Category Archives: Poverty

The return of tangible value in jobs

The building that I live in has been having renovations done over the past few months, and the folks doing the work are mostly from Central America. In fact just today a young man came by to put a second coat of paint on the front door.

In watching him work, it occurred to me that in today’s society, there is a large gap in salaries between people doing “tangible” work, like construction or farming, and people doing “abstract” work, like private equity and marketing strategy. And that a lot of the folks around here in California doing the tangible work are immigrants from Central America, who don’t make a lot of money. Twenty years from now, what will the relative value be of being able to do a discounted cashflow spreadsheet vs. being able to change out a door frame or rejuvenate soil?

John Michael Greer recently wrote about how the energy bonanza of the past hundred years has allowed the flowering of many abstract lines of work. And frankly “abstract” often means “non-essential.” While it’s true that someone can make a lot of money doing “marketing strategy,” and that in today’s society such a role may financially make sense for a company to fill, it’s not hard to see a scenario in the future where there just aren’t the resources or the business justification for these “extra” jobs.

As a matter of fact, it’s well known that in India there are globally competitive businesses like WIPRO that run with a much leaner management structure, as detailed in the book Bangalore Tiger. It makes me realize that the MBA gravy train of well-paying marketing jobs may be on the wane.

I suspect that a key to being relevant in the tightening times ahead is to get as close to the “value” as possible. If I’m doing hands on work that is critical to the end offering–uncuttable, hard to replace–that’s valuable. If I’m doing the high level work of running a company *that provides something that people absolutely need* then that’s valuable. But if I’m somewhere in the middle–I’d be concerned about how to be relevant in the job market.

Donations, overhead, and the “feel good” factor

Do we really want to compete for donors on the basis of low overhead?

I had the good fortune at SOCAP 10 to meet Barty Jan Skorupa of Groundwork Opportunities. In the course of our conversation, he shared with me that when he does a fundraiser, 100% of proceeds go directly to programming. A few years ago I would have said “great!” but after hearing Dan Pallotta give a rousing “social benefit folks deserve to get paid, too” talk at the 2010 SEA Summit in San Francisco, I’ve started to actively wonder how nonprofit leaders can pay the rent when calls of “no overhead” carry the day.

What I took away from Dan’s talk is that overhead ratios are a poor measure of impact. And it makes sense, when you think about it: a smart for-profit company that is going to launch a critical new venture understands the value of investing properly and “doing it right,” and thus they raise big money in order to be as successful. Guess what—a lot of that money goes into infrastructure building and paying competitive wages to smart people, in other words to “overhead.”

But for-profit’s get it—they swing the big bats to get the big results. Dan made the point that the non-profit world often has a meek “spend as little as possible” attitude, based on the belief that “less is best” when it comes to overhead.

Now back to Barty. Here’s a smart guy who could be making good money as a consultant to for-profit companies, who runs this social benefit org “just because.” And I couldn’t help but ask him, “so how do you pay your rent?” because it just seemed unfair that he should have to scrape by. Fortunately for Barty he’s started to attract some grants and institutional money, but it’s still early, and even paying the rent is tight.

Then it occurred to me the next day: the question of whether or not 100% of all “event proceeds” go to programming is really a question for accountants. Let me explain.

Consider two $1M a year social benefit organizations that are totally equivalent in over way, except for this:

  • Org A says “20% of all money we take in, from funders and from events, goes to overhead. The other 80% goes to programs.” So that’s $200K a year to overhead, $800K to programs.
  • Org B says “100% of the money we take in from events goes to programs. And 100% of money we take in from funders goes to overhead.” Let’s say the funders are chipping in $200K a year, and the events raise $800K a year.

Now we have two equivalent organizations, right? Well, not really. Why? The psychological factor.

Here’s my take: Barty is playing it smart by saying “we have no overhead” because the typical individual donor thinks that’s a good thing, and likes the idea of all of their money going “directly to the cause,” even if people who run these organizations in fact need to eat, get medical car, and have a place to live. The casual donor doesn’t really care–from a psychological standpoint, they want the emotional gain from the “direct impact” they are having.

Thus by using the rallying cry of “all funds raised at the event go straight to programming” he can unlock funds that otherwise might not be donated if they went, even in part, to “overhead.” As much as I agree with Dan that social benefits folks also deserve to get paid, unfortunately I doubt we’ll see human nature change such that the average donor cares about infrastructure.

Having said that, I realize that whenever a friend brags about how their charity of choice “has less than 1% overhead” I engage them in a conversation about whether that’s true, and if so, what that would actually mean for the quality of the organization. I’m trying to do my part to get the people around me to think a bit deeper about these issues.

Nonetheless, consider—do you care how about how much overhead Starbucks has, or do you want a good coffee at a good price in a nice shop? If, when it comes to donors, social benefit organizations are at least partly in the business of delivering “feel good,” in return for donations, then a “100% goes to programs” strategy can be a good thing.

Note: since writing this article I finally sat down and read through Dan Pallota’s thought provoking book Uncharitable in which he goes into more detail on this phenomenon of overhead ratios and accounting tricks. He also describes the unsettling case where non-profits that don’t engage in these tricks can lose their funding because they appear to be “inefficient” when in fact the whole “minimize the overhead” frame is what’s actually at fault. It’s time to get out of the overhead game and focus on impact.

The Magic of BRAC—Amazing Social Impact

Fazle Hasan Abed, founder of BRAC

Fazle Abed of BRAC

Many people have heard of Grameen and Muhammad Yunus, but who knows about BRAC and Fazle Abed? Outside of the development world, hardly anyone, and it’s a shame because BRAC does amazing, transformative, unique work. I just finished reading a fantastic book about BRAC, Freedom from Want, which gives an engaging overview of how several of BRAC’s major initiatives have developed through the years.

What strikes me as particularly interesting about BRAC isn’t so much the areas that they have entered, such as primary education, tuberculosis treatment, and poultry farming, but rather the organizational habits that allowed them to experiment, learn, adjust and ultimately succeed in these areas.

A good idea and the initiative to enter is a good start, but to actually succeed it takes the ability to adapt, and from “Freedom from Want” I’ve learned that BRAC is excellent at adapting. Not surprisingly, this core strength at adaptation has enabled BRAC to enter several other countries such as Afghanistan and Tanzania, and have an unusual degree of success.

So what is the magic of BRAC, and how do they do it? It’s hard to know from reading a book, but here are my guesses at some of the key factors:

Leadership

Mr. Abed started BRAC in his late 30’s, well into his career. If you watch him in action on video, he comes across as extremely grounded while at the same time being very intellectually nimble. Combine this with humility and a deep desire to find solutions, and you get the key ingredients to seed the DNA of an organization with the ability to learn.

Persistence

Related to this ability to learn is having the stamina to stick with a challenging idea, and be able to see it through. For example BRAC over 10 years to start its bank, and the idea for the bank inevitably changed over time as BRAC dealt with the bureaucratic challenges in Bangladesh. But the organization seems to have had a powerful enough vision for the bank that they stuck with it, resulting in what today is a bank that helps a tremendous number of people start small enterprises.

Humility

The flip side of persistence is knowing when to pull out. BRAC has had its share of areas, such as silk cultivation, where it spent many years trying to get in, but ultimately determined that it couldn’t make it work. For an organization that emphasizes impact and learning, and means it, an unsuccessful venture can be canceled without it needing to “mean anything” about the organization itself. But for an organization that “is never wrong” and “can never fail”, an unsuccessful venture can become a black hole that pulls in more and more resources.

If you don’t know anything about Fazle Abed, I highly recommend watching one of the Ashoka videos about BRAC, which reveals much about Mr. Abed as a person, and about the ways of BRAC.

Whatever the reasons for BRAC’s success, the point is that this is an organization to watch. BRAC’s organizational culture has created an amazing track record of success, and looks poised to continue presenting and refining new ways of having scalable social impact.

De Soto on how and why institution building works

Photograph of Hernando de Soto, which he had t...

Hernando de Soto

Hernando de Soto is a very intelligent economist from Peru who has had a great positive impact on development in Peru, and around the world. Building from his cornerstone book The Other Path (to contrast with The Shining Path), he advised the government of Peru on over 178 institutional reforms related property rights, democracy, and constitutional reforms for freedom.

In this nicely produced video interview with de Soto, he eloquently describes his major ideas about how to best support the healthy growth of a developing country.

Early in the interview de Soto shares an interesting “metric” of how he knew he was having an impact on Peru, saying “If we hadn’t been shot at, it would have been an indication that we weren’t having an impact. We had an impact.” Talk about standing by your ideas.

Was it worth it? Consider that Peru’s GNI per capita PPP grew 37% between 2005 and 2009, compared to 6% growth for the United States. I bet institutions played a key role in Peru’s rapid growth. Watch the interview to learn more about de Soto’s ideas—definitely food for thought.

Attitudes for Success Run in the Family

Today I had a very special opportunity to visit one of Digital Divide Data’s computer operators, Bunthy. He was hired by DDD out of CIST, which runs an IT training program for disadvantaged youths, and given further training by DDD in order to become a successful digitization operator at the Phnom Penh office.

Bunthy’s parents, like many people of their generation in Cambodia, had to move a lot in order to stay safe during the Khmer Rouge regime. As a result they ended up with no clear place to be, and no land. After living in a slum next to Boeung Kak Lake for several years, they were forced to leave when the land was sold to a developer. Fortunately they were eventually given a cash settlement to purchase land elsewhere and start over.

Now this is where it gets interesting. Bunthy’s father is a visionary. He could see the talent in his son, and he knew that in order to get ahead, he had to support his son through finishing high school. So in spite of the hardships, he took that long term view, and allowed Bunthy to continue studying rather than leaving school early to make money for the family.

And this investment has really started to pay off. After graduating from high school, Bunthy was accepted into CIST’s training program, and after that he was hired on by DDD to be a computer operator doing digitization work. And in just a couple of weeks, with DDD’s support he’ll be attending university to study business.

What’s even more fascinating is that this cycle of education is continuing in the family. Bunthy’s sister (seen in the picture holding a young neighbor) is being supported by Bunthy to stay in school, at his insistence, rather than going away to take a factory job as his relatives have suggested. “I want her to get a job where she uses her mind” he told me, “I don’t want her working in a factory.”

Bunthy has plans to help the family finish building their home, and then to start a side business from the home, selling consumer goods. He also has an idea to make soap for sale locally. His father works in construction, and his mother works across town selling beef kabobs that she makes. This is an enterprising family with a bright future.

What was so uplifting for me in visiting Bunthy’s home was seeing the hard work, smarts, ambition, and vision that Bunthy’s whole family holds. They “get it” as to why they should keep their kids in school, and they have the core attitudes for success. Indeed this is the type of family that I aim to support in my social enterprise work.

Great Resource: Proceedings from HBS Business Solutions to Global Poverty Conference

Back in 2005 there was a conference at the Harvard Business School called “A Conference on Global Poverty: Business Solutions and Approaches.” Although I wasn’t there, I’ve benefited greatly from reading the proceedings and papers related to the conference.

There are a couple of things about this conference that I find noteworthy. First of all the corporate involvement was much more about actual business development and opportunities and much less about CSR, especially from the purely reputational point of view. It wasn’t about photo-ops and feel-good moments, but rather about real business. I find this refreshing.

Secondly, I don’t see many conferences like this, where there is a real focus on beneficial, responsible economic development with corporations as a driver. I think there is a lot of untapped opportunity here.

The key resources from the conference are as follows:

* a book of many of the papers presented–amazingly on-target and readable–here’s my Amazon review including the tablet of contents:
http://www.amazon.com/Business-Solutions-Global-Poor-Creating/dp/0787982164/

* an HBS website with many slides and abstracts from the conference:
http://www.hbs.edu/socialenterprise/globalpoverty.html

It’s funny how even though the material may seem “old,” I haven’t heard anybody else reference it; have a look.