Lee Silverman rattled fundraisers last May when he predicted that the nonprofit sector could capture an extra $100 billion a year in increased social benefit if it only changed the way it operates.
Silverman, the director of McKinsey & Co., acknowledged yesterday that that number, representing 10% to 15% growth for the field, would not be a staggering advance.
“There’s no group we’ve walked into where there is not 10-15% room for improvement,” he said during the opening session of the Direct Marketing Association’s Nonprofit Conference. The figure is “a two-by-four that gets peoples’ attention,” he said.
So what does he want? He thinks board members and “all stakeholders” in nonprofit groups ask some tough questions.
Here’s how Silverman breaks down the increase.
For starters, the sector could save $25 billion if it lowered the cost of raising and distributing funds. “What does it really cost to raise funds from each source?” he asked, admitting that “this question might be threatening to some in the room.”
For example, pledge weeks do not necessarily create long-term givers. Is there a better way to expend the resources?
Another $30 billion could be realized if nonprofits accelerated the distribution of excess funds.
Venture capital has been generous in supporting nonprofits, but groups are holding on to their assets, which have doubled in real terms since 1994,” Silverman said. “Contributed resources are being warehoused in financial assets and not being used today.”
All he asks is that nonprofits start coughing up some of those assets.
Then there is the $55 billion that can be realized from increased service efficiency. This problem stems from duplication of groups.
“There are 70 organizations to help the homeless in San Francisco,” he said. “There are 110 substance abuse centers in Los Angeles.”
Nonprofits can achieve scale by sharing information systems and back-office operations. And they should cut unneeded assets, as the Girl Scouts have done in Boston.
Added up, those changes already top $100 billion. Some smaller gains
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