046. Signaling your financial trustworthiness lowers your NGOs impact by half: George Mitchell and Thad Calabrese

SummaryDid you know....When nonprofits signal they are financially trustworthy,  they actually give up to half of their potential impact.Why is this "financial trustworthiness signaling behavior” so pervasive, when it has this high a cost?In this podcast episode, I interview George Mitchell,  Professor of Nonprofit Management at Baruch College, City University of New York – and a long-time collaborator, including on our book (Between Power and Irrelevance: the Future of Transnational NGOs’ (Oxford University Press, 2020) -- and Thad Calabrese,  Professor of Public and Nonprofit Management at New York University about their provocative new findings. George’s Bio: Professor of Nonprofit Management at Baruch College, City University of New York Director at Center for Nonprofit Strategy and ManagementMoynihan Research Fellow at Syracuse UniversityIndependent consultant at InterActionPh.D. from Syracuse UniversityCo-author of our joint book ‘Between Power and Irrelevance: the Future of Transnational NGOs’, together with Hans Peter Schmitz, University of San Diego (Oxford Uni Press, 2020) Thad’s Bio:Professor of Public and Nonprofit Financial ManagementAssistant professor at Baruch College, earlier on Ph.D. from New York University We discuss: Nonprofits frequently adhere to four financial ‘orthodoxies’ or norms:Though shall keep your overhead costs minimalThough shall be financially lean, i.e. not look too profitable, not sit on a large financial or capital reserveThough shall diversify one’s revenues as much as possibleThough shall avoid taking out debt (in the form of loans, bonds, bank notes) etc to acquire capital for investmentWhat if these practices, these financial norms, actually reduce your impact as a nonprofit by as much as 50% (in terms of your overall spending levels)?George and Hans did a large-scale, quantitative study on US-based international and domestic nonprofits that indicated exactly this. Their research findings were picked up by several national US media, given their provocative nature. Quotes:“Norm-adhering nonprofits sacrifice about half of their mission impact over a 10-year period compared with norm-busting nonprofits.”“Forgone mission impact is the hidden cost of trustworthiness”Resources:George’s LinkedIn ProfileThad’s LinkedIn ProfileGeorge's blog post – pointing to an article in The Conversation: HERERelated article in Nonprofit Policy Forum  (Open Access): HEREBook: Between Power and Irrelevance: the Future of Transnational NGOs’ (Oxford University Press, 2020): HEREYoutube video of this podcastClick here to subscribe to be alerted when new podcast episodes come out or when Tosca produces other thought leadership pieces.Twitter LinkedIn Facebook