A 2024 survey by Forvis Mazars found that nonprofits' most popular tactic for reducing expenses was using volunteers.

Here’s why this concerns me.

Nonprofits are systems

The purpose of a nonprofit is to establish a system that takes money and converts it into impact. I like to think of these outputs as "units of good."

Let's use the example of a community kitchen that provides free meals to the food insecure.

As donors, we expect that the money we donate (input) will be used to produce free meals (output).

Here's the question: why should a donor give to this nonprofit instead of directly to someone who is food insecure?

The system!

Food-insecure people may not have access to a kitchen to produce their own meals, and even if they did, they may not live near a grocery store or be able to afford the ingredients.

If a donor gives that person $15 directly, their best option is probably to purchase a meal at a nearby restaurant.

By giving directly, $15 generates one meal. ($15 per unit of good.)

If the nonprofit has designed an effective system, it could produce an equivalent meal of the restaurant for much less. A strong community kitchen benefits from economies of scale, partnerships with food vendors, and the commercial kitchen infrastructure that is only possible with a groundswell of collective donor generosity. We'd hope that a gift of $15 to a community kitchen could generate two or three meals for the same money, thereby justifying the system's existence.

Some systems are bad

However, if the donor discovered that the community kitchen required $30 to produce a meal, they would be (rightly) concerned. Despite good intentions, the nonprofit has built a poor system for producing good, one less effective than giving directly.

This happens more often than we'd like to admit and has left many donors jaded. Give Directly's research suggests that the best way to generate impact is by giving directly to those in need rather than through intermediaries. Skeptics of traditional funding models could make the case that nonprofits are merely "middlemen" or layers of a bureaucratic system that ultimately erode impact.

While I appreciate Give Directly's innovative approach to charity (their commitment to data makes me swoon 😍), their model doesn't work in many contexts. For instance, giving $25,000 to an eight-year-old who needs foster parents will not produce the outcomes this child needs. Money alone is often not the answer. We need systems that convert money into impact.

But volunteers are "free"

Since volunteers are "free," it seems like low-hanging fruit for nonprofits with tight budgets. The problem with leaning on volunteers to save money is that volunteers don't build systems; professionals do. Volunteers can be helpful within the system (for instance, people who volunteer at community kitchens), but they shouldn't design them. Systems built and sustained by volunteers are fragile. They break down when volunteers lose passion, get burnt out, or face personal challenges that limit their time to invest in the effort. Volunteers have a responsibility to take care of their families first; their work in nonprofits can only come from the margins.

Professionals build strong systems (and they must be paid)

When nonprofits increase the use of volunteers to "save money," this signals that they are abandoning systems thinking for short-term cost-cutting. The frustrating side effect is that they give away their buying power. For organizations that so often feel tossed by the whims of governments and funders, I hate to see one more way their power is eroded.

Buying power gives you the authority to make this work someone's job. Doing so moves the work from the margins of  someone's life to the mechanism by which they provide for their family.

Everything becomes elevated: expectations, quality, accountability; now, this person can commit to building dependable systems and infrastructure.

So why are so many nonprofits turning to volunteers?

Sometimes, it's because they lack systems thinking. Another big reason is because...

Donors think in terms of causes, not systems

Many donors don't want to pay for salaries or overhead; they want 100% of their money to go directly to the cause. Of course, this is unreasonable. They want the benefits of an efficient system without paying to develop it. They want to eat at the restaurant without paying for the labor of those who prepared the meal and brought it to their table.

The distaste donors have for "overhead" is debilitating for those trying to build systems that generate good. Just as important, it undermines progress on the cause the donor cares so deeply about!

What can we do about this?

This is a huge problem; I don't pretend to have a good answer.

Dan Palotta's Ted Talk on this topic is stellar and has totally changed my thinking.

This six-minute video* is another great resource that beautifully illustrates how donors undermine the good they want to create with unreasonable expectations.

(*Succession fans will recognize the actress at 4:19)

While I don't have answers, here are three questions to consider.

• Can we quantify the value of the systems we've created and the impact they generate? How many units of good did you produce last year?
• Can we teach our donors about the systems we've designed and the impact they generate?
• Can we invite our donors to invest in our systems rather than merely giving towards our causes?

I want to see nonprofit systems thinkers rewarded with funding that gives them leverage to hire experts. (Buying power, baby!)

I'd be curious to hear from you: what are your go-to examples of excellent systems that generate outsized impact in the nonprofit space? Keep up the good work. (Try not to do it for free.)

Ted

ps

If you want to improve your system for generating good in the world, we explore building processes and measuring impact in sessions two, three, and four of my cohort, which starts in two weeks. There are seven spots left.