Are we facing a stark choice now?

A recent article by Chase Behringer warned the nonprofit sector to change or go bankrupt. That’s certainly a stark choice.

I think it’s an important piece to read and think about. But I wanted to address a few problems with it. Here they are:

We are not the for-profit sector

Comparisons to the for-profit sector are almost always inaccurate. That begins with measuring success by profit and organization size. Chase tells us that the top 50 nonprofits by revenue have remained more or less unchanged since 1998.

The problem here is that these large nonprofits do not reflect the vast majority of organizations in the US. The Urban Institute tells us that as of 1028, there are roughly 1.6 million nonprofits in the country. Independent Sector tells us nonprofit workers comprise about 10% of the US workforce.

But small is the norm. Again, from the Urban Institute:

Even after excluding organizations with gross receipts below the $50,000 filing threshold, small organizations composed the majority of public charities in 2015. As shown in figure 1 below, 66.9 percent had less than $500,000 in expenses (210,670 organizations); they composed less than 2 percent of total public charity expenditures ($32.3 billion).

So is being in the top 50 the goal?

If we were a for-profit sector, we’d be eagerly looking at finances to judge success. But that’s not how we measure success.

We succeed when we make bad things better.

Does one small organization with a $500,000 annual budget move the dial on hunger in the US? Of course not. But that’s not what they’re designed to do. How many people did they feed in their community?

We have always been disrupting… but maybe not the way Silicon Valley means it

Look at the history of many smaller organizations and you’ll see plenty of start-ups. Look at history and you’ll see plenty of organizations that simply couldn’t keep making it work. There’s lots of disruption. Just not the fancy kind.

My friend Clay Buck puts it better:

What is the nonprofit sector if not disruption itself?  Founders of nonprofits see a problem, say “this is not acceptable and must change” and then they rally people around them to help change the status quo.  That IS disruption.  

T. Clay Buck

The problems Chase identifies:

1. Missing the big picture

COVID-19 will certainly change how nonprofits work. Because it will certainly change how everything works.

And I agree that many strategic plans are too internally focused. That’s an area where small organizations could certainly use help. But that help costs money they don’t have. Community foundations could help by lowering the budget amount required before an organization qualifies to receive grants.

And while right now many organizations are becoming better acquainted with operating virtually – including fundraising online – I’m skeptical that we’ll see an immediate sea-change.

Right now, direct mail is still doing quite well, despite forecasts of its demise for the last 10-15 years. Do we need to get better? Yes. Always. Do we need to change everything we do in a moment? No. For fundraising, watch where your donors are, and keep the channels open.

2. Underestimating and underinvesting in technology

We absolutely underinvest in ourselves – from tech to fundraising to staff. So I wholeheartedly agree with this idea. It’s hard. But those investments do pay off. Spend more money on smart fundraising and skilled staff and you will raise more money. Improve your tech and you will work better.

Our websites are too often old and clunky. And I’m not talking about how they look as much as how they work. That’s not terribly hard to fix for a small organization. But time is as much the issue as money. Who’s going to own this project?

Chase suggests that this crisis will affect venture funding for tech companies. She sees this as a potential opportunity to hire people who have left the tech industry. That would be great news for our sector.

Are we ready to pay for them?

3. Relying on old assumptions

I also agree that the pandemic is causing all of us to rethink assumptions. The role of government is a huge one.

Personally, I think a fair amount of what the nonprofit sector has taken on ought to be government funded. These are not small problems, even if we must attack them one community at a time. Issues like housing, healthcare and hunger could be solved… if we (collectively – which is government) decided it was important enough. I continue to live in hope.

Chase also mentions brand loyalty and public trust. These are tightly connected. Every nonprofit can and should be focused on these. Trust, once lost, is hard to regain. And the importance of your brand isn’t an immediately identifiable logo, but how people feel about you – those feelings have a lot to do with trust.

We can control much of this. Don’t depend on what you did 2 years ago. What are you doing now to show people your work matters and you’re doing what you say you’ll do?

4. Ignoring Silicon Valley’s “Fail Fast” mantra

As I said above, I think we’re pretty good at the failing thing. Guidestar tells us that between 2010-2014 half of our organizations were operating with less than one month’s cash reserves.

But Chase is really focusing on thinking and behaving the same way we always did. As she says, “spending money the same way to pay the same people to run the same programs”. Fair enough… “just because” isn’t a good reason to do anything.

In my experience, the same people problem is rare, and one many organizations would be happy to have. Keeping nonprofit staff around is hard work. Average turnover in the sector was at 12.3% in 2018. But we do need to be better at setting expectations fairly and then making sure people have what they need to meet them.

And new ideas are great. But be on a solid footing before your organization starts creating new programs. Planned innovation is great. Seat of the pants is not. The idea-generating part is fun. The work – program work and fundraising to support the program – is harder.

5. Not thinking proactively about mergers & acquisitions – especially with nonprofit start-ups

Again, I mostly agree with Chase here. We start too many new organizations instead of building on already established ones. So do you need to begin a new organization? Or do you want to be the leader of one? Ask yourself honestly.

It can feel like a dog eat dog world out there when it comes to funding. So collaboration can be hard. Finding ways that all the organizations involved can succeed is tricky. But it’s absolutely worth trying.

How will this crisis change your organization and our sector?

Chase is right that the financial crisis we’re in now will reshape our society, including our nonprofit organizations. And like her, I’ve been thinking about Rahm Emmanuel’s saying: “You never want a serious crisis to go to waste.”

I think of it when I see good organizations deciding to go quiet right now. It makes me sad. Now is not the time to pump the communication and fundraisings brakes. People are responding to the organizations who are doing a good job communicating now.

Let’s make reviewing our missions and strategy part of our everyday operations. Ask “why?” and “why not?” a lot. Find good people and pay them a decent wage – so they can become good people who stick around long enough to really create change.

But let’s not despair if our organization never becomes a household name, with a huge budget. There is room in the ecosystem for small organizations, too.

Photo by Markus Spiske on Unsplash