Small Nonprofits, Big Nonprofits: The Where to Give Dilemma

According to Giving USA, donations reached nearly $360 billion in 2014, the highest amount since the 2007 recession. With text to donate, high-profile endorsements, and online crowdfunding, it's never been easier for individuals to choose and contribute to a cause.
07/30/2015 04:45 pm ET Updated Jul 30, 2016

Good news, charitable giving is up.

According to Giving USA, donations reached nearly $360 billion in 2014, the highest amount since the 2007 recession. With text to donate, high-profile endorsements, and online crowdfunding, it's never been easier for individuals to choose and contribute to a cause.

Yet the question of how and where to best give not only remains unanswered, it continues to get more complicated.

Over the past few years, critics like David Callahan have insisted, "The nonprofit sector is filled with waste and duplication," and concluded, "Things are getting worse, not better." Callahan argues against small nonprofits, too many of which he claims are "just getting by," while there are "too few big ones that can really solve problems."

Callahan's solution? Consolidate, and allow "some nonprofits [to] die of starvation." In Callahan's view, small nonprofits equate to high overhead and wasting the donor's dollar to pay for staffing and keeping the lights on.

The large versus small nonprofit debate has gained significant attention in the wake of the ProPublica report on the Red Cross's programs in Haiti. The Red Cross, a large nonprofit, is irrefutably an incredible fundraising machine. During the Haiti crisis, the organization raised a staggering half a billion dollars. Yet the organization was confronted with a common problem for large nonprofits. While skillful at fundraising, the Red Cross lacked the nuanced expertise to carry out significant programming on the ground. As a result, the Red Cross outsourced many programs to small, local nonprofits that had more experience with the country and therefore had more potential for impact.

However, there were significant problems with this particular large nonprofit/small nonprofit collaboration. The overhead did not simply get passed on to small nonprofits, and the Red Cross' approach to transparency in spending was staggeringly insufficient. As ProPublica discovered, "Even on the projects done by others, the Red Cross had its own significant expenses - in one case, adding up to a third of the project's budget." Admittedly, the small nonprofits struggled to make progress in Haiti, which became a common critique. However, potentially more problematic was that the Red Cross insisted they achieved results, all while simultaneously using the tragedy to shrink their $100 million deficit.

The resulting scandal has left uncertainty in its wake. If small nonprofits are wasteful, and large nonprofits lack knowledge of local nuances and transparency, where can a donor comfortably give?

As the founder of goods for good, a nonprofit that benefits orphans in Malawi, this controversy hits home. In the aftermath of such a discovery and such opportunity in donor giving, how should I structure my own nonprofit, which operates with 15 staff members across its international offices on a budget of just over one million dollars? Unfortunately, I don't think there is a clear answer. There is an increasing desire to standardize evaluation across organizations of all sizes in order to help donors make tough giving choices, but the reality is--it is not that simple.

I believe the nonprofit sector world mirrors most other sectors. Some nonprofits are strong, efficient, and inherently good, regardless of their size. Some are less so. There are large nonprofits that are incredibly effective on the ground. There are small nonprofits that are impressively lean in staff and expenses, but large-scale in their impact, and there is everything in between. Before we base judgment solely on an organization's size, as Callahan does, we should remember that for better or for worse, one incident and one nonprofit does not necessarily make a trend. Evaluate an organization by its impact, not its size.

With countless nonprofits out there, evaluation is crucial. We are all disappointed with the results the Red Cross achieved with the resources it had at its disposal. Yet this does not mean large nonprofits are inherently bad or ineffective. Organizations of such size often have vast reaches, and their scale allows them to mobilize funds and other resources with immense speed. These characteristics can be critical, particularly with natural and humanitarian disasters.

Alternatively, small nonprofits tend to bring an intimacy with the challenges faced in particular communities, which are culturally specific and unique. Just because they lack funding--or even desire--to scale does not mean they are unambitious or superfluous. Both large and small nonprofits are capable of enacting positive change, and both have disadvantages they are trying to overcome. Importantly, one's weaknesses shouldn't necessarily negate their strengths.

In fact, many of the strengths of large-scale nonprofits are the exact complement to the challenges faced by small nonprofits, and vice versa. Dare I recommend the obvious? Could it be that with more and better orchestrated collaboration between large and small nonprofits, the better the outcomes will be across the sector and for donors?

I regularly encourage my team to take stock in their strengths and weaknesses, and to ask for help where they need it. Recognizing strengths and weaknesses--whether in fundraising, programs, marketing, or something more particular to one's mission--celebrates differences in a way that helps us all grow, together. Large-scaled organizations like the Red Cross should be encouraged to work with culturally relevant nonprofits on the ground, and they should celebrate such partnership with a transparency that ensures donor money is going towards projects that indeed catalyze change.

As donors and as nonprofit organizations, we are all responsible for doing our due diligence, for admitting our limitations, and for acting in the best interest of our beneficiaries as well as our supporters. This likely means sharing the support that American donors are so generously providing. By being upfront about our abilities and limitations, we can increase collaboration that will lead to better practices, and most importantly, get us all one-step closer to the world as we envision it.

About Melissa Kushner

Melissa Kushner is the Founder and Executive Director of goods for good, a 501(c)(3) nonprofit organization that empowers communities in Southern Africa to transform orphan care. Together with local partners, goods for good builds small businesses that finance orphan care programs, create jobs, and boost the local economy. Since its founding, goods for good has supported nearly 80,000 children and built ten small businesses. Learn more at www.goodsforgood.org.