A Perfect Storm
A "perfect storm," a violent disturbance caused by a rare combination of threats, is brewing for nonprofit organizations. First, a shortage of leadership talent is looming in the near future. The nonprofit workforce is aging, and baby boomers, many of whom are in executive positions, are beginning to retire or move to the private sector. At the same time, 3,000 new nonprofits are being created each month. They not only need effective leaders, but also they will require capable board members--a role that retired baby boomers are unlikely to take on.
Second, the sagging national economy has produced a sharply restricted resource base for nonprofits. This deficit is exacerbated by waning public confidence in the honesty and ethics of nonprofits. Fueled by controversy surrounding nonprofits' disbursement of September 11 contributions, Americans' distrust for nonprofits is at the same level as for the U.S. Congress.
Paul C. Light warned representatives of nonprofit organizations of these new realities at a conference sponsored by the Incarnate Word Foundation, the Metropolitan Association for Philanthropy, and the Nonprofit Services Consortium. The meeting brought together nonprofit executives and board members to explore ways to survive the building storm. Light, who is vice president and director of Government Studies at the Brookings Institution, Washington, DC, shared insights from his research. The author of Making Nonprofits Work, Light most recently published Pathways to Nonprofit Excellence, which contains case studies of 250 high-performing organizations.
The experiences of these successful organizations, which range from small to multimillion-dollar enterprises, are the basis for Light's most important message to leaders of nonprofits: "Be more nonprofit-like." Light's advice defies the conventional wisdom, which says that nonprofit agencies must act more like for-profit businesses if they are to thrive.
Light defines a nonprofit-like entity as "a mission-centered, results-driven, high-performing machine." He would like to see this definition broadly accepted by funders, businesses, nonprofits, and the public, just as "businesslike" is generally understood to imply innovation and efficient management.
Mission is where success begins, Light stressed. The organization that succeeds in today's turbulent environment will have a clear understanding of its mission--why the organization exists, whom it serves, and how it measures success. This vision will sharpen the organization's focus and guide effective decision making.
Light proposed that nonprofits open honest conversations with grantors to help them understand the specific needs and problems of the nonprofit sector. For example, funders waste nonprofits' resources by requiring a variety of inconsistent, time-consuming forms for writing grant proposals and reporting results. Another major difficulty is that grantors are generally reluctant to supply monies to cover essential ongoing overhead expenses.
Nonprofits can take several innovative actions to resolve their problems, Light advised.
Encouraging the workforce. Nonprofits should take advantage of a unique source of talent--enthusiastic volunteers, who often pass through their organizations. Light urged nonprofits to aggressively recruit these young volunteers to fill the leadership void created by the aging workforce. "Volunteers are excited about making a difference. Do we give them an important job or have them Xeroxing?" he asked. "If volunteers feel their talents are used wisely, they will consider a career in nonprofits."
Light advised nonprofits to nurture their employees, who are among the most highly committed in the nation's workforce. In surveys he has conducted, only 19 percent of nonprofit employees said compensation was their main motivation for coming to work every day, as opposed to 50 percent in the private sector. Light said the best nonprofits try to increase salaries but also support their employees by providing training and benefits packages. The number of young Americans who are willing or able to work for low pay is dwindling, he cautioned. College tuitions are rising, and many students are graduating with heavy debt loads. Part of the solution, he said, is to encourage grantors to fund loan-forgiveness programs that would help young graduates repay debts quickly.
Regaining public confidence. Light warned nonprofits to expect increasing, highly publicized scrutiny in the coming years. The Senate Finance Committee is beginning an investigation of the nonprofit sector, beginning with foundations. Also, there is a movement to set standards for nonprofits. "We either get into self-regulation or we will be regulated from outside," Light warned. He urged nonprofits to commit to improving their performance every day. "I see so much complacency in the sector. Never be satisfied with where you are," he advised.
Nonprofits need to work harder to counter negative media reports, the researcher added. "We don't do a good enough job of telling our story."
Initiating conversations with constituents. Working with boards and with grantors can help nonprofits articulate their mission and how "businesslike" ways of operating may or may not be appropriate for the nonprofit organization. He noted that the standards movement has prompted conversations among grantors and grantees about problems such as the need for funds for infrastructure and capital improvements, and for streamlined grant writing and reporting mechanisms.
Recharging. By networking with others, leaders can gain new ideas and affirmation. Light recommended that nonprofit executives lunch regularly with peers in both the nonprofit and business sectors.
Committing to improvement. Organizations must adopt a commitment to "fearless rigor" in looking at their problems, Light said. Although such honesty can be painful, nonprofit executives must fearlessly confront faults and continually try to fix them. But they should "abandon all hope of perfection" and stop looking for a silver bullet--a charismatic leader, for example--that will make the organization perfect. Successful leaders are simply "ordinary people who are extraordinarily committed to the organization's mission," Light said.
Light advised nonprofits to cease some unproductive, although widely accepted, practices. He urged them to:
Look beyond the private sector for inspiration. Light suggested that nonprofits be selective about what reforms they adopt from business. It is false that the business sector is a paragon of efficiency and high performance. Light noted that only 30 percent of mergers driven by reengineering have succeeded, and recent corporate scandals have revealed shameful practices.
Put the basics before strategic planning. Grantors tend to think every organization must have a long-range strategic plan to succeed. But most nonprofit executive directors say organizations cannot use a strategic plan until they have a competent board, high-performing employees, and strong financials.
Accept collective responsibility for the sector. To strengthen the nonprofit sector, successful organizations should intervene when another nonprofit has problems.
Avoid negative attitudes. In Light's surveys, bright young people say they are discouraged by the poor attitudes of employees who are stressed-out by such energy-draining factors as obsolete technology. One nonprofit boosted morale by obtaining a grant to replace its outdated computer system.
Beware of the "flavor of the month" in strategies for reform. Stick with one approach such as total quality management or some variation of outcomes measurement and do it consistently.
Religious faith provides strength to many nonprofit leaders. Light has found that other types of faith also bolster leaders as they strive to make improvements.
Faith in the organization's own individual pathway. There is no one true way (e.g., working with the board; updating technology) for an organization to get better.
Faith in the possible. "At the end of each day, have faith that tomorrow you will make a tiny improvement over what you did today. That's how you'll succeed."
This report is a publication of the Incarnate Word Foundation, St. Louis.
Writer: Judy Cassidy, Cassidy Communications
December 2002
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