Dan Pallota, the author of Uncharitable, has a great article on nonprofit effectiveness at the Huffington Post. An excerpt is below:
...The word "profit" comes from the Latin noun "profectus," meaning "progress." Thus the term "nonprofit," means literally, non-progress. The sector remains bound by an ethos of deprivation laid out by the seventeenth century New England Puritans in a twisted effort to ameliorate the terrible reality of their self interest. It said that on this side of a line we can make a profit and on this other, which we shall call "charity," we will deny ourselves. Thus the carpenters and farmers of the world got free-market capitalism, and the needy got a religion -- charity -- in which everything that worked in commerce was banished.
By and large, it is still what the needy have today. We let people make a fortune doing any number of things that will harm the poor, but want to crucify anyone who wants to make money helping them. This sends the top talent coming out of the nation's best business schools directly into the for-profit sector and gives our youth mutually exclusive choices between making a difference and making money. This we call altruism. We let Apple and Coca-Cola plaster our billboards and television sets with advertising, but we don't want important causes "wasting" money on paid advertising. So the voices of our great causes are muted and consumer products get lopsided access to our attention, twenty-four hours a day. This we call frugality.
Amazon could forego investor returns for six years to build market dominance. But if a charity embarks on a long-term plan with no return for the needy for six years we expect a crucifixion. This we call caring. We aren't upset when Paramount makes a $200 million movie that flops, but if a $5 million charity walk doesn't make a 75% profit in year one we want the attorney general to investigate. So charities are petrified of exploring new revenue-generating methods and can't develop the powerful learning curves the for-profit sector can. This we call prudence. We let for-profit companies raise massive capital in the stock market by offering investment returns, but we forbid the payment of a financial return ("profit") in charity. The result? The for-profit sector monopolizes the capital markets while charities are left to beg for donations. This we call philanthropy.
...It is time to give charity the big-league freedoms we really give to business -- the freedom to get the best people and pay them whatever it costs for the value they can produce, freedom to buy ads on the Superbowl -- yes, at a cost of $2.6 million a pop -- to start building market demand, freedom to take big risks, and to fail big if that's what it takes to learn, and the freedom to start attracting capital in a stock market by paying investors a financial return. It's time to stop obsessing about overhead and start focusing on progress.
Read the rest here.