Confronting Organizational Entropy

By Todd J. Sukol
Today I had the pleasure of attending a luncheon in honor of Joshua Venture Group‘s most recent cohort of talented social entrepreneurs setting out to the change the world through Jewish values and teachings. What an impressive group! What stood out most to me was the way that the two year experience they had with Joshua Venture Group has given them the support — and the tools — to turn their respective bold visions into clear, impactful actions. The degreee to which this group had learned to care for and bring out the best in each other was palpable. As I sat among these inspiring young visionaries, my thoughts turned to my more established colleagues in blue chip Jewish organizations we all know and sometimes love.

upstart bikkurim joshua venture group presentenselish. There is a risk in being too hard on the old guard, of course. It is no easy task to remain sustainable and relevant in the face of financial pressures, changing circumstances, a tough labor market and immutable forces of diminishing returns. Twenty years ago I was outraged at what I have come to call “organizational entropy,” the tendency of established nonprofit organizations to slide into an impotent state of self preservation as primary mission, with lofty visions deployed only as fundraising rhetoric and anti-accountability tactics. Today I am no less saddened by the tendency, but I no longer blame individuals. No one goes into this line of work because they yearn for mediocrity.  Rather, organizational entropy is a natural condition that necessarily accompanies nonprofit efforts just as greed accompanies commercial enterprise and corruption accompanies government. The trick is not to get angry about the tendency or blame individual actors, but rather to productively seek ways to mitigate the negative forces in order to keep positive efforts on track. I think many nonprofits — large and small — recognize this trend. Some are trying hard to confront it. A few are succeeding. 

What lessons could this newly minted group of Jewish social entrepreneurs teach old time professionals at established Jewish communal organizations that play such important roles in the fabric of American Jewish life? How could the support JVG taught them to give each other be applied to BigOrga? Are there ways we can take care of each others’ neshamas (souls) to keep individuals and organizations vibrant and impactful, even in the face of organizational entropy? Success happens when inspiration coexists with environments of structure, support and accountability. This is what Lisa Lepson and her Joshua Venture Group colleagues have taught today’s young leaders to strive toward. It is time we stop looking at these innovative young leaders with kind eyes that say “awww, isn’t that nice,” and start opening our eyes widely to their wisdom, learning from them as we mentor them — allowing them to show us how to repair what is broken, how to take care of our most precious commodity, each other.

The Nonprofit “Uniqueness Epidemic”

Last summer I had the pleasure of taking a course in Economics as it relates to the philanthropic and economic sector (at the Lilly Family School of Philanthropy at Indiana University). Like many in our field, my background is on the programmatic side and my orientation is more intuitive than analytical. Over many years as a nonprofit manager and leader I have developed financial literacy and some degree of expertise, but only as a means to an end. I have had little exposure to the field of economics per se, and little to do with those who study and practice this fascinating subject (at least professionally – I do have some charmingly nerdy friends who are economists, people whose work life never seemed to connect with mine). I’ve always thought of economics as something in the cerebral, mathematical, scientific arena. I never appreciated the vital role its principles can play in increasing nonprofit impact. My study this summer opened my eyes to see economics with a very new perspective, one I think many nonprofit leaders and managers would benefit from.

Working from the somewhat dated but surprisingly readable text, Economics for Nonprofit Managers, by Dennis R. Young and Richard Steinberg, I came to see economics as a “behavioral science,” a “decision science” and a “moral science.” Economics can help describe and explain the way individuals and organizations act. It can help us make wise decisions about allocation of resources. Economics can help us clarify and refine values and develop theories of change to help us fix serious social, societal and environmental problems. The complex formulas and graphic functions that used to baffle me are simply representations of anticipated human behavior. By taking what we know about individual and group psychology and translating it into formulas, we then have a means by which to evaluate different courses of action objectively and see how they might work in service of or against our organizations’ missions. We strip away the messy details and attempt to predict outcomes of various choices quantitatively.

Of course economic analysis is imperfect as a predictor, and only one tool for decision-making, but it can serve as an important counterweight to our sector’s rampant overreliance on intuition and over emphasis on nuanced sensitivities. As a group, nonprofit leaders suffer from a uniqueness epidemic. We frequently fall into the trap of thinking that our particular situation is completely different from anything else in the world. But in reality stripping the details out of a circumstance in order to make a more analytical decision is not such a bad idea. Our refusal to consider the possibility that maybe our organization is not so different often leads to wasted resources and diminished impact.

Three prevalent characteristics of nonprofit organizations and nonprofit leaders contribute to this problem. First is passion. We are who we are as a sector because of our incredible passion for making real, meaningful, lasting change. This is the engine that drives us and we could not survive without it. But sometimes our incredible zeal blinds us. As a wise person said to me recently “it’s hard to see a picture when you’re standing in the frame.” The set of tools that economic analysis provides would lend some much needed objectivity to our decision making.

Second is hubris. By definition the nonprofit sector gives private actors that opportunity to express their beliefs about major societal issues and take direct action based on those beliefs. Engagement in our work depends on a conviction that we are right about the change we seek, and that our approach to making that change is the best way. Think about how much confidence it takes to build organizations that actualize our vision, not to mention convincing others to invest their hard earned resources. Let’s face it, this kind of certainty comes with risk of a certain measure of arrogance. Why waste time seeking objective analysis when we already think we know the truth. Economic analysis can provide a reality check on what we think we know. Even minor modifications to our assumptions or methods could dramatically change outcomes.

Third is collaborative decision-making. The most sustainable nonprofit organizations have strong leaders, but they also have a deep well of committed constituents that participate in decision-making. This includes boards of directors, other volunteers, staff members and other stakeholders. Collaborative decision-making is a critical tool, but sometimes we over idealize it and overuse or misuse it. Arriving at good group decisions takes a long time, and lots of trial and error. It also involves an unendingly complex mixture of human emotions and interrelationships. When the process becomes a game of “the strongest personality wins,” stupidity often prevails. Economic analysis provides a way of bringing calming pillars of sanity to turbulent deliberations.

I want to thank my fellow classmates from this summer, and especially our professor, Dr. Patrick Rooney, for giving me literally dozens of ideas for applying economic principles to the nonprofit and philanthropic sector. If you have not been initiated, I encourage you to spend some time getting to know the fundamentals of economic analysis. It’s a lot more practical — and applicable — than you may think.

Zero-Based Budgeting for Nonprofits

I recently had the pleasure of debating with fellow students at the School of Philanthropy about the relative advantages and disadvantages of zero-based budgeting for nonprofit organizations. Over the last few years, zero-based budgeting has become very much in vogue again in the nonprofit and philanthropic sector. Like so many good things, however, is sometimes overused, misused, or extolled as having ridiculous magical properties. While I acknowledge the extraordinary value zero-based budgeting can have, it can also be a colossal waste of time for many nonprofits.

A tremendous benefit of zero-based budgeting for nonprofits is that it forces planners, leaders and managers to ask the tough questions about “business as usual.” When we’re honest, we all know that organizations tend to default toward self-perpetuation. That’s the silent plague in our sector. Zero-based budgeting forces us to question assumptions and tie spending to desired outcomes and anticipated program accomplishments. That’s a good thing!

But zero-based budgeting can also cause planners who think they know better to ignore valuable lessons learned from the trenches of program execution. I have seen zero-based budgeting introduced by a CFO who was completely out of touch with the rank and file within the program side of the organization. It became an exercise in his ego and candidly it was more of a gimmick to impress the board then anything that was practical or useful. So yes, I agree that it’s important to rethink the way we do things periodically, and to make sure the desired outcomes indicated by our vision and mission find their way directly into the anticipated outputs of our programs.

My favorite comment from our debate was the suggestion that perhaps zero-based budgeting could be institutionalized, but not every year – perhaps once every two, three or five years, depending on the organization’s size and culture. Such a balanced approach would make for more healthy, self-evaluating, ethical, impactful nonprofit organizations. That’s an idea I can get behind! And for you zero-based budgeting zealots out there – hey, it’s better than nothing.

This Morning I reach

Here’s a beautiful meditation that was shared with me…

This morning I reach gently for the cup
The container in which Your spirit is carried
Carried to me and to all humankind
I drink from the precious cup
And know that the cup is treasured only for its role


It is but a container of Your Joy, Your Treasure, Your Essence
The cup is flawed, but is precious nonetheless
It will never be a perfect or true conduit
But it is good enough
And it is essential


I cannot apprehend you
I cannot approach you
Your approach to me is through this vessel
I treasure it, I reject it
You


You I seek
You I require
You have chosen me
You have chosen us
You have created something I will never understand


But you have placed me here now
Here I stand
Here I walk
Walk with you now
For you


About you on my best days
May today be such a day
I drink from the cup and invite you inside
To fill me with your holy spirit
Please guide me to act and not act in accordance with what matters