80:20 and the Nonprofit Sector

Corporations are often able to scale by identifying which solution will meet 80% of the market’s needs. They realize it is rarely doable to find a solution for all 100% and pursuing it would be too costly. The gains are to be made by focusing on the 80% and ceding the remaining 20%.

Public policy often works the same way. You can’t create policy to meet the needs of every American. At best, it can serve the needs of 80% of the population. Nothing on a large scale can ever meet every stakeholder’s needs.

The nonprofit sector defending the remain 20%

The nonprofit sector is often left to deal with the remaining 20% of the market–the most challenging part of the population, which has been left un-served. It is not uncommon for nonprofits, and those they serve, to feel like society and “the Man” have left them exposed to the elements. This naturally creates resentment and an underdog mindset.

It is therefore not surprising that most nonprofits create models designed to meet the needs of ALL the 20% left exposed by macro policies. These programs are intended to be optimized and focused on each individual’s needs rather than to most efficiently serve 80% of that remaining 20%. Although focusing on only 80% would de facto enable them to serve more people at a lower cost, following this logic would be an acceptance of the decision-making strategies used by large companies and the government (those bodies that initially left nonprofits’ target populations un-served).

Social enterprises

Over the last decade an entire generation of “social entrepreneurs” has bucked this assumption, has adopted the 80/20 mindset and has been able to build scalable organizations that are generally more efficient and effective. They are often criticized by traditional, local nonprofits for using solutions that don’t fit the exact needs of a particular neighborhood or child.

This criticism is fair, but the reaction should not be a call to shut down these national organizations or to have them change their strategy for further customization. In order to best serve the under-served, society must both support these organizations that effectively meet the needs of 80% AND support local nonprofits which are needed to catch the remaining 20%.

For example, if there are 100 million people in need, public policy is responsible for serving 80 million (80%). That leaves 20 million people (20%) under-served and exposed. The social entrepreneurial segment of the nonprofit sector can then focus on serving 80% of that population, or 16 million. That leaves 4 million (20%) to be served by small local nonprofits–society relies on these organizations to fill in the gap. These nonprofits have the hardest job–customizing their solutions for individuals and working on the most challenging situations.

That is the architecture of our safety net when it works. We need to recognize the reality of the structure and consider it a success when the government and social entrepreneurs can provide solutions for 80% of us. We must also celebrate local nonprofits who are asked to do the hardest part of the job securing the safety net and not criticize them for being inefficient or call for their consolidation. They are part of the equation we need.

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