This is the second of a three part series by Non-Profit Consultant, Derek Link, on energy, mission, and organizational entropy. Part 1 appeared on February 5, 2010.

You’ll have to read my previous post Organizational Entropy Part I: What the Heck is Entropy? on entropy of organizations before this one, or it may not make sense at all – which it may not anyway, or it may not anyway if the first one didn’t make sense. Nevertheless, here goes, and damn the torpedoes.

I see lots of grants from foundations that seek to give away money but which DO NOT FUND “indirect” costs. In other words, whatever it costs your organization to run the program, tough, you will have to find funds for those administrative costs another way.

I always wonder to myself, what is the color of the sky that these organizations live in? I decided that sky must be a green one, one that rains money. Who pays for their administrative costs, I wonder? Why would they be opposed to paying for a little healthy administration?

So my question – you may have thought I’d drifted away from it for good by now – is whether spending money on administrative costs represents energy/resources that are essentially wasted? Can the work of an organization be done without administrative work? Would it be feasible to give grants only for the good work it is actually going to do but none of the support structure? How would an organization complete its mission if it were giving away shoes to shoeless people in Tanzania and all grant makers said every penny must be spent on shoes and/or shoelaces and nothing else?

Is not administration a necessary part of the work? After all, someone must go to Tanzania to assess the need for shoes, someone must negotiate with local organizations to assist giving shoes out in an orderly and effective manner, someone must inventory the shoes, someone must make arrangements for shipping, someone has to write and sign paychecks to staff, and endlessly so on. Why is this work considered superfluous entropic waste?

Perhaps the answer partly lies in the fact that some non-profits are paying huge salaries to their employees and consultants – ours excepted. It may be that grant makers have seen some of their precious resources wasted by conflagrant administrators. The decision to ban all use of funding for indirect costs may well arise from bad experiences.

To answer my own question, I must conclude that administrative/indirect costs can be entropy, i.e., wasted resources or energy; However, reasonable administrative costs are a necessary part of getting the work done and are supportive of accomplishing the mission. Inadequate administration can actually get in the way of getting the shoes from point A to feet B. Poor administration is probably entropy, busily gobbling up energy and resources of an organization.

Good non-profits make an effort to prove the efficacy of their administration. The fact that grant makers feel the need to set policies restricting administrative costs dictates transparency and a high level of accountability among administrators and Boards. In order to convince grant makers that administrative costs do not represent entropy and in fact are a necessary part of the work mandates that all resources are clearly spent to support the motion of the mission, and are not wasted, thereby creating unnecessary friction.

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Part 3 of this series will discuss specifically how organization’s fall into a state of entropy.  It will be published on February 10, 2010.

This is the second of a three part series by Non-Profit Consultant, Derek Link, on energy, mission, and organizational entropy. Part 1 appeared on February 5, 2010.

You’ll have to read my previous post Organizational Entropy Part I: What the Heck is Entropy? on entropy of organizations before this one, or it may not make sense at all – which it may not anyway, or it may not anyway if the first one didn’t make sense. Nevertheless, here goes, and damn the torpedoes.

I see lots of grants from foundations that seek to give away money but which DO NOT FUND “indirect” costs. In other words, whatever it costs your organization to run the program, tough, you will have to find funds for those administrative costs another way.

I always wonder to myself, what is the color of the sky that these organizations live in? I decided that sky must be a green one, one that rains money. Who pays for their administrative costs, I wonder? Why would they be opposed to paying for a little healthy administration?

So my question – you may have thought I’d drifted away from it for good by now – is whether spending money on administrative costs represents energy/resources that are essentially wasted? Can the work of an organization be done without administrative work? Would it be feasible to give grants only for the good work it is actually going to do but none of the support structure? How would an organization complete its mission if it were giving away shoes to shoeless people in Tanzania and all grant makers said every penny must be spent on shoes and/or shoelaces and nothing else?

Is not administration a necessary part of the work? After all, someone must go to Tanzania to assess the need for shoes, someone must negotiate with local organizations to assist giving shoes out in an orderly and effective manner, someone must inventory the shoes, someone must make arrangements for shipping, someone has to write and sign paychecks to staff, and endlessly so on. Why is this work considered superfluous entropic waste?

Perhaps the answer partly lies in the fact that some non-profits are paying huge salaries to their employees and consultants – ours excepted. It may be that grant makers have seen some of their precious resources wasted by conflagrant administrators. The decision to ban all use of funding for indirect costs may well arise from bad experiences.

To answer my own question, I must conclude that administrative/indirect costs can be entropy, i.e., wasted resources or energy; However, reasonable administrative costs are a necessary part of getting the work done and are supportive of accomplishing the mission. Inadequate administration can actually get in the way of getting the shoes from point A to feet B. Poor administration is probably entropy, busily gobbling up energy and resources of an organization.

Good non-profits make an effort to prove the efficacy of their administration. The fact that grant makers feel the need to set policies restricting administrative costs dictates transparency and a high level of accountability among administrators and Boards. In order to convince grant makers that administrative costs do not represent entropy and in fact are a necessary part of the work mandates that all resources are clearly spent to support the motion of the mission, and are not wasted, thereby creating unnecessary friction.

***************

Part 3 of this series will discuss specifically how organization’s fall into a state of entropy.  It will be published on February 10, 2010.

Here are some thoughts on energy, accomplishment of your mission, and entropy, provided by Non-Profit Consultant, Derek Link.  This is the first of a three-part series on the topic.

A few big ideas stuck with me from my days at the University and one of them is the idea of entropy. Entropy is a universal principle which is probably why it stuck with me – I love that kind of stuff. My professor said that everything in the universe is moving towards maximum entropy, or disorder. Energy is lost as entropy occurs and the eventual result of entropy is rest, equilibrium, stasis.

The easiest example for my brain to understand entropy is the idea of a perpetual motion machine, like a clock pendulum that once set into motion can continue to swing without any additional force being applied for eternity. We know this doesn’t happen and the reason why it does not is entropy. The friction of the pivot point of the pendulum, of the work it is creating in moving the clock, and even with the air it is moving through is dissipating some of the energy of the swinging and over time, this pendulum will come to rest, equilibrium. When it comes to entropy in non-profit organizations, the concept is important to understand because every bit of work done expends energy that is a byproduct of the work, rather than result of the work.

So how in the heck does this apply to your organization? Well, let’s say that your organization’s mission is like the pendulum. You apply some force to the mission; in other words, you give it money, time, effort, management, supervision, accountability, and governance. The pendulum of your mission begins to swing, the gears start to turn and work gets done. As long as you continue to apply energy to the pendulum/mission, it continues to do work, but if you stop applying energy to it, it will slowly expend all of the energy applied to it and come to rest.

In the case of an organization, energy can be expended on accomplishing the mission but some will always be wasted, that’s entropy. The key is to understand that keeping the pendulum swinging takes continual application of force or entropy will use up all of the energy applied and motion will stop.

If energy flows to it that isn’t directly related to accomplishing your mission, that’s entropy. I worked with a company on a project that would result in the production of videos. We had a non-profit partner and we had a great concept. The thing we needed was national distribution and a recognizable name so we could draw in corporate grants to get the pendulum swinging. We approached a national non-profit I had family ties to and voila, they said yes, we want to take part.

Then entropy set in. The national office of the non-profit approved the project but wanted us to raise an additional 1 million dollars for their overhead. This was equivalent to the entire project budget! If we accepted their participation, we had to accept that a lot of energy would be wasted and spent outside of our mission, so we politely declined the offer to increase the project entropy.

Some entropy is unavoidable, imposed by outside forces, and these things are usually shrugged off as “the cost of doing business”. Some entropy is avoidable so look around. Where is your organization expending useless energy as a result of doing the work? Find those areas and try to reduce or eliminate them. Doing so will mean that you have to apply less energy to your mission’s pendulum to keep it swinging strongly.

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In part 2 of this series (appearing on February 8, 2010), Derek will discuss overhead and administrative costs.  In part 3, the final installment in this series (appearing on February 10, 2010), the topic turns to specifically how organizations lose the motion of their mission.