[joanna]

Another important thing to remember when comparing non-profits and companies is the power of the customer. Companies go bankrupt because the customer has the power to discontinue their patronage if they deliver a product or service poorly (unless there are anticompetitive practices in play - ahem comcast). However, in the non-profit world the recipient of the service or products has very little power to motivate a market. Those who contribute money to non-profits could theoretically be this force, but does someone who wants to invest in reducing malaria really have to invest in understanding the health metrics and do this assessment with each investment? I don't think that is a permanent solution either. No doubt feedback and accountability are vital to making non-profts more successful, but let's challenge ourselves to think of a more systematic way to implement this type of change rather than summing with measurement is needed.

[jseliger]

What you're really addressing is the issue of incentives, as economists call it, and so is the original author of the story. I wrote this comment on his blog:

To my mind, this isn't news, but that might be in part because I've worked in my family's grant writing firm for so long. The real issue you're discussing is one of incentives: nonprofits don't have much incentive to measure how well they're doing because funders don't demand that they do, or at least don't as a large group.

If the funder is federal, state, or local, the funder doesn't have the resources (or the brains) to really measure effectiveness; if the funder is a foundation, the funder probably cares more about the appearance of doing good than effectiveness. I've addressed this point in some detail here: http://blog.seliger.com/2008/01/04/more-on-charities and here: http://blog.seliger.com/2008/01/23/foundations-and-the-futur... . The blow, which I contribute to, deals with the issues you raise on a regular basis, and if you want to learn more about why things are the way they are at the moment, take a look at the archives.

[stcredzero]

Companies go bankrupt because the customer has the power to discontinue their patronage if they deliver a product or service poorly

This definitely happens to many kinds of non-profit!

in the non-profit world the recipient of the service or products has very little power to motivate a market.

For 501-c3 organizations that provide classes, lectures, and performances, often the opposite is the case. Many non-profits have to be run much like a business. There can be something like a marketplace where the "customer" pays not with currency, but with their time. (And sometimes, both money and time are involved.) Also, very often, the "recipient" of services can easily directly involve themselves with running the organization. (KPFT radio in Houston is an example of this.)

[anamax]

>> Companies go bankrupt because the customer has the power to discontinue their patronage if they deliver a product or service poorly

>This definitely happens to many kinds of non-profit!

Unless I missed the sarcasm, it doesn't happen with charitable non-profits. They die when funding dries up, and since their customers don't provide funding, their customers have little/no effect on their survival.

Yes, a charity can continue to exist long after folks stop showing up to receive services.

[dagw]

since their customers don't provide funding

That depends on your point of view. I'd argue that the people supplying the funding are the customers and that the work they do and people they help is the service they provide. So if their customers aren't happy with the quality of the service they'll take their money somewhere else, exactly like in the for profit case.

[yummyfajitas]

The problem is the customers of nonprofits often cannot measure the results themselves.

If McDonald's serves me a burger that is inedible, I know about it immediately and can stop patronizing McD's.

If Burgers4Africa distributes inedible burgers in Somalia, how do I know about it?

[stcredzero]

My point is that often the customers can measure the results. The article is worded as if this applies to all non-profits.

[anamax]

> I'd argue that the people supplying the funding are the customers

That definition is inconsistent with 'There can be something like a marketplace where the "customer" pays not with currency, but with their time.'

Charities, almost by definition, provide products/services to folks who can't afford the full cost of said products/services so the charity gets money from elsewhere.

Note that not all non-profits are charities.

[SapphireSun]

What if you had some kind of nfp evaluating nfp that would help a person who wants to donate decide what is effective?