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Tuesday, April 30, 2013

Five Things to Know Before You Go Work for a Nonprofit

For years, Charlie enjoyed volunteering at the annual fun run his company sponsored to benefit a local charity. So when he was offered early retirement, Charlie began talking with that group about joining their leadership team. He felt sure he could help them a lot, given his business background.

It all sounded like a good plan. Unfortunately, Charlie was overlooking five potential pitfalls of going to work for a nonprofit.

What Is a “Nonprofit”?
In the United States, Section 501(c) of the Internal Revenue Service Tax Code defines 28 types of entities that are exempt from federal income taxes. Perhaps the most common among these are the religious, educational, and charitable institutions described under part 3 of the code. Hence the terms “nonprofit” and “501(c)3” are commonly (though not very precisely) used interchangeably as synonyms.

To qualify for tax exempt status, an organization must legally specify that none of its assets will benefit a member, director, officer, or agent, and that it exists for a charitable (and also  legal) purpose.

While nonprofit entities exist elsewhere in the world, there’s no question that the United States has done more than any other nation to encourage, use, and benefit from nonprofit work. Independent Sector, which is a kind of industry association for nonprofits, reports that they generate $805 billion for the U.S. economy (5.5 percent of GDP). And that number will only grow: between 2001 and 2011, the number of U.S. nonprofits increased a whopping 25 percent to more than 1.5 million organizations (Urban Institute).

Clearly, Americans love nonprofits!

So it’s no surprise that with Baby Boomers now turning 65 at the rate of 10,000 per day, many of them are thinking like Charlie, the guy mentioned above: why not leave the rat race of the business world and devote the remainder of one’s productive years to some worthy nonprofit cause?

I think that’s a great idea. But not for everyone! I’ve worked with quite a few people who leaped from the corporate world to the nonprofit world—and hated it! In almost every case, their disappointing experience was the result of either ignorance and/or misplaced expectations about five important realities.

(Note from the outset: the nonprofit world is extremely diverse—so much so that I’m sure nothing I say below will apply to every single nonprofit entity. But I think I can trust you to do the math in applying the overall principles.)

I. There’s nothing inherently more “significant” about nonprofit work.
For some reason, common opinion holds that there’s something magical about nonprofit work that makes it more valuable than for-profit work. Usually the assumption gets framed along the lines of holding up Mother Theresa on the one hand, and greedy Wall Street types on the other. Charity is good, business is bad. Sure, we may have to go make a buck when we’re younger and raising a family, but at some point we should let go of that nasty, dirty business world and “give back.” In short, we should do something “significant.”

If that’s more or less how you see things, I hate to disillusion you, but you’re simply misguided. All work (all legal work, that is) has value. 

“Nonprofit” is just a tax status. There’s nothing inherently significant about nonprofit work. If you think there is, then you are conferring divine authority on the Internal Revenue Service! Who would have guessed that they would turn out to be the arbiter of what is and is not “significant”?!

Look, when I need food, the work of the farmer becomes pretty significant. When I need a place to live, the work of the carpenter becomes pretty significant. When my kids need an education, the work of the teacher becomes pretty significant. When I need to take out a loan to finance the purchase of new equipment for my business, the work of the banker becomes pretty significant.

“But Bill,” I hear someone countering, “you’re able to take advantage of all these people’s work because you have means. What about people who are marginalized and can’t afford food or housing or education, and will never qualify for a loan? Don’t they need help?”

Absolutely they need help! And thank God we have a tradition of social sector activity in this country that has become very innovative in providing that help (because government, which was established to create good policy to foster that help, is itself very poorly equipped to do the job of providing that help).

But where’s the logic in the view that says if a farmer sells food to someone who can afford it, that is somehow less “significant” than when a food bank obtains surplus food and sells it at under-market cost to someone who can’t afford to pay full cost?

I find that for a lot of people, “significance” boils down to a feeling they have when they do something kind for another person. Nonprofits tend to do kind things for people. So if you go work for a nonprofit, you’ll feel significant, right?

Well, no. That’s like saying it takes a courageous man to wear a pink shirt, so I’m going to put on a pink shirt in order to gain courage.

There’s also a huge argument to be made against doing nonprofit work in order to feel significant. Check out Toxic Charity, by Robert Lupton. That book ought to be required reading for everyone, but especially for anyone pondering a move to the nonprofit sector. Lupton shows that despite the good intentions by which we have created such a robust nonprofit sector, we have managed to create a dysfunctional system that actually wastes money and harms the people it’s supposed to help.

One of the biggest problems is that a lot of people who do volunteer work (i.e. nonprofit work) do so in order to feel good about themselves, but pay no attention to how their “help” affects those who are the targets of that help.

So I’d think twice and really search my motives before I jumped into a job that may be set up to benefit me, but really isn’t making any difference for the people my group is supposedly “helping.” I know that kind of ruthless self-examination is a tough assignment. But the real professionals in the nonprofit world, the ones who are doing the most good, are actually rather dispassionate when it comes to doing what is effective, as opposed to doing what feels good.

And of course, the truth of the matter is that if you go work for a nonprofit, you may actually end up feeling insignificant! Just ask some of the people already working at nonprofits. They will tell you that while they feel like they’re doing good through their work, they also feel like second-class citizens in the economy—a point only emphasized by the reduced compensation they get for working in the nonprofit sector.

Which brings us to the heart of the matter: the real source of misunderstanding about this significance thing is that we’ve got the significance of everyday, for-profit work all screwed up. We place huge value (as in monetary value) on things that really don’t amount to much, and grossly undervalue stuff that makes all the difference in the world as to how people actually live, and also for the world we are leaving behind for future generations.

I don’t have the answer to all of this! But I know one thing: the desire to feel greater significance is not a good reason to go into nonprofit work. Because significance is not about where you work or what you do for work, but about why you work and how you do whatever work you do.

II. The rules are different in the nonprofit world.
If I’ve heard it once, I’ve heard it a thousand times: “Boy, they sure do things differently in the nonprofit world!”

Yes they do. In business, you go find a customer and then create value for that customer. They buy your product or service. You deliver on the expectations you’ve created. You get paid. Out of that revenue you pay expenses. Then you take a profit (and pay taxes on that profit). If you keep doing that and doing it well, you get to stay in business. If you don’t, they take you out of the game.

In the nonprofit world, you go find someone who has a need. You figure out a way to meet that need. You then go raise some money that allows you to meet the need (and you don’t get taxed on that money). You then go meet the need. If you keep doing that and doing it well, you get to go ask for some more money in order to keep doing it. If you don’t do it well, you still get to go ask for some more money in order to keep doing it.

The only reason a nonprofit ever quits the game is if it can’t keep raising money, or else it gets tired and throws in the towel. (Note: nonprofits never like to throw in the towel!)

Which is why, if you use the numbers I gave at the beginning to do the math, there is now one nonprofit entity for every 250 Americans. No wonder we all feel over-subscribed when it comes to donor appeals!

We’re talking here about the issue of accountability. The rule in the business world is that you have to make a profit. Even if it’s only by a penny, you have to come out ahead. But in the nonprofit world, when the money runs low, you can always go ask someone for more money. (I know, I know, things are slightly more complicated than that—but not in principle).

Think about how that affects most everything that goes on in an enterprise. In a for-profit business, you pay close attention to the numbers, because when they all add up, the profits line has to be larger than the expenses line. 

But in a nonprofit, you have this other concern called “the cause,” which means the mission of the nonprofit. Yeah, nonprofit leaders have to pay attention to the numbers, too. But when the numbers are not adding up, nonprofit leaders generally don’t respond the way for-profit leaders do. For-profit leaders say either, “We’ve got to cut expenses,” or else, “We’ve got to increase revenues.” Because profit is the rule of the game. But nonprofit leaders are more likely to say, “We’ve got to go raise more money.” Because in that world, “the cause” is what rules the game.

If that reality offends your business intelligence, then don’t go into the nonprofit sector. Should that reality exist? I don’t know. I just know it is what it is.

III. Social entrepreneurs are a force to be reckoned with.
The past few decades have seen a proliferation of social entrepreneurs, cause-oriented visionaries who see a need in the social sector and devise an innovative strategy to address that need. Some of the better known social entrepreneurs of our time are Dan West (Heiffer International), Millard Fuller (Habitat for Humanity), Marva Collins (Westside Preparatory School), and Wendy Kopp (Teach for America).

Almost without exception, social entrepreneurs are driven people. And it’s easy to see why. They almost always are fighting against some sort of systemic inertia that has not only created a social problem, but keeps it in place. In other words, social entrepreneurs tend to be warriors. They don’t suffer fools gladly, and they have very clear ideas about what’s supposed to happen and how it’s supposed to get done.

Of course, almost all successful entrepreneurs are driven. But what sets the social entrepreneur apart is that they are driven by “the cause,” a high and noble effort that rises above the everyday humdrum of making a buck. As a result, they justify their decisions by appealing to the transcendent value of their mission and the worthiness of their ideals.

That mindset is significantly different from anything you’re liable to have experienced in the corporate world. Yes, some companies rally their troops around a lofty B-HAG and manage to whip everyone into a frenzy to go achieve that. But (successful) businesses always operate with an over-riding pragmatism, governed by satisfied customers and profit. By contrast, many a nonprofit led by a dynamic visionary (often the founder) makes choices and pursues activities that may stir the heart but make absolutely no sense business-wise.

A social entrepreneur’s intensity and driven-ness can be a powerful force for enlisting people in their cause and spurring them on to action. But the potential dark sides of that giftedness can be severe. A driven person can come across as (and may actually be) quite dictatorial. They may be terribly impulsive. They may not listen to their inner circle. They may confuse loyalty with blind loyalty, as well as confuse opposition and loyal opposition. They may have significant problems with accountability. And while they may be brilliant at raising money, they may be utterly foolish in spending it.

By no means am I saying that all social entrepreneurs are given over to their potential dark sides. But just know that working under a leader who believes they have righteousness on their side is not for the faint at heart. Their allegiance is to “the cause.” And that cause may be the most noble and worthy cause imaginable. But everything and everyone who works under that leader will be subordinated to that cause.

IV. Gifts for administration and management tend to be undervalued.
This point follows from what was just said. Nonprofits are all about “the cause,” the mission. Yes, they require some housekeeping in terms of accounting, human resources, compensation, facilities management, and so forth. But that administrative stuff is secondary to the mission. That’s all in the background.

One practical consequence of that cause-orientation is that giftedness for carrying out the core mission tends to be prized and celebrated, whereas the gifts for administration and management tend to be less appreciated. They are certainly less understood.

I’ve seen countless scenarios where a bright, dynamic, visionary brings enormous horsepower for pinpointing a problem to be solved, rallying the troops around that issue, and raising the money to fund it. People fall in love with their vision. And as we all know, without a vision the people perish.

I may scream the next time I hear that axiom trotted out yet again! It’s not that I don’t believe it. I do. Without a vision, people indeed perish. But without a well-considered plan and the ability to execute it, the vision itself rings hollow.

And that’s what so many visionaries lack—the ability to get stuff done. What they need is a strategy champion, someone who has a bias for action and the innate giftedness to organize people around actual work that will, over time, bring the vision into reality.

But guess what? That sort of person—who we call a manager—probably doesn’t possess the sizzle and sparkle and sex appeal of the visionary leader. In fact, they may actually come across as boring or dull. That’s because they’re less interested in shooting off fireworks than in stoking an engine. But because they don’t impress, the rock star visionary is liable to ignore them, even though they bring exactly the kinds of administrative gifts that the cause so desperately needs.

Leaders by their nature tend to have their foot on the accelerator. For them, it’s “Hurry up! Let’s go! Time’s a’ wasting!” By contrast, managers tend to have their foot on the brake. It’s, “Slow down! Be careful! Let’s wait and see.” I think you can see the inherent tension here. But guess who tends to have the upper hand in a nonprofit entity?

If you want to contribute your managerial experience and wisdom to a nonprofit group, then I’m all for that. Lord knows your gifts are probably needed there! But just know that for a host of reasons, the value of your contribution may not be appreciated, and you yourself may not be understood.

V. Money still commands the deal.
It’s a time-worn cliché: business is about making money, while nonprofits are about doing good.

Well, as I pointed out above, I don’t hold to that distinction. But I do know this: nonprofits tend to be every bit as concerned with money as businesses are. Indeed, in many cases, a nonprofit may be more obsessed with the money part—especially if it doesn’t have enough money to keep going!

In the main, the lion’s share of a nonprofit CEO’s time (and attention) is devoted to raising money. And in the main, the second-highest paid person on the staff of a nonprofit is the development (or fundraising) executive. That should tell you everything you need to know about the importance of money in the life of a nonprofit.

So if anyone thinks they’re going to escape the relentless pursuit of money by heading over to the nonprofit side of the tracks, they’re probably getting ready to have a rude awakening!

So What Happened to Charlie?
I began by telling you about Charlie, who took early retirement in order to go work for a nonprofit agency. How did that work out for him? Well, Charlie turns out to be a composite of the many people I have worked with who went into nonprofit work, but eventually quit. Based on their actual experiences, let me piece together what easily could have happened for Charlie, were he an actual individual.

Once Charlie arrived at his new job as the organization’s business manager, he discovered he no longer would have the benefit of an assistant, as he did back at his old company. Instead, he had to do all his own correspondence, scheduling, filing, making travel arrangements, etc. That was a lesson in humility!

Then, as he got into the work, he discovered that the finances of the group were horrific. There were all kinds of questionable accounting practices going on. Some of them, he suspected, might even be in violation of the organization’s nonprofit status. Lots of the numbers were either inaccurate or missing. Most of it was the kind of stuff that a decent accounting software package could deal with. But when he recommended that the organization invest in such a system, he was told they had other, “more important” areas to fund.

Another observation he made was that excellence was not particularly valued. Part of that, he could understand, was simply due to financial limitations. Because the nonprofit couldn’t pay very much, it couldn’t hire the best people (at least, that’s what everyone always said). But even more than that, there was just a general tone of mediocrity with which most of the staff did their work, as if quality wasn’t really expected.

But sincerity? Wow, that was really celebrated! He remembered one time at a staff meeting, the CEO made a special point of highlighting how a lady on the team had gone out of her way to give one of the organization’s clients a ride to her doctor. “That really captures the spirit of what we’re all about,” the CEO exclaimed. And then he recited the slogan that everyone knew by heart: “It may not be in our name, but serving is our game!”

Charlie always winced when he heard that. He appreciated the sentiment, but it just sounded corny. It was part of the cozy, homespun culture that the group shared.

But what really struck him about that lady’s gesture was that, kind as it was, it had nothing to do with the organization’s mission. In fact, it had taken her away from some other rather important responsibilities that had gone unattended. To him, her act of kindness seemed like a somewhat wasteful use of time.

There was no particular crisis that suddenly precipitated Charlie’s resignation. Rather, after about a year of working and watching from the inside, Charlie knew in his heart that this wasn’t a place for him. The final straw was a fundraising banquet where the CEO got up and gave the most amazing, motivating appeal for funds Charlie had ever heard. Even he felt tears in his eyes as the CEO gave touching anecdotes about all the good his organization was doing for needy children. It was a masterful performance, and a huge amount of money was raised that night.

There was just one small problem: by now, Charlie knew the group’s finances through and through. And so he knew that the appeal that night was for a whole new initiative that the CEO had envisioned and was keen on pursuing. Except that most of the money that would come in was not actually going to go toward the new initiative, but instead would be used to keep the organization afloat by paying for expenses already incurred.

In short, Charlie felt like this group, which indeed was doing so much good, was nonetheless acting unethically.

So rather than make a big stink and get into what he knew would be a losing battle with the CEO, Charlie quietly tendered his resignation with the excuse that, regretfully, he needed to quit in order to take care of his aging parents. Which was half-true. 

But the reality was that Charlie had become disillusioned by his stint in nonprofit work. He had gone into it with such high hopes, only to have them disappointed when he realized that nonprofit work turns out to be a lot like any other work: it has to be done by people. And people, he could now see, no matter how gifted to the task they might be, also turn out to be flawed and broken.

Unlike a lot of folks who figure that out, Charlie didn’t become bitter or start labeling the CEO and others in the organization as hypocrites. He just made peace with the fact that he himself was probably not cut out for nonprofit work. 

Instead, he would do what most Americans do rather well: send checks to causes he believed in, and hope that the people running those causes would use his donations as well as they could to do some good. The convenience of that arrangement was that he didn’t have to be bothered with the making of the sausage in order to feel good about being generous. Plus he would get a tax deduction.

Question: What are some stories you’d like to share about trying to move from for-profit work to the nonprofit sector?

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