The Problems with The Nonprofit Sector (And How We Can Fix Them)

I like to bitch a lot about nonprofit issues (especially funders and how they aren’t doing things the right way, but the truth is, neither are we). And I can bitch as much as I want, but it’s no good unless I provide solutions, right?

I don’t have all the answers, but I do want to highlight what I see as some of the major things that slow progress down and a few things we can do to fix it.

Problem 1: The landscape

I can’t speak for the whole nation, but I can tell you that the nonprofit sector in Los Angeles is mostly made up of very small organizations. And while there is nothing wrong with being small, making a big impact is difficult with little budget and a small staff.

Solution

I’m going to use a jargon word here: Strategic Restructuring. Gross, right? It’s a big, dumb word that basically means think about what (or who) you might need to work better and then organize your business in such a way to get it. For example, maybe the HR and administration type things that you have to do are taking up a bigger portion of your resources than you want. You can find other organizations that have the same problem and go in together on an administrative solution (which might mean hiring one person for both orgs or hiring an outside company to do the work). Another example would be if you were providing arts programs to kids in Venice and you found another organization that provided similar services to kids in Santa Monica, and you merged together to be one stronger organization that served kids on the Westside.

The bottom line is that when the problems are big, it’s not ok to only be ok.

Next Steps

Create a Backwards Logic Model. Think about the impact you want to make. When you get to resources, think outside of what you have available to you right now. Look around to see how other organizations with similar goals might be able to help.

Problem 2: Accountability

You saw that title and thought I was going to talk about nonprofits, didn’t you? Surprise! I want to talk about funders (that’s not really a surprise). Because as much as people talk about how nonprofits need to tell their stories better and provide data and prove, prove, prove…who is demanding the same of funders? Are they exempt because they have money? I hope not, because not only is that gross, it totally goes against what our sector stands for.

When a funder gives tiny grants that barely do anything or require paperwork that takes hours to fill out or otherwise spend resources (yours or theirs) in an unwise way, who is there to say, “Naw, man. You have to do better than that”? As far as I can tell, the answer is no one.

Solution

This is a tough one. How do you tell the people with the money that they have to do better? How do you punish the people with the money…make them stop giving out money? It’s an issue that we have not only in this sector, but in all sectors. How do we tell politicians that they shouldn’t bend to the whims of big corporations whose dollars got them elected in the first place? I mean, if Obama can’t figure it out, I’m not sure that I can. But a good place to start would be to recalibrate the relationships between funders and nonprofits. I’ve said it before and I’ll say it again: we want the same things, so let’s find a way to smash this unhelpful power dynamic, eh? Let’s start inviting each other to talk and let’s empower each other to speak our minds. Because conflict is great if it helps us reach our shared goals.

One example of this that comes to mind is the Real Cost Project. When I first heard about this I was all, “Yay!” and then I saw this: “Created by funders for funders, the Real Cost Project will explore what it takes for funders to develop new grantmaking practices based on what it really costs to deliver outcomes.” By funders for funders? Um, knock, knock. Who’s there? It’s me, Rachel, wondering why nonprofits are not a part of this conversation. How are you going to know how to better fund us if you don’t invite us to the conversation?

Next Steps

Unfortunately there isn’t a ton that can be done for now other than adding your voice to the conversation. Not that that is a small thing or an easy thing.

Problem 3: Funding

This leads us right into the next problem. The way nonprofits are funded. The whole issue here is that for a majority of nonprofits – the people they serve cannot pay them, so organizations have to find money elsewhere. This is where things like individual donors, foundations, government contracts, and social enterprise come in.

But the thing is, because there are sooo many nonprofits out there (see Problem 1!) and a lot of them are scrambling for the same dollars, we are all constantly in starvation mode. There are a lot of for-profit businesses out there that can afford to take their whole fleet of staff to an off-site retreat, or provide really sweet benefits, or have whole departments that do what one or two people in a nonprofit will do. But it’s very rare that a nonprofit is in a place to do that and even if they are, you bet your ass that someone will write a scathing article about them in the local paper about how they are wasting money.

We have no money and we are not free to spend the money we do have in the ways that we see fit. This is beyond frustrating and really holds the whole sector back. We lose good employees, we run inefficient businesses, and we hinder our missions.

The Solution

First of all, the world needs to start seeing nonprofit professionals as grown-ups with good ideas. Yes, there are some nimrods out there, but just because someone works for a nonprofit doesn’t mean they are less-than or not as bright as someone in other sectors. (We’re mostly just poorer)

Second of all, funders need to start funding missions, not projects. If you are a funder that gives grants to organizations that help solve homelessness, then freaking give grants to them. Don’t give to their various projects and put restrictions on how they can spend it. If they end up not using the money wisely, you can always choose not to fund them later. But if you believe in the work that they do, believe them when they tell you what they need and how much it will cost. I can’t tell you how many nonprofit people I have heard say they straight up lie on their grant applications in order to get what they need. And that’s ridiculous.

And another thing – if you believe in us and our work, do more than give (unrestricted, general operating) grants. Stay in touch, ask us questions, introduce us to people that might be able to help, connect us with other organizations that are doing similar work. Your job should be much less money-focused and much more mission-focused.

The last thing I’ll say about funding (for the moment anyway), is that you need to be ok with funding failure as well as funding things that have no immediate impact. That means funding get togethers and networking events and trainings. That means going all in on something that could be really cool and if it fails, doing the follow-up necessary to find out why it failed, what lessons can be learned from it, and figuring out how to share those lessons with others. Failure gets a bad rap. When I was in 3rd grade I was in a spelling bee. I lost because I misspelled aggravate. Twenty-five+ years later, I know how to spell aggravate, but I can’t even remember one other word that I had to spell that day. Failure is an important step in the improvement process, and make no mistake, we are in the improvement business.

Here’s a fun idea: there’s a thing called Fuck Up Nights where people get together, The Moth-style, and share stories about when they messed up so everyone can learn from their mistakes. Maybe we should have Social Sector Fuck Up Nights. Funders can pick up the bar tab.

Next Steps

Again, be honest with your funders. Share the real costs, even if they won’t cover them all. Treat them as partners. Ask them for their advice when you need it and see if they have any suggestions for mentors or partners that might be good for you.

You might also consider doing the work yourself and finding partners and going in on grants together.

Problem 4: Lack of Education

As much as I’m glad that the government doesn’t focus too much on who can start a nonprofit and for what purposes, it seems a little weird that just anyone can throw their hat in the ring. If I start a coffee company and I have no idea how to run a business and I put my café right next to a Starbucks and buy bad coffee and sell it at high prices or mistreat my employees, the market has a way of putting me out of business. But it’s not the same for nonprofits. They often manage to inch along, years after they should have crashed and burned, surviving on the fumes of goodwill.

Solution

We need better systems in place for building the capacity of nonprofit professionals, boards, and volunteers. There are a few ways we can do this.

First, we can start thinking of ourselves as a sector and promote the idea of joining in. A large arts nonprofit should definitely know the small violence prevention org down the street and vice versa. We should make it a point to go to networking events and join associations and be actively engaged in them. We should be reading up on the latest trends and ideas in the sector in places like The Nonprofit Quarterly, The Chronicle of Philanthropy, Stanford Social Innovation Review, and RachelBrookhart.com (see what I did there?). It’s not enough to focus on our own organizations. We need to reach out to each other to listen and learn and share.

Second, funders should take the lead in…I don’t want to say forcing nonprofit folks to educate themselves, but…forcing nonprofit professionals to educate themselves. It wouldn’t be difficult for a foundation to say, “Before we give you a grant, we need to see that your board has gone through training” or “we need to see that you have been trained in management best practices”. If funders are going to be annoying about data and impact, why not do the same to make sure we know how to do something right in the first place.

Next Steps

Get educated! There’s nothing worse than an incurious person. Read about how to develop nonprofit talent when funders won’t pay for it.
There’s also of plenty of free or cheap resources out there. Start with the 2-Minute Answer Guide at the very least.

Problem 5: The sandbox

Nonprofits love to play in their own sandboxes. We like to talk in our unique jargon and blow our own horns and go round and round about our struggles without taking a second to see what’s going on outside of our bubble.

The Solution

We need to spend some serious energy on engaging other sectors. This means we need to learn their language, and understand what success looks like to them, and learn from how they are doing things. Because one nonprofit organization, no matter how large or well-funded is going to solve a problem on their own.

An environmental nonprofit might do well to check out Elio Motors, a for-profit company, and see what they are doing to reduce our carbon footprint. They should say, “How can we work together to reach our goals”. That same nonprofit should get to know their local politicians. They should find out which ones are environmentally-friendly, which ones aren’t, and how they can work with both. Once these sectors are familiar with each other, understand each other’s definition of success, and find ways to work together we might actually see a difference in the environment.

Next Steps

Do some research to find out with businesses and political figures are prominent in your area and which ones might be able to help (or hinder) your goals. Find a way to reach out to them. Start slow, there’s no need to jump into “how do we work together”. Get to know them, get to know how they work and what they want. Build a real relationship.

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These are just a few of the problems I see out there. What about you? What are the challenges you face every day and what solutions, if any, do you think might work?