Sunday, July 15, 2007

Non Profits Part 3: Accountability is See-Through

The dot-comer's of the world and west coast culture insisted business attire didn't have to be stuffy. "Down with the corporate nooses (otherwise known as ties)," some said, "You can be comfortable and still run a business." Amen. It's true, you can dress comfortably and still have a very successful business as long as the sharp business sense and shrewd savvy doesn't leave with the cuff links.

This is some of the issue that many take with non-profit organizations. In many instances it may be unfounded but there is a sense that the stewardship is not up to snuff on some of these organizations and people don't like it. The bank would never give money to some of these folks, but we're supposed to be nicer than the bank so we continue to give. Perhaps the bank is onto something . . .

During the aftermath of Hurricane Katrina my professor told me that he donated some money to the Samaritan's Purse (A non-profit headed up by Franklin, son of Billy, Graham). He said that they sent him back a brochure of sorts that had the amount of money he sent and the amount of total money collected, where the money was allocated in the support of Katrina victims (as a percentage of all money collected) and a thank you for his support. That is an important aspect that should not be overlooked. A good non-profit should be transparent and open about where it's money is going. The bank has insight into the finances of a privately held organization that must be accountable to the bank for taking its money on loan. Publicly held companies have share-holders to be accountable to. Non-profits must be accountable to those writing checks to their cause in good faith.

This will be discussed in greater detail but I want to point out that my model of a non profit looks just like a business, but rather than a profit maximizer it would be a retained earnings maximizer. In order to do this the manager must run it like a business. The better he runs it the more money the charity receives. In the end the manager will likely get more customers too because they work hard and they're transparent so people can see in. Because of that transparency they will need to be accountable to the customers. More on the way. Hope you had a great weekend.

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