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Monday, March 28, 2005

Non-Profit or Profit? Which Organizations Provide Services More Efficiently?

I came across this commentary on the Environmental News Networks website written on the alleged myth that all non-profit organizations are run in an inefficient manner. It was written by Duane Silverstein who works for Seacology, a non-profit organization that works to preserve the enivironmental integrety of the worlds' small islands.
In his commentary Mr. Silverstein argues that an organization like his runs much more efficiently than any for profit company. He used five areas of comparision: budget size, responsiveness to the public, reliability, board meetings, and bang for the buck on expenditures. While he did make a decent argument that non-profit organizations do in fact run rather efficiently with respect to managing a tight budget and being responsive to the public he left out one major aspect of the argument that I believe lies in favor of the private, for profit companies and organizations. And that is the incentives to provide services to others. The incenitives for a organizatin like Seacology to protect island environments are not monetary incentives but have more to do with emotions and morals. People donate and offer to provide work for these kinds of organizations becasue they feel they are doing their part in making the world a better place.
But what about providing automobiles, telephone and internet service, and the latest computer technologies? In these areas for-profit organizations provide their services much more efficiently regardless of their hugh budgets because they have the incentives to do so and non-profit groups do not.
Can you imagine a non-profit group wanting to provide telephone service out of the kindess of their hearts where they only ask for donations instead of sending a monthly bill? It's simply not going to happen.
Where emotional and moral incentives are high non-progit organizations may trumph with regards to efficiency over the more capitalistic for profit companies. But where these incentives are lacking for profit companies will provide their services the most efficiently because they have the incentives to keep others happy in their pursuit of the all mighty dollar.

1 Comments:

At 10:23 PM, Blogger Nicole and Andy said...

Oftentimes, we work for incentives of a raise or other point. It seems to me that a non-profit organization is more limited in that aspect than in any other place. Its certainly hard to work for personal profit in a non-profit organization.
Until we arrive at a time when helping others is more important than money, it will be hard to improve significantly service.

 

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