Consumer Behaviour

Being Wrong – A part of leadership

I was wrong. For those of you who know me, I will repeat this not often heard statement.  I was wrong. Being wrong is a gift. But it can also be dangerous, if we don’t consider the possibility that we might be wrong.

Recently I finished a couple of studies that illustrate just how often we are wrong. My first study is about the nature of international development – specifically an organization called the Foundation for International Development Assistance (FIDA).  FIDA works with agricultural cooperatives in Haiti to create self-sufficient, prosperous communities. But FIDA struggles with fundraising, because they focus on adults, not children.

It turns out that donors are more likely to give to an organization where there is an “identifiable victim”.  And children in particular tweak our heartstrings.  Hence the vast majority of international development charities use children in their fundraising.  They analyze the gaps in the community infrastructure and fill those gaps.  If you don’t have a school they give you a school.  The problem is that they don’t give you the teachers, or the operating budget.

The evidence shows that effective community economic development starts with the capabilities of the community and its needs, and builds on those.  The agricultural coops that FIDA supports increase average member income by 40%.  That is successful, sustainable, efficient development.

Most of us are wrong about what is effective and efficient in international development.  It turns out that we are pretty wrong about other forms of charitable activities. For example, the big thing in non-profits these days is social enterprise. If charities can run businesses, they can use the profits to fund programs and offset government funding cuts. Sounds great, doesn’t it?  And many people believe that this is the best response to the long term funding sustainability needs of non-profits.  I thought so too.

Sorry to rain on your parade, but recent studies show that social enterprises are actually not very profitable, in fact, 71% of NFP social enterprises lose money.  Another study showed that only 5% of social enterprises make more than $50,000 in profit annually. At the same time 46% of non profits surveyed had started a social enterprise and a further 32% were thinking about it (Ontario Non-Profit Network, 2010).  This may change with time as NFPs become more adept at managing for profit enterprises, but with the failure rate of traditional for profit businesses at 50 – 70%, (depending on the study), this seems a risky choice, with very little reward, for most non-profits.

It’s a great thing to entertain cool new ideas. It’s wonderful to examine and wrestle with new approaches to old problems. But all leaders, in the process of developing strategies and making decisions, need to closely examine our assumptions.  It it possible that you too are wrong about something?

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4 replies »

  1. Thank you for this great article and collection of data. For some time I have been concerned about NFP’s taking on the risk on new business. Thank you for sharing.

  2. This is a great post! Thank you for sharing your research! I teach leadership at a local community college and teach a unit on failure and how it can be a good thing. It’s amazing how every time, a majority of my students state how it has opened their minds to the success of failure. The mind is so powerful and wonderful!

  3. As usual, thanks for the insight. As a famous person once said, “Sometimes the most wrong you can be is when you are totally convinced that you are the most right.” Oh wait.. that was me.

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