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Nonprofit Graphic

Applying Contradictions to Solve the Problems of Overhead in Non-profits

Like many organizations, BMGI has numerous employees who support charities or have even founded one themselves. Given our professional involvement in for-profit organizations, this gives us some unique insights into both worlds. 

Comparing the management of for-profit and non-profit, one can see the latter faces numerous constraints. One of them is that the overhead of charities is eventually considered a necessary evil—the less there is, so the thinking goes, the more funds that can be allocated to the charity’s cause. Dan Pallotta sums it up: “Our generation does not want its epitaph to read, ‘We kept charity overhead low.’” Which is why his TED talk is titled: The way we think about charity is dead wrong.

From a problem-solving perspective, he suggests a higher level solution: If the world changes the way it thinks about charities’ overhead, then the problem simply disappears. Many charities can’t attack the problem at that level, though, nor can they wait for the problem to be solved for them by influential people like Pallotta. Rather, they must take a proactive approach and find their own solutions.

In problem solving, working out clearly the constraint is a powerful guideline toward the solution. TRIZ, the Theory of Inventive Problem Solving, is famous for using contradictions to do just that. 

Contradiction Bubble Chart showing the contradiction charities need to solve

This Contradiction Bubble Chart shows the contradiction of overhead that charities need to solve.

At BMGI we call this graph a Contradiction Bubble Chart. These charts show the two interlinked sides of a problem: a physical contradiction (we want something and its opposite at the same time) and a technical contradiction (we want the one thing but in the current state of affairs that hurts something else).

Physical contradictions can be overcome in four ways. While it’s key to collect several ideas for these solution concepts, for simplicity we will only show one example each.

  1. Separation in time: Incur overhead mainly in the setup-phase of the charity.
  2. Separation in space: Accrue overhead merely at the headquarters.
  3. Separation on scale: Set up “cells” using overhead; run the “network” with honorary work only.
  4. Separation upon condition: Have donors choose whether or not their funds can be used for overhead.

For the solution of the technical contradiction, we can use the TRIZ Contradiction Matrix 2003 and choose adequate “features to improve” and “worsening features” that best describe the contradiction at hand. In a real-world context, several contradictions might be found to match. Here we will only focus on the following one:

A charity’s objective of “having scale” can be translated as "increase amount of substance." (parameter #10). “Applying all funds to the cause” can be translated as "efficiency of the function." (parameter #24). In other words, one problem a charity needs to solve is the contradiction between the parameters #10 and #24. The matrix then tells us the following five solution principles have solved such contradictions in the past. Again, we will only give one example per solution principle.

Solution principle

Application to charities

Local quality

Actively spot and exploit local opportunities to reduce overhead.

Flexible shells and thin films

Keep hierarchies very flat across the charity.

Segmentation

Set up franchises or (cost-effective) local administrative committees.

Parameter changes

Identify all parameters that drive overhead. Manage them in a Y=f(x) method.

Strong oxidants

Use intrinsic motivation to keep volunteerism a lively aspect of the organization.

Brainstorming around such principles often yields superior solutions to brainstorming done without such guidelines. Such focused brainstorming also helps overcome “group think” and the psychological inertia that happens when teams have successfully used a hammer in the past and all to easily see a new challenge as a nail. We also recommend using such focused brainstorming after a first round of brainstorming where all ideas are allowed. When facilitated well, such an approach helps people from a large range of creative styles to work together effectively.

Revisiting Pallotta’s point, it is undoubtedly right to convince people to adopt an attitude toward charities that is not “dead wrong.” At the same time, we are convinced that non-profit organizations can gain a lot if they take a proactive approach to innovate and use entrusted funds with an efficiency that may even be unheard of in the for-profit world. Using contradictions to do find those solutions is a powerful way to approach the problem—and it works. Educara is one of the charities that was founded by a BMGI employee. Its focus is on school education for children in structurally weak areas. Since the year 2000, the organization has been active in rural northeastern Brazil and is currently expanding into India and Eduador. It successfully employs a number of the above quoted principles.

Dr. Michael Ohler is a principal with BMGI who brings over 20 years of experience to his work in applying people-driven approaches to shape and execute strategy and innovation efforts. You can follow Michael on LinkedIn here.

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