their development program would run smoothly, and they would make more money. They are DOOMED by short-term thinking.
If the nonprofit sector was set up to be efficient, then this is what would happen. You would hire the best person for the job, period, not the one who you could give the least money to.
3. Funding fraud
If there are not proper checks and balances in place, and the rules are not observed, then this is what happens.
Program reporting fraud -Misrepresenting program accomplishments or failing to comply with regulations.
This might be telling donors you were helping 3,000 people when you were really helping only 400.
Financial reporting fraud -Overstating program expenses/understating fundraising and administrative expenses, charging unallowable costs to grants or inflating contributions.
I knew of a nonprofit that was defrauding both the government and their employees this way. There was government grant money to give their employees raises, but instead this money went to fatten the wallet of the CEO.
Fundraising fraud-Making misleading statements to donors or noncompliance with restrictions.
So you raise a lot of money for a specific purpose with grants. More than you need. Then the leadership decides that since there’s a lot of extra money left over, you can use this for hiring new people instead.
How can they do this? No one is watching! The board doesn’t know what’s going on, or doesn’t care. So the Executive Director or CEO is the only one watching! If the executives are willing to substitute ethics in these situations, then it is no wonder why organizations are inefficient, ineffective and teeming with fraud.
Can you think of any more reasons? Leave your comment below!