Start the Conversation

Why competition is unhealthy for the charitable sector

This article was originally published June 27th, 2013 in the Guelph Mercury.  To view this article online click HERE.

We live in a global economy and generally are not immune to economic forces that affect other countries. Sometimes it just takes a bit longer to get to us.

Dan Pallotta has become well known for his Ted Talk video based on an article that was published in the Wall Street Journal titled, "Why can't we sell charity like we sell perfume?"

He makes a compelling point when he asks, "What if we let philanthropies operate like businesses?" He contends that donors should let them pay for talent, advertise aggressively to build market share or even build a stock market for charity, because maybe then capitalism could finally save the world.

Pallotta endorses paying the passionate people who feed the hungry, clothe the naked and take care of the widows and orphans, but does not extend the same reasoning to pay middle organizations such as the United Way.

The causes we love and our ability to change the world is powerful. Our social problems are huge, yet our existing thinking is keeping the passionate people small.

Do we have too many charities in Canada? According to Imagine Canada, there are approximately 161,000 registered charities and incorporated non-profit organizations in this country, with more than two million people employed in the sector. Every year, thousands apply for charitable status but at the same time, thousands lose their status by either ceasing to operate, by failing to file their annual returns, or by having their charitable status revoked by the Canada Revenue Agency.

Why do so many registered charities, which were set up with the best of intentions, request to have their status revoked or fail to meet their obligations? Did they not have the capacity to operate effectively? Did they fail to anticipate the competition for donations and volunteers? Were they duplicating programs and services that already exist? Or should they even have applied in the first place?

Some would argue it's too easy to register as a charity, and too many have done so for selfish or egotistical reasons. Many do not think adequately about what they are trying to achieve and whether setting up a new, independent charity is the best way to achieve that goal.

A new organization starts when someone becomes passionate and motivated about making a change, but they cannot find the framework within an existing organization to develop this passion and decides to start their own.

Unfortunately, many smaller charities do not have the resources to be effective. They cannot raise the funds to carry on the activities they wanted to do, although the paradigm exists that some of the small charities may be more efficient in the delivery of the services or goods, as they are driven by what matters most, the heart.

Many of these charities often give up in frustration, not realizing that running a small charity can be a lot more complicated than running a small business.

The world we live in is complicated. People are confused, and confusion breeds apathy. Having a lot of charities means duplication of services, governance structures and volunteer requirements, and charities are increasingly being forced to deal with that complexity. It is not just about handing out cans of food, although check out how many competing organizations do just that. To be effective, charities need resources, capital, structure, governance, volunteers, donors and employees.

With the plethora of charities that exist, many are dealing with the same issues, and that poses the question: Is competition in the charitable sector effective? Can competition, in fact, be unhealthy for the future of the charitable sector?

Having intense competition leads to more funds being spent on your marketing, to differentiate yourself from other charities. More and more effort is spent justifying that you are doing a fantastic job, rather than actually doing a fantastic job.

We have incredible overlap in the charitable sector. Does anyone, for instance, know the difference between the Community Foundation and the United Way? This creates confusion and distrust among donors, especially when they end up giving to a different charity than the one they thought they were giving to.

Is it necessary to have a few hundred different cancer charities? Does anyone ever ask, "Do we have too many Tim Hortons?"

In general, the more the better, as business drives our economy. Perhaps, instead of a couple thousand Anglican parishes issuing receipts, it would be better to have one Anglican Church body doing that. Some critics would say that would result in a concentration of power and less transparency about operations, and the cost of running one large national organization will be greater.

I would love to see more charities driven exclusively by purpose, passion and pride. An economy characterized by not-for-profit organizations might serve us better than those led by shareholders.

The public's real confusion comes in not knowing what to do about all the competing marketing appeals from charities, not the charities themselves.

It seems like every day, people encounter fundraisers on the street, open piles of mail seeking charitable donations, or respond to TV, telephone and online appeals. As charities get more skilled in presenting cases and outcomes in compelling ways, the public is finding it increasingly difficult to choose between them. That, and being worried about their own finances, is hardening people's hearts to suffering or need.

We should be leading the way in collective and collaborative approaches to fundraising, respecting the dangers, opportunities and strengths of donors and clustering, and collaborate around common causes. It's not charities that urgently need to be rationalized, but charity marketing.

Kevin Cahill is a Guelph-based financial planner.