Charities in Crisis: The Charitable Industries Most Pervasive Problem

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Charities in Crisis

Embracing Business Principles for a Sustainable Charitable Sector

The charitable sector faces an existential crisis. Escalating demand strains resources, and more than one-third of Canadian charities, totaling more than 26,000 organizations, are projected to become insolvent within a decade. This reflects a global trend: rising need and declining capacity in a sector unprepared for sustainable operations. The sector’s greatest vulnerability is not financial but strategic: a long-standing, self-imposed resistance to essential business principles and a deeply embedded belief that charity exists outside—and even in opposition to—enterprise. This disconnect, while appearing to safeguard the ideology of their mission, actively erodes their capacity to deliver and limits their operational effectiveness, sustainability, and impact. To survive, the sector as a whole must evolve, seeing business acumen, technical expertise, and domain knowledge not as threats to charitable purpose but as powerful enablers. When properly understood, strategic governance, operational efficiency, and functional depth amplify impact, unlock sustainability, and ensure long-term relevance. The rejection of business is not mission-aligned resistance—it is mission failure by design.

Historical Context

Pre-1900's

For centuries, charity was administered through religious institutions, almshouses, and the patronage of the wealthy. Nearly all major world religions, including Christianity, Judaism, Islam, Hinduism, Jainism, Buddhism, and Sikhism, have embedded giving into their core practices. Religious organizations acted as stewards of aid, delivering localized social services long before formalized state welfare systems. Even as far back as the 17th and 18th centuries, a new debate was already ongoing: Should welfare be a public or private responsibility?

Political economist Thomas Malthus vehemently argued against government-led relief programs, claiming they were economically unsustainable and morally corrosive, advocating instead that charitable activities be entirely managed by the private sector. His 1803 work, An Essay on the Principle of Population: A View of its Past and Present Effects on Human Happiness, became a foundational text advocating for private-sector control of charitable activity and setting the stage for a deep-rooted, laissez-faire tradition in welfare philosophy.

The 20th Century

The 20th century saw the rise of iconic global organizations such as the Red Cross and Oxfam, which rapidly expanded in response to war, poverty, and industrialization. However, many of these entities emerged in direct opposition to the social harms created by unchecked industrial capitalism. The resulting philosophical opposition hardened into an operational divide. As labour unions, advocacy groups, and social justice movements pushed back against exploitative practices, the charitable sector positioned itself as a moral counterweight to business. Over time, this oppositional stance solidified into an institutional doctrine that interpreted its role as a counterbalance to that of industry.

The Modern Charitable Sector

Even today, this inherited divide persists. Corporate philanthropy is routinely handled by distinct charitable arms, symbolically and operationally distancing social good from business logic. Within charities themselves, business integration is often viewed as a threat—an affront to values rather than a catalyst for mission delivery.

This ideological divide is neither benign nor beneficial, actively preventing efficiency, stifling innovation, and compromising mission outcomes.

The Rejection of Business Principles

Charities often reject enterprise values based on four interlocking drivers:

  1. Mistrust of private enterprise
  2. Philosophical and legislative divergence
  3. Professional homogeneity
  4. The rise of nonprofit careerism

Each factor compounds the others, producing an ecosystem that resists strategic input, denigrates operational excellence, and clings to outdated governance models. 

By understanding and addressing these factors, the charitable sector can begin to bridge the gap between nonprofit and business practices. Embracing strategic planning, financial management, and operational efficiency from the business world means equipping charities with the tools they need to operate more effectively and sustainably, ultimately better serving their communities and achieving their missions.

Mistrust of Private Enterprise

The charitable sector has long framed private enterprise as antithetical to altruism, equating enterprise with exploitation and assuming that financial acuity is inherently at odds with altruistic outcomes. This is not without precedent, and many charities were founded as reactionary measures to the exploitation of the working class during industrial expansion. Further described in the article Women and charitable organisations in nineteenth-century Ireland and the contemporaneous book The History and Objects of the Foundling Hospital by John Brownlow, this reactionary perspective to societal reform further fueled a philosophical identity rooted in contrast—one that sees private enterprise not as a parallel system, but as its ideological opposite. This legacy perspective, however, has become a barrier. For many organizations, the private sector is not only a different operating model—it is the ideological “other.” This narrative persists in boardrooms, hiring decisions looking for charitable industry-exclusive candidates, and funding appeals seeking endless funding on a one-way hope of trust, fueling resentment and an entrenched “we are not a business” posture that actively undermines effectiveness.

Legislative Challenges

Governance by Design

Many of the sector’s most debilitating inefficiencies are not the result of poor leadership but poor structure. In most countries, charities are governed by legislation that mandates unpaid boards, imposes complex reporting frameworks, and relies heavily on volunteer labor. These regulatory choices reflect a public desire to preserve moral clarity by ensuring that charitable work remains untainted by profit. But the unintended result is a governance model that routinely underperforms.

Many charities are governed by unpaid, majority-voting boards. These structures are intended to preserve moral integrity but often result in underqualified oversight. Boards are frequently composed of well-intentioned professionals—lawyers, educators, doctors—who may bring credibility but lack the strategic, operational, or financial expertise required to guide increasingly complex organizations. Without cross-functional leadership or a clear mandate for performance, boards become reactive, ceremonial, or resistant to necessary reform. 

The inclusion of ex-officio members without accountability further entrenches stagnation. These ex-officio members, often long-serving organizational members, retain unchecked authority based on the flawed assumption that longevity equals insight. This dynamic makes challenging the status quo politically risky and impairs governance quality. While community and internal staff trust is essential, governance must be functional, not just symbolic.

Compliance as a Burden

Over time, regulatory demands have multiplied. Charities must now navigate complex financial disclosures, staff-to-program ratios, and layers of donor reporting. While these mechanisms were intended to ensure accountability, they have evolved into bureaucratic hurdles that disproportionately affect smaller organizations.

This compliance overhead discourages innovation and favors larger institutions with the resources to absorb the administrative load. It also leads to performative transparency: reporting systems that produce information without insight, metrics that optimize donor sentiment rather than program outcomes, and systems that provide a perception of utility without meaningfully providing such.

The pressure to appear lean and altruistic often results in underinvestment in infrastructure, staff development, and long-term planning. Public watchdogs such as the Better Business Bureau reinforce this behavior by rewarding overhead ratios rather than organizational effectiveness. Canadian charity lawyer Mark Blumberg has called this fixation “fundamentally damaging,” noting in his article How Much Should a Canadian Registered Charity Spend on Administration, that public scrutiny around overhead has warped sector priorities and stigmatized healthy operational spending.

In many cases, even fundraising becomes distorted by this narrative. Charities often feel compelled to pursue recurring appeals that rely on donor emotion, moral obligation, or tragedy—rather than evidence of the charity’s impactfulness. As a result, the public is inundated with requests but rarely informed about actual results. This breeds fatigue and erodes trust, ultimately undermining the very goals those appeals were meant to support.

In Canada and the U.S., nonprofit law often enshrines board-level decision-making in unpaid, majority-voting bodies. While designed to ensure fairness, this structure regularly impedes agile operations and sidelines subject-matter expertise, and ensures that charities are run by committee. This committee-first approach dilutes strong perspectives, restricts traditionally authoritative expert decision-making, and suffocates innovation.

Professional Homogeneity and Nonprofit Careerism

Charity leadership is overwhelmingly insular. Most executives rise through nonprofit or public-sector ranks and have limited exposure to business environments, performance-based systems, or innovation-driven cultures. Strategic roles typically held by specialists in the private sector—such as Chief Strategy, Chief Revenue, and Chief Experience Officers—are often replaced by generalist committees or omitted entirely as a result of the misguided belief that a committee of competent generalists can replace targeted, deep expertise. This lack of functional expertise reinforces an internal echo chamber, where inefficiency is normalized, and knowledge that conflicts with industry norms is viewed with suspicion; where only the ideas that a group of inexperienced, non-experts sees value in are adopted. The nonprofit sector often defines itself by the strength of its intent and the purity of its goals, mistakenly assuming that this translates into meaningful impact.

“Mission without method is structural fragility impersonating value.”

This homogeneity has also reinforced a pervasive fear of enterprise concepts, particularly terms like profitability, scalability, or customer acquisition. With many charitable boards and leaders still believing that experience in the private sector is incompatible with nonprofit values, recruitment pipelines have remained closed to enterprise leaders, systems thinkers, and performance operators. Many charities still view terms like “efficiency” or “scalability” as antithetical to altruism, reinforcing a false binary: that business acumen undermines purpose. This perception, shaped by historical tensions with industrial capitalism, persists in hiring practices, boardroom conversations, and donor messaging. Rejecting this expertise may protect purpose; it undermines credibility and limits the ability to deliver real value. In direct contrast to the private sector, where efficiency means decreasing the cost of a given output, many charitable organizations operate on a ‘spend-the-budget’ mentality, with limited or no pressure to improve solely because being more efficient is, by itself, a worthy goal.

This resistance to enterprise talent is more than anecdotal. A 2023 study by Bridgespan and LinkedIn found that less than 20% of US-based nonprofit CEOs had any meaningful private-sector executive experience. In Canada, the trend is nearly identical. Similarly, based on research by Antoinette La Belle, effectiveness in nonprofit leadership correlates more sharply with diversity in career experience than with time spent in the social sector alone. 

Without cross-sector leadership, the sector becomes slow to adopt technology, resistant to performance management, and unable to capitalize on data. It overrelies on intuition and moral clarity, where it needs systems and structure. The result is a deeply passionate workforce, but often ill-equipped to solve the very problems it was hired to address.

The historical shift from charity leadership often comprised of businesspeople and executives to a predominantly ‘insider’ professional administration has, inadvertently or not, created a leadership ecosystem unaccustomed to driving deep operational efficiencies. Worse still, some avoid systemic improvements altogether—not due to malice, but because deep operational reform can destabilize familiar structures, including roles designed to manage persistent issues.

The Impact of Missing Business Acumen

The result of these structural failures is a slow but steady erosion of public trust. According to the Environics Institute, only 8% of Canadians expressed trust in charitable leadership in recent years, showing a significant decline from 19% in 2008. Similarly, the Muttart Foundation reports a 33% drop in public confidence since 2000. This trust crisis is not just perceptual; it is financial. Donors, both corporate and individual, are increasingly skeptical of the real value delivered by charities. Many charities default to vague “support us because we do good” style messaging, failing to communicate clear, measurable outcomes or value propositions.

A key component in this strategic evolution is the reimagining of organizational governance. For too long, charitable boards have been assembled based on traditional networks or philanthropic commitment alone, often resulting in a lack of essential functional expertise at the highest level. To truly steer an organization through this period of crisis and towards sustainable impact, boards must be constructed with the same rigorous intentionality applied to building a high-performing executive team. This means identifying the precise strategic and operational skills required—from financial stewardship and risk management to digital transformation and sector-specific advocacy—and actively recruiting individuals whose expertise directly addresses these critical needs. While a single individual may embody multiple competencies, the overriding imperative is to build a board comprised of functionally relevant individuals, each contributing a distinct and vital strategic perspective. Such a disciplined approach to board composition is not merely good practice; it is a strategic imperative for ensuring robust oversight, informed decision-making, and the proactive leadership necessary to navigate complexity and drive transformative change.

The Impact of Expertise

The benefits of expertise are undeniable. Why, then, do charities often reject this premise, or otherwise feel threatened when expertise conflicts with their operational reality? Many charity leaders believe that a charity’s ability to create an impact will naturally follow from the dedication of committed people. While well-intentioned, these organizations struggle to connect with potential donors and resist adopting business practices that would allow them to measure and communicate their impact effectively.

In the Arts and Culture sector, for instance, many charities make little effort to track metrics related to quality, impact, or effectiveness. They view numerical evaluations as an affront to their interpretive or artistic value. An executive director of an Ontario-based charity, when asked about metrics for program quality, responded, “Unless you are from the theatre community, you will not be able to determine whether a program is high-quality or not,” and suggested that potential donors should “trust that our programs continue to be high quality.” Unfortunately, as public trust in charities declines, this expectation becomes increasingly unrealistic. This also points to a clear sense of perceived value; despite the need to foster effective donor relationships, many charities end up dismissing knowledge from outside their mission.

Beyond operational improvements, business expertise can bridge the gap between public messaging and the organization’s mission, tailoring messages to different donors.

Case in Point

One Ontario-based charity incurred over $13,000 per client annually for a core program. Despite having both an experienced Executive Director and a professional administrator, the organization lacked any meaningful experience in finance, operations, technology, or strategy. Eighteen months after a business leader assumed the role of board chair, costs dropped to just over $2,000 per client, while program quality and reach significantly improved. This expertise enabled the organization to make confident, financially sound, and data-backed public statements to its donor base.

Bridging the Gap

Despite numerous challenges, the charitable sector continues to grow in cultural significance as more individuals rely on its services. According to an Ipsos survey in 2022, 22% of Canadians anticipated needing charitable services to meet essential needs, a figure that rose to over 26% in 2023. This increase accentuates the urgent need for charities to operate efficiently, especially in the face of declining funding options. Drawing on the consulting expertise of Porter’s Management Group (PMG), the following framework offers charities a path forward grounded in practical, replicable action:

  1. Recognition: Audit leadership. Are functional leaders empowered? Does the team include voices from non-public sectors? Is excellence a performance expectation, or a moral abstraction?
  2. Evaluation: Diagnose root causes, not symptoms. Tools like why-why analysis can uncover hidden operational flaws—whether from flawed methodologies, poor governance, or structural policy barriers.
  3. Communication: Craft differentiated messaging for internal and external stakeholders. Staff want clarity. Donors want value. Boards need vision. Speak to each—strategically.
  4. Implementation: Plan redundantly. Separate target metrics (your outcome) from indicator metrics (your proof-of-process). Use external project managers to overcome missing internal expertise.
  5. Iteration: Use short, frequent data cycles. Make incremental changes. If metrics stall, revisit the root causes—not just the symptoms—and refine your approach. Measure everything so you can prove your programs are not only important, but also effective.

Step One: Acknowledgment

Charitable sector leaders must first introspectively examine their operations and leadership teams. Key questions to consider include:

  • Do we have leaders from non-public industries?
  • Do we empower our functional leaders?
  • Do we value excellence and innovation or compliance?
  • Is our organization attractive to professionals who can contribute to our effective operations?

While asking these questions is crucial, it is equally important to accept that some, if not all, answers may be “no.” Acknowledging these gaps allows for open and transparent communication about the core functional needs of the organization.

Step Two: Evaluation

Effective leadership demands moving beyond symptomatic reactions to identify and resolve underlying issues. Organizations must implement rigorous analytical frameworks, such as a ‘Why-why’ analysis, to uncover the true origins of operational challenges. For instance, a persistent staff turnover issue, initially perceived as interpersonal conflict, was revealed through such analysis to stem from fundamental flaws in program development methodology. For an example of a why-why analysis, see the appendix below. This systematic evaluation ensures that solutions are targeted and impactful, avoiding mere superficial fixes.

Step Three: Communication

Effective communication is crucial to ensure that both internal and external stakeholders are aware of the project. This involves providing a project description, key reasons for undertaking the project, a timeline, and expected benefits. Tailored messaging for different stakeholder groups is essential. For instance, internal stakeholders might focus on job stability and role expectations, while external stakeholders might be more concerned with program quality and community impact.

Step Four: Implementation

Careful and redundant planning is essential during the implementation phase, where the project plan is put into action. This stage may benefit from the oversight of a project manager, especially if the organization lacks project management experience or the project is complex. Identifying success indicators and separating target metrics from indicator metrics is critical. 

As you implement your project, it is crucial to identify the indicators of success that will be used to evaluate both the quality of your implementation and the overall effectiveness of the solution. It is essential to distinguish between two groups of metrics: target metrics and indicator metrics. This distinction is important because using the same metrics for both indicators and targets can lead to a situation where your indicators become unreliable in assessing actual success. For example, in an educational institution, metrics should distinguish between standardized exam preparation and providing a meaningful, well-rounded education.

Step 5: Iteration

Iteration involves collecting data on indicators and target metrics and making small, incremental adjustments to improve the project. Effective iteration should follow these principles:

  1. Regular data-collection periods are necessary.
  2. Short data-collection periods are optimal.
  3. Iteration is valuable only if an event occurs frequently.

The goal is to improve a project once it is 80% delivered, focusing on the continuous improvement of target metrics. If achieving the desired quality or outcome proves challenging, a “Why-why” analysis should be conducted to understand the root cause and inform further adjustments.

The Key Barrier

The charitable sector’s most dangerous obstacle is its own identity. While charities are legally incorporated entities, their persistent century-long rejection of “corporate” logic has become a self-imposed blockade against growth, relevance, and sustainability. For charities to survive, thrive, and truly maximize their impact in an era of escalating demand, they must fundamentally shift their perspective. Consciously embracing business acumen is not a betrayal of their mission; it’s the only solution towards enhanced capacity, sustainable operations, and compelling donor engagement.

Organizations must reframe terms like fundraising, marketing, or governance not as commercial impurities but as universal functions across sectors. As the National Association of Nonprofit Organizations & Executives (NANOE) has noted, too many nonprofits suffer from “iced innovation,” “competitive blinders,” and “values vacuums”—all symptoms of a strategic vacuum.

Charitable leaders need to accept and integrate business values within their organizations. This integration is crucial for several reasons:

  1. Efficiency: Charities that adopt business practices can streamline their operations, making them more efficient and effective in their mission.
  2. Corporate Sponsorship: Understanding the business perspective can help charities craft compelling proposals for corporate sponsors, emphasizing mutual benefits and ROI.
  3. Donor Relations: By valuing the professional and vocational backgrounds of potential donors, charities can avoid alienating them and instead foster stronger, more enduring relationships.

To allow business ideas to integrate into charities requires a reframing of the idea that for-profit businesses as soulless, unethical entities, and therefore that their methods and values are the source. Before charities can grow beyond this limiting notion, they must recognize that business principles can coexist with charitable values. Many business functions are already present within the charitable sector, albeit under different names. For example, corporate fundraising involves strategies and skills similar to those used in sales and marketing. By adopting a more business-oriented approach, charities can gain a competitive edge, connecting more effectively with corporate sponsors and maximizing their impact.

A New Era

The fundamental crisis facing the charitable sector and the root cause of many financial and operational challenges lies not in a lack of funding, but in a pervasive self-imposed barrier that perpetuates funding challenges. Charities, by rejecting business principles and distancing themselves from the private sector, have hindered their ability to operate efficiently and sustainably. Historical context, philosophical differences, and the rise of professional charitable administrators have all contributed to this divide.

The reality of today’s charitable climate is that charities must embrace business acumen to thrive. By integrating strategic planning, financial management, and operational efficiency from the business world, charities can better fulfill their missions and sustain their operations. This shift does not compromise their altruistic goals but rather equips them with the tools to achieve greater impact.

As public trust in charities declines and the demand for their services increases, the sector must adapt to survive. Embracing business principles can transform charities, enabling them to communicate effectively with donors, manage resources efficiently, and innovate. This change is essential for the sector’s longevity and its ability to meet the growing needs of communities worldwide.

The Imperative for Evolution

In charting its future, the charitable sector faces a definitive strategic choice: either persist in the well-intentioned but ultimately unsustainable standards of the past or embrace a proactive evolution into an operationally excellent, mission-amplified force for good. The not-for-profit identity, though foundational, must stop functioning as a cultural barrier against the very operational excellence charities are legally and fiduciarily obliged (and urgently required) to pursue. The pervasive, often active, hostility toward business acumen is not merely self-defeating; it is the fundamental impediment to achieving the sector’s profound potential. By shedding these self-imposed limitations and intentionally integrating the strategic discipline of the private sector, charities can transcend their current crisis. This transformation, championed by visionary leadership, will not only safeguard vital services for generations to come but will also unlock unprecedented avenues for innovation, efficiency, and truly amplified social impact. The pathway to a secure, more impactful future is clear: strategic evolution, now.

Whether it’s rebuilding public trust, modernizing outdated governance structures, or equipping leaders with the tools to deliver real impact—these are not challenges for tomorrow. They are the defining crisis of today’s charitable sector.

Bryce Porter

Bryce Porter

Bryce Porter is a nonprofit strategist and CEO who helps purpose-driven organizations modernize their operations, improve board performance, and scale mission impact. He works directly with charities and nonprofits globally to bridge the gap between business acumen and charitable purpose.

Appendix

One charity faced a significant turnover of formerly loyal programmatic staff in a single season. The following is a sample of the Why-why analysis conducted for them, with identifying characteristics and evidence removed:

Problem Statement: Our programmatic staff turnover was 72% year-over-year.

Question: Why was the programmatic staff turnover 72% year-over-year?

Answer: Because the workplace was a hostile environment that did not facilitate collaboration and stifled creativity.

Question: Why was the work environment hostile and uncreative?

Answer: Because policies implemented two years prior required excessive committee oversight, slowing down impactful changes and diluting the core intention behind new programmatic initiatives. These policies disallowed variation in core responsibilities and mid-season adjustments, requiring overtime and creating ambiguity regarding responsibility for required changes.

Question: Why did these policies slow down or prevent changes that would have positively impacted programming?

Answer: Because the previous program committee elected to follow a Waterfall Method of programmatic development. This approach disallowed periodic adjustments and mid-season changes to facilitate larger, periodic programming changes, using seasonal operations as the verification stage.

Question: Why did this Waterfall approach limit periodic adjustments?

Answer: Because the program committee did not have an in-depth understanding of the Waterfall Methodology and did not effectively integrate this approach into the program team’s workflow. Specifically, they did not consider the maintenance phase of the methodology and did not meaningfully evaluate alternative methods.

Question: Why did the program committee implement a methodology they did not fully understand?

Answer: Because they believed they did. The program committee had seen a presentation from a potential project management consultant who pitched their expertise in Waterfall methodology. To reduce expenditure, the committee did not hire the consultant but attempted to implement the methodology independently.

This analysis illustrates the complex nature of problem-solution pairs. While the surface-level issue might have been dismissed as a conflict among staff, the real cause was rooted in structural policies that would persist despite new hires. The problem highlighted several well-known challenges of the Waterfall model, including:

  • Longer delivery times: The inflexible step-by-step process often extends the delivery of the final product, unlike iterative processes such as Agile or Lean.
  • Limited flexibility for innovation: Unexpected occurrences can derail a project, as the model’s rigidity can cause setbacks with even minor issues.
  • Limited opportunities for client feedback: Once the requirements phase is complete, the project proceeds without further client input.

And may require changes as foundational as adjusting the organization’s operating mythology to resolve the problem statement itself.

Effective “Why-why” analysis transforms organizational diagnostics from symptom-chasing to root-cause resolution—enabling targeted interventions with real strategic value. For instance, recommendations such as “Create new policies that more accurately reflect the Waterfall method” and “Remove the policy disallowing periodic adjustments and mid-season programmatic adjustments” are specific and actionable, enabling quick implementation once approved. This stage of evaluation also involves determining the most suitable project management method for the organization’s needs.

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