The Nonprofit Contrarian
Nonprofits are failing.
By Richard Male
As certain as the turn of the seasons, our email and conventional mail boxes are now brimming with invitations for summer fundraising events from nonprofit organizations. Golf tournaments, themed parties, wine tastings, 5K runs, and moonlight bike rides abound.
By all means, participate and be as generous as you possibly can.
But let’s be honest: so many nonprofits are failing.
And it’s time we admitted it.
First, the caveat. The global independent sector is profoundly diverse in size and purpose, so it’s almost ludicrous to try and characterize it meaningfully. (Does anyone really think that the day-to-day concerns of a rural health clinic in Alaska are actually similar to those of a global fund with an endowment that rivals the size of some African nation’s GNP?) However, there are some unpleasant and glaring weaknesses in the sector that are universal, and it’s time to candidly explore them.
Too many nonprofits insist on operating on a tactical rather than strategic level. Our challenging economic times expose a common problem among nonprofit professionals: that we often work hand-to-mouth, chasing the next donation or grant, focusing on program and day-to-day operations. Operational expertise is essential to keep your organization running, of course, but our propensity to plug along without a strategic vision does not bode well for the sector’s long-term survival.
Executives and boards are chasing funding rather than meeting needs. Nonprofit boards in general are weak when they should be strong, particularly in fundraising. Too few board members understand the implications or responsibilities of the role, yet since they serve as volunteers, everyone is loathe to criticize them. I see boards hiring the wrong executive directors for the right reason, a mangled mix of good intentions and bad decisions.
We’re busy training managers, not cultivating leadership. Sustainability in our sector will demand a unique competency of leadership based more on organizational philosophy than technical, operational, or management expertise, but this level of professionalism among nonprofit leaders is a long way off. I have enjoyed teaching college and graduate courses on nonprofit leadership and governance, but too many of the students are stilted thinkers. They’re great at how and weak on why—I see wonderful papers written on operations and tactics, but little thought to systems or long-range strategy. I’m troubled that most curricula related to the nonprofit sector do not really include, or require, strategic thinking. Each emerging generation of nonprofit executives dutifully learns to write a budget, develop and evaluate programs, and engage a board of directors. The skills of considering far-reaching external factors, along with learning to live with ambiguity, taking risk, and moving out of one’s comfort zone, continue to be in short supply.
Nonprofits have a dangerous gap in perception. We claim to be “the ethical sector,” but we have no actual code of practice for the important work we do with the public’s trust. Architects, doctors, lawyers and, yes, even bankers have formal, regulatory structures for accountability within their professions and to promote the standing of their respective industries.
Fear rules too many foundations. Call it hardening of the arteries, call it being transfixed. Foundations are less inclined than ever to foster and promote innovation, deflecting criticism by pointing to their own losses. No one argues that their considerable assets have shrunk along with the rest of us, but wouldn’t the bold way forward out of this mess be to support more innovation, more R&D, and nurture true system change? Leadership is easy when times are good. And speaking of hard times, so many foundation trustees are too far removed from, well, the realities of the world they claim to be helping. It is ironic indeed to consider that early 20th century American foundations funded individuals and served as a needed catalyst for innovative methods and strategies, but fast-forward to the early 21st century, and foundations are now timidly content to fund ongoing service delivery programs and little else.
Corporate philanthropy is all but dead. Bill and Melinda Gates and Warren Buffett set an ambitious standard, but there’s no groundswell in their wake. Corporate giving in this country has been flat since 1985, with only a handful of companies donating even 1% of profits. Any glimmer of social responsibility has been absorbed into the bowels of marketing departments, so unless your cause translates directly into bottom line results, don’t bother.
We’re losing ground to the for-profit sector. Caught in a cruel game of keep-away between government and commerce, all but the very largest players in the nonprofit sector are losing their unique identity in a increasingly sector-bending marketplace. There is serious money to be made these days in education and health care, so massive chunks of historically mandated, unique nonprofit territory are disappearing faster than a polar ice shelf. How bittersweet it is to recall that the American nonprofit revolution of the early 20th century evolved to fill the gaps in our lives where government and industry fell short, yet today, that which is profitable is rapidly being “cherry-picked” and commercialized, leaving nonprofits with an inventory increasingly made up of the unfundables and untouchables of basic services for the poor and disenfranchised. Can you really blame the corporate interests who see an opportunity, have capital to invest, have political resources in place, and are ready with management models that far exceed ours? For-profit ventures also have the luxury of making costly mistakes, at least in part because they can incur debt—a practice nonprofits abhor. Staggeringly costly mistakes like BP’s well explosion in the Gulf or the fines imposed in 2009 on Merrill Lynch? Well, such is the cost of doing business.
Meanwhile, we fail to learn essential lessons from the private sector, like operating strategically in a competitive environment, evaluating risk, having a succession plan, developing sophisticated messaging and communications, and protecting the essential ingredients of our brands. Nonprofits may not be able to shift gears as rapidly as corporations do in pursuit of a new market/mission, but the least we could do is adapt more of the sensible and practical practices of the marketplace. Older nonprofit executives decry that their sector is “being overrun by MBAs,” although I would suggest that what is needed is probably more, not less, management expertise to help nonprofits operate more efficiently and sustainably. At the same time, there’s a bizarre transformation that occurs when a successful corporate CEO takes a seat on a nonprofit board: it’s as if they lose their core business sense. “Wearing a nonprofit hat” apparently causes even well-seasoned business brains to malfunction.
Apparently we are content to stay as bottom-feeders. Perhaps living too long in the world of serving the poor and disenfranchised has made us passive and unwilling to claim our legitimate share of the pie. When every recession comes—and I have lived through something like eight of them—the nonprofit sector is hit harder and for a longer time than most industries or government sectors. Better planning, better leadership, and, yes, better management could at least bring us up to the level of most everyone else in the marketplace. The life cycle theory of organizational management is abundantly proven in our sector: once an innovative, grassroots nonprofit expands and stabilizes and accrues some wealth, it invariably loses its edge and its capacity for risk. We know better, but we can’t seem to avoid the same mistakes. And don’t even imagine starting a conversation about the time, talent and treasure wasted on founder’s syndrome in the nonprofit sector. At least businesses have a process to get sold. Or merge. Or fail. In our sector we seem to have a propensity of maintaining weak and broken organizations in a delusional way that the real marketplace would never allow. “We seem to get stuck in our own quicksand of inertia,” one nonprofit sage said to me recently.
Evaluation is still extraordinarily weak. Meaningful measurement on long-range outcomes would do much to build sector credibility and donor/funder confidence, but good evaluation keeps getting pushed aside for another day. Lean budgets due to donor hesitation has only exacerbated this problem. Donor confidence is flat at best because of poor outcome reporting, and good measurement takes money. Another fine mess.
We’re too content to simply deliver service, not do the challenging work of lasting system change. For example, advocacy and lobbying, including essential dialogue around meaningful public policy change, seems to scare everyone. Nonprofits in the U.S. have to be mindful of their role in advocacy, but that doesn’t mean avoid it altogether. Learning how to navigate your own local government and workings of the state legislature is a great start. (For too many nonprofit executives, you’d think we were asking them to hand out cigarettes in the schoolyard.)
Turf and ego have collaboration in a choke hold. Nonprofit managers don’t think about mergers and partnerships, but leaders do. The redundancy in our sector, however created and perpetuated by well-intentioned people, is a terrible waste. No wonder the big funders are frustrated. At RMA, we frequently coach our nonprofit clients that “Collaboration is not just a ‘nice idea,’ it’s THE idea.” But so few are listening. ‘Lone wolf’ seems to be the default style of so many nonprofit founders and executives.
In order for this situation to be a proverbial “wake-up call” for nonprofit leaders, they would first have to acknowledge that they’re “asleep.” The nonprofit/NGO sector is filled with staggeringly intelligent, passionate people who work tirelessly to make a difference. Sadly, in their well-intentioned frenzy and overwork, sleep is something they are quick to assure you they never get enough of. And so it goes.
All this said, I still believe that our best hope resides with nonprofits/NGOs. Our current economic times have once again underscored the shameful reality that the capitalist system is failing to make life better for most people. Nonprofits and NGOs are uniquely suited to fulfill ambitious goals for peace and quality of life. Flawed though it is, our sector must work harder and smarter in its mission to value people for their service to the world rather than by their pocketbooks. Greed and Good shall forever be locked in battle; for all their shortcomings, I for one still root for the good guys.