Our Director of Database Marketing & Analysis, Maciej Przybylowski, handed me a great article from the Wall Street Journal this morning that, while somewhat negative about the future of nonprofits, speaks to the need for organizations to become more efficient if they are going to survive this recession. Of course, the stories of those that haven’t made it are often heart-rending, especially if they work in feeding the hungry, sheltering the homeless or paying for the education of inner-city youth.
But looking at this from a solely business perspective, maybe there are just too many non-profits right now. Over the last decade or so:
With the bar to getting tax-exempt status low, the number of nonprofits registered with the Internal Revenue Service doubled to 1.5 million organizations, employing about 12 million people, or 10% of America’s work force, over the past 15 years. Organizations range in size and substance, from the 1,300 local United Way charities to the Grand Canyon Sisters of Perpetual Indulgence Inc., whose members dress in drag to raise funds for HIV/AIDS.
Don’t get me a wrong: it’s fantastic that individuals are free to identify a need and then to identify their own way to fill that need. That’s the free market. But that same free market — and the sudden lack of funds from the public and private sector — “is in the midst of a shakeout…culling weak groups from the strong.”
“There were too many poorly performing nonprofits,” says Paul C. Light, a professor at New York University’s Wagner School of Public Service. “There were very many niche nonprofits devoted to small slices of a problem and they needed to be merged.”
The organizers of the “Bridge” conference in DC saw this coming, which is why they asked me to speak on the effects of rebranding and merging on fundraising last summer. And fundraising is one of the areas where there could and should be significant efficiencies. Now that we’re further into the recession, the stories are coming out — and most are successes:
Girl Scouts of America is touting the efficiencies it gained after five Indiana councils merged in 2007. After the merger, the councils had enough money to hire a fund-raising department—something they couldn’t afford individually. As a result, donations increased 25% by 2008. Participation in the scouts’ technology workshop, hosted by Purdue University in West Lafayette, Ind., expanded to 44,000 girls, up from the 4,000 who were eligible for the original program.
By combining administrative functions, property management and audits, the organization is saving about $1 million a year. “Five councils need five executive directors and five fax machines, meaning that money is not going to programs,” says Ms. Aviv of Independent Sector.
One way that a small, local group can reduce its expenses short of merging with another is to join together with either similar organizations from other cities or with “non-competing” organizations in its own city for their fundraising efforts. We run very successful “co-ops” for public broadcasting stations and for libraries, for example, and started a successful one for the Nature Conservancy’s chapters. Many cultural institutions in cities share their donor lists amongst themselves — Milwaukee and Houston are great examples.
This is the time to start thinking about how address tight budgets. Those orgs that do will be the ones that continue serving those in need beyond these tough times.