Inside Philanthropy

A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

June 20, 2011

Nonprofits grow, struggle, serve

By Todd Cohen

Twenty years ago this week, as business editor of The News & Observer, the daily newspaper in Raleigh, N.C., I launched a weekly column on philanthropy that two years later gave birth to the Philanthropy Journal.

Since then, the nonprofit marketplace has undergone sweeping changes.

Today, the U.S. is home to nearly 1.5 million nonprofits, most of them small community-based groups.

Having grown more rapidly than business or government for decades, the nonprofit sector now accounts for 5 percent of gross domestic product and 10 percent of the workforce.

Annual charitable giving totals nearly $300 billion, most of it from individuals, and at least $6 trillion is expected to go to charity over the next 50 years from wealth that is transferred between generations.

Nonprofits are stronger and more diverse than ever, but they face unprecedented challenges and still are run, generally, by people who are older, white and often male.

Despite limited resources, they take on our toughest social and global problems, and always are looking for new ways to learn, lead and grow.

They address the symptoms as well as the causes of deeply rooted problems, and serve as civic society’s research-and-development arm.

But nonprofits also are more at risk than ever of going out of business, both because of the stricken economy and because they often are poorly governed and poorly prepared to operate in a fiercely competitive marketplace.

The nonprofit sector is vast and fragmented but virtually unregulated.

In that sprawling free-for-all, big foundations, along with the trade groups, consultants and vendors that feed at their trough, have become powerful players.

And they are not shy about throwing their weight around, whether in trying to shape the agendas of nonprofits that depend on their funding, or in fighting any effort by lawmakers and policymakers to tighten regulation of the nonprofit sector.

The charitable marketplace now includes more trade groups, consultants, vendors, financial institutions and other providers that offer support and services for nonprofits.

Many of those groups are smart and effective, but many are not.

Still, providers that are mediocre or just plain bad still make a lot of money by peddling their services, and promising more than they can deliver, to nonprofits that need savvy and strategic advice but get little in return they actually can use to improve their organizations and programs.

The need for better training for nonprofit professionals has spawned a host of academic and continuing-education programs that focus on nonprofit management, fundraising and philanthropy.

Like the for-profit industry that serves nonprofits, these training programs range from those that are excellent to those that have no business being in business.

So, short of more effective regulation, the rule for the nonprofit marketplace is, “Buyer, beware.”

Today, as it was 20 years ago, operating “capacity” represents the biggest organizational challenge facing nonprofits.

Many nonprofits, for example, are governed by boards that have no clue what their role is and consist of members who are invited and agree to serve for all the wrong reasons, typically because they gave money to the organization or are community leaders or friends of the CEO.

Boards often hire CEOs who seduce them with big talk, big ideas and big personalities but have no concept of how to lead or manage an organization.

Nonprofits also struggle, continually, to raise money, sometimes understanding the tools and techniques of fundraising, but rarely recognizing that truly effective fundraising must be part of a larger vision of creating a culture of philanthropy within the organization and connecting donors to larger needs in the community.

Communication is another huge challenge for nonprofits.

They want the media to tell their story but they themselves do not know how to tell it.

They are caught up in the buzz about social media and want to plug in, but they have no inkling how to use it strategically or how much work it will take.

And they talk about transparency but stonewall when they run into trouble.

In a society and culture ripped apart over class, race, ethnicity and ideology, to name only a few of our schisms, many foundations and nonprofit advocacy groups have fallen prey to the same intolerance that has metastasized in our politics.

Despite all its problems, however, the nonprofit sector remains one of the treasures of our society and culture.

Unlike business, which has the mission of enriching shareholders, and government, which at its best serves as a firm and even-handed cop, referee and broker, nonprofits exist to serve people and places in need.

Many nonprofits are getting better at building effective business models, understanding and engaging donors, and working in partnership with their supporters to take on community problems and enlist additional partners.

Charitable giving, whether in the form of money, know-how or time, is fundamental to our society, and many nonprofits are doing a better job of nurturing donors for the greater good.

So despite the lack of resources, shortage of leadership, disproportionate clout of big players, lameness of many consultants, and ideological rigidity of many foundations and advocacy groups, the nonprofit sector offers the best hope for addressing our most urgent social and global problems and making our communities better places to live and work.

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Twenty years after that first newspaper column, the Philanthropy Journal continues to have the privilege of providing news and tools for nonprofits, and to serve as a voice and champion for this overworked, underpaid, under-appreciated and unsung sector that represents what is best about America and the best hope for our future.

While PJ is a program of the Institute for Nonprofits at N.C. State University, we receive no state funds and depend on earned and contributed revenue to cover our costs.

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