Nonprofit Groups Must Do Some Economic Soul-Searching

Nonprofit organizations are living on borrowed time. The handwriting is on the wall: Federal, state and local funding is shrinking or evaporating and, with a growing number of organizations turning to the private and philanthropic sectors for ever-limited funds, the only responsible thing to do is to try and figure out ways to survive.

Taking a cue from business, labor and government itself, nonprofits need to go beyond “re-engineering and reinventing.” Their future depends on how they answer these tough questions:

* What is your mission today? Are you serving the need you were created to serve, and does that need still exist? In other words, who is the customer and what is it they need? And how do you know they need it? What are you asking these “customers,” and are you listening carefully to their answers?

* Is there someone else delivering that same service and doing it better? What “value added” do you bring to the party that someone else does not? Should you be reaching out to other similar providers to work more closely with them?

* Does it make sense for your nonprofit to think about merging with another organization? Business has been doing this for years, and now labor is doing it and even government is eliminating departments or merging them with other parts of large agencies. Heed the message.

* Are you doing enough outreach to those parts of the community that you haven’t touched before? Are you creating alliances with the schools and minority groups where your services may not normally be delivered? Speaking of outreach, do enough people know about what you do and do they see value in what you do? And if so, are they helping you tell your story?

* Is your board made up of people really reflective of the work you’re trying to accomplish, and are they really committed? Or are they there because five or more years ago it was the right kind of board to join?

In addition to these often-contentious questions, funders are keenly aware of at least three broader issues: a skyrocketing number of requests coming in, a less-than-robust economy, and--perhaps most critical--the problem of staff capability and board oversight. This last concern has been caused by a string of major scandals at nonprofits, nationally and locally, resulting from abuse of power, misuse of funds and even outright embezzlement. Funders are on guard now more than ever. They want to be assured that boards are really keeping a sharp eye on operations.

While some nonprofits do in fact look at these issues on a regular basis, far too many do not. With the day-to-day demands on both staffs and volunteers being so great, dealing with the more profound, long-term issues is not easy. Indeed, it is usually difficult to find the right time for such in-depth self-assessment. But not to do so at this time could be perilous.

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Congress is debating major funding legislationthat will have enormous impact on just about every aspect of our communities for years to come. State, regional and local governments are re-examining every dollar they expend on services that have an impact on our quality of life, from the arts to a vast array of human care services. And if you think the private or philanthropic sector can “fill the gap,” think again.

The Independent Sector, an organization that collects data on charitable giving, recently published a survey of the funding prospects to the year 2002, when Congress expects to balance the federal budget. The Independent Sector measured the budget resolution on a sample of 108 nonprofits, from nursing homes to Head Start programs, from colleges to homeless shelters to disaster relief organizations. They found that to compensate for the proposed federal cuts alone--leaving aside any state, regional or local cuts--contributions would have to more than double in the next seven years.

We know that won’t happen.

Responsible boards and executive directors need to begin the arduous process of asking those tough questions. If you don’t, your prospective funder will. And if you can’t answer them effectively, your organization is in jeopardy.